The food industry has witnessed significant transformation because of the Covid-19 outbreak. Although pandemic has been testing every industry, restaurants, and hospitality are being hit the hardest. Consumer behaviour has majorly changed in terms of what they eat, how they eat, and where they eat. This gave rise to the popularity of cloud kitchens.
What is a Cloud Kitchen?
Introducing the future of food biz – Cloud Kitchen. As the name suggests, is in the clouds i.e, there is no physical outlet or dine-in facility. It runs on a simple formula; one roof, many brands.
This business model is entirely built around deliveries through third-party integrations or home delivery orders placed on call or through a website. They can either work within brick-and-mortar restaurants or function as a standalone facility.
“World is getting techsavvy, so why should your food be any different?!”
It allows restaurateurs, bakers, and others to operate and run their businesses using the same kitchen infrastructure and resources. One restaurant may operate many brands or virtual restaurants under one roof, or the kitchen may function as an incubator, with different vendors sharing the space.
A number of restaurateurs are raving over this concept, while others are trying to figure out the intricacies of it. People frequently mix up the concepts of Cloud kitchen and Delivery kitchen as the concept is still fresh. A cloud kitchen’s business model is completely different from what we commonly believe.
How it differentiates from delivery kitchens is that cloud kitchen has multiple brands operating in the same outlet. The owner could be the same person or different people. Whereas, in a Delivery Kitchen the outlet operates independently for a single brand name. Orders will be taken and processed under the same brand.
Why Cloud Kitchen?
Well, it is not only a quick way to launch a food business but also cheaper. The paperwork is less, and the launch can take place in a lesser amount of time. The advances in technology and changes in consumer habits have made this delivery-only business model popular & possible.
It offers certain advantages over brick-and-mortar restaurants, like:
1. Low overheads
As there are no physical outlets, cloud kitchen owners don’t have to worry about the service staff. Without the need for hosts or servers, labor costs are decreased significantly. It operates solely with kitchen staff and delivery personnel. Expenses such as location cost, land cost, employee cost, operating cost, kitchen set up cost, and marketing, etc are reduced or totally eliminated.
As a result, cloud kitchens are gaining popularity in the market because they provide a low-risk setting for entrepreneurs to try out their ideas, validate them, or fail at a cheaper cost.
2. Better efficiency
Cloud kitchens are very popular in terms of their efficiency. During rush hours, it becomes quite challenging for restaurants to cater to both dine-in customers as well as delivery orders. On the other hand, the cloud kitchen business helps concentrate on the delivery-only model. The delivery process is much faster and easier to manage.
Furthermore, ingredients can be prepared in huge batches for a number of different delivery-only brands operating from the same kitchen. Along with increased efficiency, it is also possible to save on ingredient costs by taking advantage of economies of scale.
3. Flexible Menu
Another crucial value that the cloud kitchen model provides is the flexibility with the menu. You can easily change your menu focus whenever you wish, without worrying about the printing cost or updating signage.
For example, if you run out of an important ingredient, or find that the margin on a certain item isn’t high enough, it is easy to swap out the menu item online for another alternative. This also makes it easier to respond to new food trends and fads by quickly adapting them to your menu.
4. Access to user data and real-time adaptability
Easy access to consumer data helps in analyzing the preference, tastes, and pulse of customers to innovate and improve services.
Cloud kitchens can optimize procedures, ordering, and staff scheduling depending on consumer behavior because they are built with technology in mind. The menu can also be tweaked to meet demand and boost profitability, allowing the model to improve over time.
Because you’re not tied to a physical location, you can adjust the menu or operating hours to meet your brand’s needs without impacting the customer experience. This can also help to reduce food waste by allowing you to make more informed ordering and preparation decisions.
Furthermore, virtual restaurants are so versatile that you can even develop a brand for a limited time. For example, in the summer, you could develop a healthy salad brand, and in the winter, a hearty poutine concept, allowing you to capitalize on seasonal demand for each type of cuisine while preventing any slowdown.
5. Digital brand awareness without high marketing spend
No foot traffic, no sidewalk sandwich boards, no light-up signs? No problem! Turn to the digital world and attract customers in a whole new way. Rather than having to market themselves, virtual restaurant brands can obtain instant visibility and quick exposure through delivery applications.
A new virtual restaurant concept will have to pay for visibility as part of the delivery app business model, but this can still be less expensive in the long run, especially if you are creative about building your brand.
Restaurant operators can promote their cloud kitchens on multiple platforms. Like Google, Facebook, Instagram, and third-party delivery marketplaces like Zomato, Swiggy, etc to generate buzz, as well as utilize SMS and email marketing whenever possible.
Growth from the COVID-19 pandemic
Due to the pandemic and government restrictions, many restaurants stayed in business, recoup their losses, and minimized employee layoffs by adopting this new way of doing business. The food delivery industry and companies like Zomato and Swiggy have seen exponential growth because of the boom in demand caused by restricted indoor dining.
Over to you
Overall, cloud kitchens provide numerous benefits to restaurant operators, from the opportunity to experiment with new ideas, less legal formalities to cost savings, to increased flexibility and efficiency.
With customers getting food at the ease and comfort of home, the cloud kitchen business is here to stay. Will you be opening a cloud kitchen in the near future? Make sure you’re working with the correct technology partner to help you maximize profit on every order, engage with customers directly, and generate repeat business.