All About Cloud Kitchens: The New Trend in Food Industry

Technology has transformed the food industry for good. Be it production or services, every stream is benefitting from it. With stiff competition among the restaurants, food space has witnessed many unfavorable and volatile states. 

Reducing margins and accelerating failure rate caused many restaurants to close their outlets within a short span of time from their inception. The reasons are rather simple- they are not able to cover the operational costs and combined with the ever-changing consumer behavior, the industry is seeing a lot of failures than success stories.

Even after these failures, the rate of visits and orders a restaurant gets from dine-in customers continues to decline, as people are giving preference to home delivery food services. People are more comfortable with getting their food delivered right at their location to avoid the hassle of dining out. 

What is Cloud Kitchen?

There are many names given to cloud kitchens such as ghost kitchens, shadow kitchens, virtual kitchens or dark kitchens.

It is a kind of restaurant that has no physical location or space, no dine-in facility: just like a manufacturing company. Restaurants that operate on the concept of cloud-kitchen only have an online presence and a kitchen infrastructure, where they prepare food. Users or consumers can place their orders through food aggregator apps or the restaurant’s own app. So they entirely rely on online home delivery apps or on phone-based orders.

Ultimately, just like any other manufacturing factories, they prepare food and deliver it to the consumer.

Also, the paradigm of the cloud kitchen gives flexibility to restaurants where many brands can operate under one roof or one restaurant can have many brands operating under one roof. Restaurants are switching to cloud kitchens and analyzing their intricacies.

For now, cloud kitchens are considered as the most efficient way to operate a restaurant.

Let’s understand the cloud kitchen model, it’s working, its features, and other important aspects.

Is Cloud Kitchen a Good Startup Idea?

As we have discussed above, many restaurateurs are raving over the cloud kitchen concept and adopting it. The reason is that setting up a cloud kitchen does not require much investment and is easy to manage. Although, the primary focus has to be the quality of the food, so that consumers can put their trust in your brand.

There are many factors behind the massive boost of cloud kitchen in the food industry such as increasing usage of smartphones, an increase in delivery service providers, etc. Moreover, this concept gained enough popularity to gain the trust of investors and drew a good amount of investment.

Many reports and surveys concluded that Cloud Kitchen is moving ahead with a great CAGR rate. A leading food delivery agency has gained high profits in the industry after shifting to the cloud kitchen model. 

Here, we are putting some light on the fact: Why is the Concept of Cloud Kitchens is Getting Popular? 

Advantages of Cloud Kitchen

  • Low Infrastructure & Set Up Cost

It’s easier to set up a cloud kitchen business model than a dine-in restaurant. All it needs as a business infrastructure is some space to cook the food. It is easy to update and change the menu anytime without much hassle. Experimenting with the menu is much easier since it is an effortless task to put up a new dish on the menu list and remove it if it is not doing as great as expected. It saves overhead expenses as well. Because there is no need to set up a fancy storefront for customers. The only focus of the cloud kitchen model is to maximize the margin profit. Cloud kitchen set up does not ask for fancy entrance or client services or parking services or anything else other than quality food. It is a one-time investment model where all you need is kitchen utensils and food making items.

  • Low Operational Cost

Brick-and-mortar restaurants have to invest in real estate or physical location which is not the case with the cloud kitchen model. Cloud kitchens get away with this additional cost, as they can be operated from any location including your home. Hence, no need to bear rental expenses.

Minimum staff is needed for this model and no-client facing staff is required, which also reduces the operational cost.

  • Scalability

Cloud kitchen business can be easily expanded over other city areas with a minimum investment amount. A single outlet can deliver its services up to a distance of 2 to 3 miles. New kitchen outlets can be opened at different locations for more exposure.

Also, you can set up a bigger kitchen outlet that provides food delivery services over a large area.

Disadvantages of Cloud Kitchen

It is a trending startup idea in the market and carries a few substantial disadvantages. Although it is an economical business model but being a new model, it is not able to overpower the established restaurants. The obvious reason is human psychology, as consumers cannot build an emotional connection with newer brands.

Also, it is entirely dependent on food delivery aggregators, which poses some barriers and risks to it. These are a few more disadvantages of cloud kitchen model:

  • Stiff Competition as it is easy to adopt this model
  • Extensive reliance on food aggregators
  • No-connect with customers unless you have your own app/website

How can you start your cloud kitchen?

If you own a restaurant, then setting up a virtual kitchen will add more profit and exposure to your business. Even with lesser investment, you can start delivering food services from your cloud kitchen.

Let’s have a look at the requirements to set up a cloud kitchen:   

  • Kitchen Space

The kitchen space will depend on the number of cuisines offered by you. You can set up a big kitchen space if you have multiple cuisine options and chefs to prepare those cuisines.

Opening a kitchen outlet in a prime location will require comparatively more capital. Conduct a proper survey before deciding the location of your outlet.

  • Kitchen equipment   

Kitchen equipment takes up a major part of your investment. You must have required kitchen equipment according to the cuisines you will deliver. Some common kitchen equipment types are refrigerator, oven, chimney, utensils, etc.

  • Kitchen staff   

Because your outlet and cuisines will win hearts with their delicious and unique taste, quality and taste of the food cannot be compromised. So a proper kitchen staff is required to ensure proper handling of food preparation and food delivery services. The person preparing the food or chef must be a hygienic and proficient person.

If you expand your business, you can extend your staff. Also, you can hire anyone who cooks the best food, be it your family member or friend. Minimum four persons are required as kitchen staff, one for packaging, one for handling orders & billing, one for cooking the food and one to manage other related tasks. 

  • Licensing & PoS   

You will need compliance with the local food & beverage industry compliance before hopping onto the business. Moreover, You will need PoS software for billing & inventory requirements. That way you can manage your order and staff better. Cloud-based PoS systems are a trend nowadays.

Eventually, the cloud kitchen concept is not an unfamiliar concept in the industry, as many food delivery services have been in the market for a long time. With technology development and change in consumer preferences, the cloud kitchen paradigm has never seen before market opportunities.

It has been estimated by the experts that the online food delivery sector will attain exponential growth in the coming years, which is expected to be $200 billion by 2020.

If you are wondering over How much does it cost to make a food delivery app development? Note that development cost depends on various factors. Although, you can start your cloud kitchen without having an app by registering on food aggregator apps. These food delivery partners will take some commission amount from you. But, if you have your own app, all the profit margins will fill up your bank accounts.