Cloud kitchens are making headway into the Indian food scene and are expected to run for a big slice of the growing food delivery business. A cloud kitchen is a kitchen space that caters to one or more food businesses that offer only food deliveries and not a place to dine-in. They are typically optimized food production centers that deliver food to customers through food tech aggregators like Zomato and Swiggy.
All that customers see of these kitchens are the digital menus and the food delivered to their doorstep. So, the infrastructure required for this business is much more affordable for business owners. With the demand for food delivery rising steadily and the cost of real estate rising even higher, cloud kitchens are a win-win for the kitchen owners as well as for customers if done right.
However, as with anything else, there are two sides to the coin. What are the pitfalls that you should be wary of if you run a cloud kitchen? Read on to know the top ten mistakes that you should avoid.
1. Choosing the wrong products
The menu that you set is the very first step based on which a lot of your decisions will be made. So, it is important to choose the right kind of food that you will be producing in your kitchen. Not all kinds of cuisine and food products might be the right fit for cloud kitchens. Ideally, food that can be prepared on a large scale and using short processes that do not take up a lot of time are the best bets. Also, take care to set a limited menu with limited customization available so that orders get completed quickly and efficiently.
2. Incorrect pricing
With low entry barriers for setting up cloud kitchens, this could potentially become a very competitive business in a very short time. If you set your prices too high, it might be very easy for your competitors to swoop in and lure your customers with the same products at a lower price. On the other hand, if you set your prices too low, you run the risk of incurring losses in a business as volatile as food delivery. So, it is best to spend time to understand pricing in the locality and set prices that hit that sweet spot.
3. Getting into it without market research
Food is always an in-demand product. But, it is also highly volatile due to the sheer variety available and due to easily changing preferences. It is very important to do the right market research and learn about what food business will work in the locality of your cloud kitchen. It is also important to research about the timing of your business, the other food businesses in the locality, the demographic, the preferences, seasonal variations, etc before you zero down on your business plan.
4. Not hiring right
Just hiring people who have experience in the ecosystem of food businesses might not be the best idea when you are hiring for cloud kitchens. This is an interdisciplinary concept that requires skills of experts in specific areas rather than people with a general overview and experience. For example, rather than hiring a manager to look after the food production processes, you would be better placed if you can hire an expert who knows the nuances of process design. Hire your team based on specific requirements instead of going by a general template.
5. Dependency on aggregators only
Most cloud kitchens are partnered with food tech aggregators as it makes a lot of sense as a business model. With the aggregators taking care of customer acquisition, marketing, delivery, and basically everything other than food production, the business costs get drastically reduced for cloud kitchens. However, the down-side for this is that kitchens lose control over how these business aspects are managed by aggregators. They also become too dependent on aggregators and are at their mercy if the aggregators decide to increase the commission that they charge. There is also no cap on the number of cloud kitchens in the same location offering the same kind of products and this means there is always the danger of losing customers. So, it is important to always establish a parallel connect with your customer segment and build loyalty through your products.
You can explore taking charge of more aspects of your cloud kitchen by consulting with experts at SupplyNote.
6. Not exploring alternative revenue streams
Cloud kitchens are fairly novel concepts and the extent of their relevance in our country might not have been fully explored yet. It is true that it is more profitable to run cloud kitchens for more than one restaurant. Since food is a business that is vulnerable to many ups and downs in terms of demand, it is better to always strategize in such a way that different types of restaurants work at one cloud kitchen to keep the balance of the business. It is important to keep exploring different strategies that could optimize the business possibilities of cloud kitchens in changing contexts.
7. Laidback strategy
Cloud kitchens, because of the low cost of setting up, do tend to turn profitable in a relatively shorter period of time. But, without a set vision or a long-term plan, it is just as easy for the business to lose footing. Whether it is having too many ideas and trying to achieve too many things or having no clarity about the direction of the business, both these ends of the spectrum could spell doom to cloud kitchens. So, always have a clear vision set for the business and track progress.
8. Processes that are not optimized
In cloud kitchens, speed is a crucial aspect of operations. The faster, more optimized your kitchen is, the better it is for the business. So, it is important to make sure that the processes in the kitchen are as effective as possible. Invest in training employees to make sure there are no lags in the production. Employ technology wherever it is viable and invest in machines that automize processes.
9. Not being consistent
Consistency is the most underrated aspect of cloud kitchens. The quality of food that is being delivered is the only physical part of the business that the customers have access to and hence is a representation of the entire business. With so many choices that are available on food tech aggregators, it is very easy for customers to shift their loyalty to another restaurant with even one incident of a lapse in quality. Hence, it is crucial for cloud kitchens to put consistency at the center of the business and the processes.
10. Underestimating social media
Apart from the presence of delivery apps, cloud kitchens tend to ignore the very lucrative avenue of customer engagement that social media is. It is a channel that allows more control for the business itself to capture customer loyalty independent of the aggregator’s marketing strategies. Social media can be used by cloud kitchens to build a brand around the business and a community of customers who love that brand.