Cloud kitchens seem the obvious solution to high rents and lower profits now that cloud technology has made online ordering possible. Moreover, the restaurant business is evolving because of Cloud Kitchens. They allow firms to enter the food industry or extend their current operations with little to no outlay of capital, allowing for easy expansion and the testing of novel ideas and virtual labels.
Many food firms that operate cloud kitchens use them as an experimental environment to optimise staffing and inventory and test the market for novel ideas. This extraordinary adaptability may prove to be the industry’s greatest asset. It paves the way for companies to diversify while lowering two of their greatest operating costs: rent and labour. The chefs and cooks deliver to the clients; there are no waiters, uniforms, furniture, soft furnishings, or other pricey décor.
In this guide, we go through everything which one should know about Cloud Kitchens. So, let us begin.
Exploring the Cloud Kitchen Meaning and Concept
Whether you know it as a cloud kitchen, a ghost kitchen, a virtual kitchen, or a dark kitchen, a cloud kitchen is a restaurant without a physical location. Instead, it is used exclusively for making meals for takeout and delivery. Third-party delivery services like Uber Eats and Grubhub fulfil the orders on the websites. Multiple virtual brands offering a variety of cuisines and menu items can share the same cloud kitchen.
The Cloud Kitchen: How Does It Function?
Using third-party delivery services, chefs and kitchen staff in a “cloud kitchen” prepare and serve customers their food. The kitchen space is available hourly or monthly and includes all of the appliances and infrastructure required to handle online orders.
The Evolution of Cloud Kitchens: Past and Future
Cloud kitchens and delivery-only restaurants are a global food services trend. They lower entry barriers and provide a capital-efficient platform for food entrepreneurs to test their products and market fit. This has encouraged food enthusiasts to try new cuisines and launch gourmet products using cloud kitchens.
The rise of food aggregators and logistics
Swiggy and Zomato are two food aggregators that have shaken the restaurant business by making delivery services more accessible. These new cloud kitchen businesses have attracted significant outside funding and, through deep discounts and catchy advertising campaigns, have made it standard practice to order takeout rather than cook at home.
Retail food outlets becoming delivery-only
After realising that most customers were placing orders online, the retail food outlet Fasoos switched to a delivery-only model. Because of this change, Fasoos was able to lower expenses and boost profits. This ushered in the era of cloud kitchen eateries, which are more adaptable and require fewer resources to open.
Multi-brand cloud kitchens
The popularity of Fasoos inspired other startups in the food delivery industry to create niche brands that focus on particular cuisines. They served a wider variety of food using the same space and staff.
Kitchen Infrastructure as a Service
Kitchen Infrastructure as a Service emerged in response to the growing need for commercial kitchen space caused by the proliferation of restaurants focusing solely on delivery. Uber’s founder, Travis Kalanick, came up with the idea of renting out kitchen space to independent food manufacturers. In India, startup companies and food aggregators have begun providing fully-equipped kitchens for those interested in opening a delivery-only eatery.
Third-party fulfilment models
Third-party food brands are partnering with cloud kitchen operators to handle final fulfilment. One must supply the brands with distribution services and operational infrastructure to do so. This change mirrors the advent of warehousing and e-commerce fulfilment services, which expanded the accessibility and scalability of consumer-facing and direct-to-consumer brands.
Navigating the Cloud Kitchen Business Landscape
This section covers investments, licenses, location, and everything you need to know to open a cloud kitchen business.
Cloud Kitchen Location
The cost of real estate is the main reason cloud kitchens are cheap. Location is the most significant factor in lowering cloud kitchen startup costs compared to dine-in restaurants.
The cloud kitchen model does not require footfall, parking, or a high-end site. However, sanitation, water supply, and low rents are key. The location should also be based on customer demographics and food product type. The cloud kitchen should be where your food is in high demand.
Implementing online food ordering
After choosing a location, choose order-taking technology. Zomato, Swiggy, Foodpanda, and others accept online orders and deliver food to your customers. These firms charge 18-30 per cent of your revenue per order. Some FoodTech companies charge a one-time integration fee.
Online Kitchen Licenses
Opening a restaurant requires licensing. A smooth cloud kitchen business requires Few licenses in the first month. GST Registration, FSSAI license, fire license, municipal health trade license, etc. Hiring an agency to apply for all permits is the most tedious and time-consuming task. Other permits cost around Rs 10,000 (if the FSSAI license is applied for one year).
Equipment, Raw Materials, and Packaging
The food and cuisine you serve will determine the kitchen setup cost. Setting up a cloud kitchen to serve burgers, pizza, pasta, and sandwiches will cost less than Rs 2,000,000.
You can save a lot of money by buying new electronics and old tables, racks, and storage shelves. However, heavy equipment like deep refrigerators, chimneys, and burners may raise the cost. If you plan to run multiple brands from the same kitchen, use the same equipment and resources. This will save on equipment.
Staff
A successful restaurant relies on its team, with the Chef being the most important because they prepare the food and design the menu. An online kitchen needs five employees: two chefs, two helpers, and one housekeeper. Staff salaries depend on experience.
Staff Uniform
In a cloud kitchen, a staff uniform may not be necessary. For discipline, hygiene and cleanliness, a dress code is still recommended. Give your cloud kitchen staff hair caps, masks, and gloves for hygiene and safety.
POS Technology
The entire online food ordering and delivery system depends on food order acceptance. Tracking online ordering platform orders is also crucial. To run smoothly, restaurants need order tracking and detailed reporting. Choose a POS tailored to the online ordering website. Our browser-based, hardware-independent Posist software is recommended. You can generate bills on a computer, laptop, tablet, or phone that is web-enabled.
Mobile phones and other miscellaneous items
An online kitchen needs a board line, mobile phones, high-speed internet, stationery, small counters, and chairs. Additionally, Cloud Telephony subscriptions ensure no call is missed, and calls can be recorded for training.
Marketing
Marketing and advertising are crucial to restaurant success. Marketing is crucial for cloud kitchens because it is the only way to get orders. You can save for marketing since you are not paying for location and maintenance.
Future: What Lies Ahead?
The Indian food delivery market is young, but disposable income and smartphone access are expected to increase demand. Delivery-only brands have improved cloud kitchen business economics for new and existing restaurants. As the ecosystem evolves, food brands will explore omnichannel delivery and retail. Delivery-only stores are convenient and reachable, but retail stores are more immersive. Running a consumer food brand is different from cloud kitchens. Cloud kitchen operators will split, with consumer-focused food brands partnering with cloud kitchen experts. This could spur cloud kitchen and food delivery ecosystem business model innovations.
How Much Does It Cost to Start A Cloud Kitchen?
Cloud kitchen businesses use a hub-and-spoke system to distribute food to customers, reducing overhead from equipment and personnel. Cloud kitchens in India are significantly more expensive to establish than conventional eating establishments. Approximately Rs 30 lakhs are needed to launch a franchise, and rent for 150 to 300 square feet runs between Rs 45,000 and Rs. 1 lakh. The price includes the license, registration, and a refundable security deposit. The remaining budget can be put toward advertising and sales; the average cost of a social media presence is between Rs 30,000 and Rs 50,000.
Cloud kitchens are set to play a bigger role in the food industry as the demand for online food delivery rises. The cloud kitchen business presents an attractive option for food entrepreneurs interested in entering the online food delivery market, even though they face some challenges and considerations, including increased efficiency, cost savings, and flexibility. Cloud kitchens are expected to develop further, providing novel solutions to old problems in the food industry.
