Who would have thought that selling food would be scalable and that ‘amazonification’ would have something to do with it!
While there’s no specific definition for ‘amazonification’ – you can deduce that it describes the colossal impact that disruptors like Amazon have had on industries and consumer habits. With customer expectations at an all-time high and buying experiences radically transformed, businesses must remain relevant to survive.
Add COVID-driven changes to the mix; we truly are living in a ‘survival of the fittest’ era. Everything has become digitized, and the shift towards a delivery-only model has spurred consumers to seek out a virtual, convenient and quick buying journey to purchase essential goods like food and groceries.
Thus why cloud kitchens were born.
Cloud kitchens are centralized licensed commercial food production facilities ranging from one to dozens of restaurants renting spaces to prepare delivery-optimized menu items. There’s no physical outlet or dine-in option; they only accept delivery requests via apps, calls or online food aggregators.
As online food delivery market revenues are expected to reach USD 137,596 million worldwide by 20231, the increasingly popular cloud kitchen arena is set to benefit the most. Every restaurant – no matter its size – is trying to ride this trendsetting wave and move to online food delivery services as a means of sustaining operations.
If you’re thinking of launching your own food concept, here are four reasons why you should partner with a cloud kitchen:
- Market Opportunity
The ease of getting food delivered at a reasonable price and in record time has led to an increase in online orders, which is eating into the market share of traditional dine-in restaurants and replacing home cooking. Online food delivery revenues are expected to have a compound annual growth rate of 10.39 percent (2021-2025), resulting in a projected market volume of USD 401,391 million by 2025, while the number of users is expected to amount to over 2.6 million by 20252.
- Low Setup Costs
Partnering with a cloud kitchen requires less investment since you don’t need a prime location with high footfall. Also, since there’s no front-of-house, you don’t need fancy interiors and hospitable wait staff to ensure a great guest experience.
- Ease of Experiment
The cloud kitchen business model allows you to experiment with multiple concepts without much spending. You can operate numerous brands from a single kitchen using the same infrastructure and resources.
- Ease of Scaling
Scaling operations is much quicker and simpler when working with a cloud kitchen. Since the investment is significantly less, you can run more brands simultaneously.
Now that you have a better idea of the benefits of launching your own food concept, next up are the different cloud kitchen models:
- Independent Cloud Kitchen
This model has emerged as the most common, whereby a virtual restaurant operates without a physical storefront visible to customers, helping small businesses cut down on investment and specialize in a single cuisine. Food provided under this model can only be sold via online delivery apps.
- Multi-Brand Cloud Kitchen
Under this tech-specialized model, a sole mother brand operates through multiple cuisine-specific brands that identify and supply the most ordered dishes in an area with few competitors. Only online food orders are accepted, and delivery is fulfilled through an aggregator or the brand’s delivery staff.
- Hybrid Cloud Kitchen
This model is a partial cloud kitchen that allows customers to visit and see how the food is being prepared. However, these kitchens don’t offer dine-in services; customers can only pick up their orders or request them online.
- Shell Kitchen
With this aggregator-based model, restaurants use a particular delivery agent who owns the kitchen space in which they operate. Multiple restaurants can function under one roof, making it a good option for small food entrepreneurs to launch without a lump-sum investment since an empty kitchen space with basic infrastructure is provided. Additionally, the association with a single popular delivery app helps secure greater visibility, customer reach and brand awareness.
- Fully Stacked Kitchen
This takes the shell kitchen model one step further, whereby the delivery app owner offers brands a fully equipped kitchen; they just need to manage the food preparation while the delivery agent takes care of equipment supplies, order reception and food delivery. This model has a storefront that’s accessible to customers.
- Outsourced Cloud Kitchen
Most of the food preparation process is conducted in a centralized cloud kitchen, whose owner buys and stores raw materials, receives orders, and then pre-prepares dishes in a centralized kitchen. However, a partner restaurant gives the final touch, and the meals are again delivered through the cloud kitchen owner. This model benefits restaurants receiving huge orders regularly as the workload is shared with the cloud kitchen brand.
Now that you have a clearer understanding of which cloud kitchen model would best suit your food concept, keep in mind that digital marketing is crucial to your success, considering that your restaurant has no footfall or a storefront to attract customers. Make sure to invest in your social media presence and get on food delivery apps for an added push. Remember that the only point of contact between you and your customers is packaging, which can serve as a powerful and creative tool to appeal to more foodies.
Given the pace at which the restaurant industry is growing, joining a cloud kitchen is the next big thing. Not only do they make the dream of serving great food a reality, but they also make it accessible by eliminating the challenges of hefty rentals and investments.
By: Dina Toukan’s Senior Investment Analyst at ISSF