Tag: Revenues of Cloud Kitchen

The economy of the country has already been graphing down the line due to lockdown and people have lost their jobs, their investments, and savings, yet it has been quite difficult for the middle-class and the poor section of the society to cope up with the current situation. But the Business scenario has also been grim with core sectors like food and beverage being hit hardly by the pandemic. Not only has there been increasing cost of raw materials and manpower but also technology and changing consumer preferences have forced all the traditional food businesses either to shut down or align themselves with the changing time.

Nevertheless, the lines quoted by Gerg Kincaid – “No matter how much falls on us, we keep plowing ahead. That’s the only way to keep the roads clear.” literally gives a sense of hope to overcome the quandary we are becoming resigned due to the current situation people are facing. Despite such a scenario, the new kind of ideas and innovations with the help of upgrading technology have smartly been coming up to vanquish and defeat the negative impact on the economic condition of the pandemic which has been pretty strenuous. Looking at the miserable condition of the food and beverage sector, with the highest expectations on hygiene, safety the burdensome regulations and now the pandemic has threatened the restaurant industry and traditional business models are all now looking up to shining armour their saviour and that is the cloud kitchen

Cloud Kitchen a new change-

A new concept introduced in the food industry as Cloud kitchen also referred to as ghost kitchen, virtual kitchen commissary kitchen or dark kitchen they have different names but they refer to a new model where it is a delivery-only restaurant that has no physical space for dine-in. As the global cloud kitchen market size was valued at $0.83 billion in 2019 and is anticipated to reach $2.23 billion by 2027 with a CAGR of 13.4% from 2021 to 2027. The market is expected to see the highest demand share coming from China and India, which currently hold more than 50% market share. The main focus of the Cloud Kitchen is in food preparation and delivery rather than anything else. There is no perturbation about table management, location, decor, etc, which further saves your business running cost with lesser space and staff. One of the biggest advantages and fact is the ability to target multiple segments of markets simultaneously. You could be running multiple brands out of the same kitchen, and serving various demographics at the same time, while benefiting from economies of scale you can also run into brands out of the same kitchen. It is also very flexible and assessing to the leads to lower costs, better efficiency, and reduced risks. The lack of a physical storefront makes it toilsome to build a natural customer. There is also a major dependency on aggregators to facilities delivery making it crucial to develop an independent digital presence. The curator’s desire to deliver the experience in a box is also a challenge as it depends not only on the packaging but also on the caution with which the food is delivered.

Metrics aside, much of the hype around cloud kitchens is being driven by changing preferences. For long, delivery was synonymous with pizza, or Chinese.

Now, with cloud kitchen companies rapidly expanding their portfolios, customers have a bigger plate to choose from.

Revenues of Cloud Kitchen Vs Traditional Restaurant Models

If you are a restaurateur looking to make comparable revenue from a cloud kitchen model, there needs to be the recognition that revenue per store at a cloud kitchen is typically much lower than the revenue generated by one 50 seated dine-in restaurant. It may take about 4 or 5 successful cloud kitchens to attain a similar top-line as that of one dine-in restaurant. Or you need to be able to have a very strong digital marketing program and spend intelligently to keep the audience engaged in your catchment area, when this is done, the top line can surely soar to different levels Even if you run a multi-brand format from one cloud kitchen, the revenue generated from those individual brands will not be comparable to the revenue of one dine-in restaurant if the digital activity is not done correctly. The stagnation in revenue has meant that even high-street restaurants, once dismissive of cloud kitchens, are willing to change tack. A successful restaurateur understands the importance of both and uses them both for driving revenue.

Cloud Kitchen- Pre COVID and Post COVID.

An obligation to reduce non-essential outdoor activities, and an increased supply of cloud kitchens in both existing brands and new entrants will accelerate the pre- Covid trend of ordering in and takeaways, and become a permanent shift post-crisis,

With the coronavirus lockdown keeping restaurants closed and would-be diners at home, takeaway meal options have been booming in India. And there are signs that the shift toward home-delivered food is here to stay. Cloud kitchen has better suited to the needs of socially distanced customers than traditional dine-in restaurants. They’re also able to minimize some costs, such as rent, and without wait staff require fewer people on the payroll.

Demand for cloud kitchens will emanate from fatigue with home-cooked food and the need to order once in a while, though frequency will reduce due to income effect. Working professionals will use the options very frequently as it gives them the independence to focus on other activities beyond the kitchen.

Earlier, the contribution by cloud kitchens was estimated to be 20 percent of the food delivery market. However, this percentage is changing and will undergo drastic changes in the favour of cloud kitchens.

As the food industry has undergone a tectonic shift which is likely to continue in the near future, the option of ordering food through apps has boosted cloud kitchens.

When the food delivery company, Swiggy started cloud kitchens three years ago, it had been a sideshow in its food delivery business. The concept caught on as restaurant brands that had a following in one area could expand easily into new localities or maybe other cities. Investment in land was reduced because these kitchens might be smaller and didn’t need premium locations, aside from doing away with seating and therefore the staff for serving. And now Swiggy has co-created nearly 200 brands since the launch of this model using existing kitchens of restaurants in February

Various models arose. Some introduced cloud kitchens additionally to restaurants for expansion, like Chennai’s Buhari becoming available in Coimbatore. Others like Rebel Foods created fully virtual brands that only came from dark kitchens. This became a replacement land and services play as restaurants only had to supply cooking staff while everything else, including cleaning and maintenance, might be outsourced.

 The current plot of Cloud Kitchen

It’s a grim reality that many restaurants will go out of business. Every restaurant is currently in survival mode. In the short term, it will become critical for traditional restaurants to pivot to delivery for survival. Even if they do make the pivot, many still will not make it. In the current environment and with the continued uncertainty of the COVID-19 pandemic, cloud kitchens or food and beverages outlets backed by a cloud kitchen network have a better chance of survival and are likely the future of the food industry.

Most research and consulting reports on Indian cloud kitchens suggest that market size is expected to be about $1 billion by 2023 with a healthy double-digit growth rate every year, points out Narendra Singh Dahiya, Founder and Director, Home food, a mobile application for home food made by home chefs. Hence it is imperative for all food business owners to look at franchising their business and pivoting to a cloud kitchen as an extension of their business or maybe as a newer brand serving newer customers with the same old promise of quality and service now at your doorstep.

For the business seeker who is exploring to buy a food franchise in India, you may want to look at brands who are offering a successful cloud kitchen franchising model for sale which hasa strong tech backing and a very robust supply chain in place.

 The restaurant is an old age vintage car, used for showcasing and branding. On the other hand, cloud kitchen is its fast-paced futuristic- high-tech cousin.