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Cloud kitchens are delivery-only restaurants that do not have a physical location or offer to dine. A cloud kitchen company generally accepts orders from third-party online food aggregators and its website with online ordering capabilities. It can also take phone orders from a central call center, directed to the nearest cloud kitchen outlet.
These delivery-only restaurants are also known as dark kitchens, ghost kitchens, virtual restaurants, and satellite kitchens because orders are handled over the internet. There is no actual storefront for clients to walk inside.
What is a Cloud Kitchen, and how does it work?
As restaurants close their dining spaces due to pandemics, several cloud kitchens are springing up to fill the need. Every other day, you might see some new delivery-only firms popping on Zomato, Swiggy, Uber Eats, or Fatafat. As a result of the pandemic, cloud kitchen (s) have risen as delivery-only businesses, which do not have dine-in options and rely on food aggregators for online ordering.
Cloud kitchens, Ghost kitchens, and Virtual Kitchens are used to describe these types of kitchens.
Cloud Kitchens are commercial kitchens designed to prepare food for delivery. They also have a driver’s waiting area. They are technologically advanced and use meal delivery apps on your smartphone. According to a Rediff.com analysis, the cloud kitchen sector in India is expected to reach $1.05 billion.
Suffescom is dedicated to fostering this community. And assist aspiring food businesses in bridging the supply-demand gap by providing them with the necessary technology.
- Business Models for the Cloud Kitchen
- Cost of Setup, Revenue, and Profitability
- Pros of establishing a Cloud Kitchen Model Cons of establishing a Cloud Kitchen Model
- Cloud Kitchens in the Future
Different Business Models for Cloud Kitchens
There are a variety of cloud kitchen models to choose from, all of which can be customized to suit your needs.
Adding a delivery module to your current physical restaurant
This will allow you to get the most out of your current employees, storage, ingredients, and kitchen. While also freeing up space for profit. You may also make your existing restaurant more productive by adding a pick-up option.
It has several drawbacks, even though it will help you increase your restaurant’s profitability. Delivery guys coming in and out of the restaurant may irritate dine-in customers because it disrupts the ambiance. When your restaurant is fully booked, delivery requests may be sent to the bottom of the priority list because your kitchen isn’t set up for a delivery menu. Things may get a little messy when you’re coordinating many orders and running two separate businesses.
Managing a Virtual Kitchen (also known as a Cloud Kitchen, Ghost Kitchen, or Dark Kitchen)
A cloud kitchen exists when the customer-facing side of your restaurant/kitchen is entirely in the cloud and has no physical presence, such as a food truck, pick-up location, or physical storefront. Dedicated cloud kitchens alleviate some of the model mentioned above’s drawbacks.
This methodology can build numerous food brands based on consumer preferences and mold the brand accordingly. Each of these businesses is referred to as a virtual restaurant, and they all operate on the same delivery-only model. Depending on your needs, you can have one or more brands under your umbrella and scale them up or down. All of these restaurants appear to be independent brands to the customer. They are, however, all prepared under one roof in a food production complex on the city’s outskirts.
To manage a virtual restaurant or a cloud kitchen, you’ll need all of the restaurant’s operating requirements. A licensed trademark or concept, as well as a commercial kitchen facility, are required. In addition, visibility on or across all delivery applications is required to keep orders coming in. A well-educated and managed workforce and enough raw materials to match order demands.
Managing a Public Cloud Kitchen
Don’t want to work with the models listed above? There is a way to profit from the food industry boom. Many food entrepreneurs rent commercial kitchen areas to various businesses. For cloud kitchens, this is similar to a co-working space.
You are more of a landlord in this paradigm than a food provider. To enjoy the big earnings and rentals, you’ll need to be more practical and hands-on with the business by providing orders to the virtual restaurant that rents from you. This model also includes jobs such as property maintenance, pest control, equipment, and security services for the workforce. You can also give them dishwashing and laundry services to make your offer more profitable and appealing.
Cloud Kitchen Setup Cost
The most crucial aspect of establishing a cloud kitchen is obtaining all necessary permissions and certifications, such as an FSSAI license, GST registration if you’re in India, and fire permits, among others. It’s a good idea to hire an agency for this. Because it is a time-consuming operation, the agency will charge a fee for its services in addition to the permit expenses.
Rent and the cost of equipment are two other factors to consider. This depends on the type of food you want to serve in your kitchen; for example, if you simply want to provide burgers and fast food, the equipment required for traditional cuisines will be lower.
By purchasing new electronics and used equipment like tables, racks, and storage shelves, you can save a lot of money. There are a few more prerequisites to open a cloud kitchen.
The salary of your employees is the other major expense. You’ll require a minimum of 5 people, including two chefs, two cleaners, and one housekeeper. Your kitchen is only as good as its cooks, therefore hire the greatest chefs to increase the food quality.
In India, the cost of setting up a cloud kitchen might range from INR 2 lakhs to INR 5 lakhs.
Here’s where you can learn more about building your cloud kitchen!
Cloud Kitchens’ Revenue and Profit Potential
The number of orders they receive from aggregators like Zomato, Uber Eats, Swiggy, Fatafat, and others determines their earning potential. Although these aggregators provide orders to the cloud kitchen, they grab a large portion of the profit margin as commission. The solution is to create a mobile app that may assist you in acquiring orders without losing any earnings to these aggregators.
The cloud kitchen saves money with no front-end restaurant setup, which adds up to profits. Whereas a restaurant’s profit margin is 3-5 percent, cloud kitchens typically have a 10-15 percent profit margin per order, which increases if your menu is based on similar items that require the same raw materials. You save money on cooking gas by preparing the base of recipes together. Here are some ideas to assist you in gaining an advantage over your competitors.
Benefits of Starting a Cloud Kitchen Business Improved Efficiency:
Cloud kitchens can run more efficiently by utilizing custom-built commercial kitchens and configuring them for delivery. If you have numerous brands under one roof, you can save time by batch processing recipes that use the same components. You can also streamline the kitchen flow by handing over meals from chefs to drivers.
Data-driven decisions and real-time applications:
Because cloud kitchens are based on technology, they can optimize their processes based on consumer behavior data. This can help the kitchen reduce food waste, increase profit per meal, and increase production of best-selling items while removing loss-leading items from the menu.
Lower entrance barrier:
Because the activity is limited to the kitchen, the cost of entry is far lower than that of opening a restaurant. Because there is no need for a view or to create an environment for the consumers, you may start it anywhere by renting a low-cost space on the outskirts of town. It is simple to get started even on a cheap budget.
Operations and Workforce to Manager ratios are lower.
The majority of the administrative work is done in the cloud, so you won’t have to worry about hiring many employees to operate your kitchen; all you’ll need are skilled chefs and delivery workers, as well as a cleaner. This reduces costs because you have a smaller crew to manage and lower wages to pay.
Experimental and quick
You have an appetite to experiment with other things on your menu because you have saved a lot of money on wages, rent, and other expenses, and you can do it quickly and efficiently with the data.
Scalable in the Future
In a very short period, you can open a cloud kitchen anyplace; after you’ve established your kitchen in one city, it’s incredibly simple to copy the model and grow quickly.
The disadvantages of the cloud kitchen model are that there is no foot traffic.
Your clients can only order from you through your applications; they have no opportunity to stumble across your brands in a mall, nor is it available in a physical location.
Embassies and High Commissions
Because the 3rd party applications are your only source of orders, they have the power to charge you a large commission because you are completely reliant on them.
Food Quality Has Less Control
Things can go wrong for various reasons, including the weather, shifting employees, delivery time, and traffic. In the entire process, numerous aspects cannot be controlled.
Customer Interaction Deficit
The dine-in experience, ambiance, and friendliness are the main reasons why customers are loyal to a restaurant. The only way to communicate with your customers under the cloud kitchen model is through your or third-party apps.
The Future of Cloud Kitchens: Growing Delivery Demand
Consumer behavior is evolving, and everything is altering to make the consumer’s life easier and more convenient. According to a Forbes article, the meal delivery sector will reach $200 billion by 2020. Consumers are prepared to pay a premium for meals delivered to their doorstep, thanks to the rise of firms like Zomato and Swiggy.
Using Emerging Technologies to Reduce Delivery Costs
Since cloud kitchens are designed for technology, this will be the next breakthrough in cutting down the cost of production and increasing profits by a large margin; with drone deliveries and robots taking over the kitchens, the entire cost will be substantially reduced.
The Cloud Kitchen Industry’s Big Names
Rebel Foods’ cloud kitchen in Mumbai is worth more than $500 million. It was founded in 2011 and now operates over 2000 restaurants over the internet in over 35 cities under the Fasoos and Behrouz brands.
Virtual Kitchens is a company that creates virtual kitchens.
With a $15 million investment in a series, In San Francisco, Virtual Kitchens Co operates six delivery-only kitchens and plans to launch more shortly.
Conclusion
With the digitalization of all services, individuals choose online platforms. Food and the restaurant’s online food ordering system are in the same boat. They don’t have time to walk to a restaurant or drive through traffic to get meals, and food delivery services have done an excellent job of alleviating this problem.
In the future, cloud kitchens will revolutionize the way we eat. Its growth is because the level of risk is quite low. Because the demand for the digital platform lowers operational expenses, the financial limits are readily overcome.