Cloud kitchen is the new cloud in the market. They are distinctively tech-enabled and they take advantage of the ubiquitous food delivery apps such as UberEats, Grubhub, Zomato, Swiggy and Doordash. Cloud kitchens are commercial facilities purpose-built to produce food specifically for delivery. They are also known as ghost kitchens, shared kitchens, or virtual kitchens.
In simple words, cloud kitchens are restaurants that don’t have a physical outlet. The food is cooked in the kitchen and then delivered to other sites. While the cloud kitchen trend is still maturing, it is definitely on the rise.
For decades, Chinese restaurants have been making most of their business via delivery channels. The pizza industry fundamentally has built its business model around optimizing for delivery. But moving to a delivery-only model has been made possible and is popular recently due to a leap in technology and changes in consumer habits.
Merits of Cloud kitchen
- Higher Profit Margin: A restaurant has an average profit margin of 3% while a cloud kitchen’s profit margin hovers close to 10%.
- Savings on infrastructure: The costs incurred from paying rent and other services are drastically lower compared to traditional restaurants.
Demerits of Cloud Kitchen:
- Technological expenses: The biggeststumbling block in cloud kitchen is that the replacement of real estate costs with colossal technological costs and that is because to have the proper communication flow between food delivery apps regarding the orders and customers’ location.
- Heavy competition: Inconsistency and huge competition as large restaurants are now prioritizing online delivery mode.
Business Models: The primary business models in which a cloud kitchen operates are given below
- REAL-ESTATE PLAY: In this, Lease underutilized properties are converted into multiple shared kitchens, and rent them to other existing F&B brands in densely populated areas.
- VIRTUAL RESTAURANT BRANDS: These are the restaurants that exist only on third-party delivery apps.
- OPERATIONS/KITCHEN EFFICIENCY MODEL: For this model, one must create a large kitchen with multiple stations and then partner with existing brands, and not just provide them the kitchen space but also take over their entire operations and supply chain.
- DELIVERY APP-OWNED STACKED CLOUD KITCHEN: Zomato, a delivery app-owned stacked cloud kitchen, provides aspiring food entrepreneurs with kitchen space as well as amenities such as built-in kitchen equipment and comprehensive processes. Its ordering app and delivery system are included in the price. This model also includes a storefront option for customer interaction.
- Door dash
- Kitchen United
- Rebel foods
The global cloud kitchen market is expected to reach around $57bn in 2021, with market revenue exceeding to $115bn by 2025. This phenomenal growth can be attributed to technological advancements as well as the flexibility and efficiency of ghost kitchen.
With the new wave of the pandemic hitting the world, cloud kitchens globally, are emerging as a strong backup allowing restaurant operators to streamline operations and become more efficient.
For details on Business models and growth please feel free to refer to the following Cloud kitchen Industry report from CrispIdea: