The entire restaurant industry suffered heavily due to the pandemic. But somehow, it did find a way to sustain itself. The Cloud kitchen model emerged as a way for the existing restaurants to save themselves from shutting down completely. Cloud kitchens are delivery-only based restaurant models which only function by taking online orders through their own websites or third-party aggregators. This pre-existing model came into buzz because of its low investment cost and high returns. Many renounced restaurants shut their dine-ins and had their kitchen working around the clock just to cater to online deliveries.
As per a research conducted by Redseer Management Consulting, due to the current situation, the Cloud kitchen restaurant model is estimated to be worth $2 billion in India by 2024. This valuation is much more than the previous $400 million. Even though the idea of such profitable kitchen model might seem tempting to any potential or existing restaurateurs,
There are a few pros and cons of operating a Cloud kitchen that you should know
1. Needs Low Investment
The Cloud kitchen business requires low investments. With this model, the restaurateur need not put heavy investments in the infrastructure or the interior of the restaurant. The Cloud kitchen only require a fully equipped kitchen, raw material and well-trained staff to operate. The location of any restaurant plays a key role in understanding the target audience and customer trends. But in the case of Cloud kitchen, its location does not really matter as long as it can deliver customer orders on time.
2. More Expansion Opportunities
The traditional restaurant models work on a set structure. A Chinese restaurant cannot expand its menu to authentic Italian or a fully functional bar would not fit in with a family restaurant’s theme. But with Cloud kitchen, this limitation is eliminated. Cloud kitchen as a whole can choose to manage and cater variety in their menu and hence reach to large customer base.
Take the example of, Rebel Foods which manages many Cloud kitchens like Faasos, Behrouz Biryani, The Good Bowl and many more.
3. Cheap Advertising and Marketing
With Cloud kitchen marketing and advertising costs are low. For a Cloud kitchen, the best way to advertise is through their own website, social media and sales promotions. They do not have to hire food bloggers, rent billboards or pay third parties for marketing. A good social and online presence is their biggest asset to gain quick popularity.
4. Low Labor Charges
Cloud kitchens do not need many employees. With no dine-in setup present, this model helps cut costs on hiring many waiters, captains or managers. This budget is used in finding trained chefs, paying third party online delivery aggregators and hiring restaurant delivery personnel.
5. Serve all kinds of Customers
Since cloud kitchen manages only online deliveries, they have a big opportunity of offering the best customer services. They can spend more time understanding recent market trends and customer demands. This helps them expand their reach among the customers. At the same time, saving money on other aspects increases the kitchen’s budget for acquiring quality raw material and creating a unique menu to cater to all kinds of customer needs.
1. Limited Offline Visibility
The entire model of Cloud kitchen is based on online and cloud services. And so, the customers might never know if the cloud kitchen exists and where. This becomes a major limitation in generating a new client base. With a proper restaurant structure, presence in the market itself helps in creating credibility. This element is absent in the Cloud kitchen business.
2. Higher Competition In The Market
Since the model and its functioning seem so lucrative and simple, more and more restaurants have entered the market. These numbers witnessed a spike especially due to the pandemic. Due to this, all the cloud kitchens have become a substitute for each other and the prices have been kept the lowest. This has affected the profit of the business at large.
3. Lack of Trained Staff
Cloud kitchen is a comparatively new model of restaurant and hence, the customer, as well as the staff, are less acquainted with it. Compared to the traditional model where there is one person for each task (biller and captain) here the entire staff has to handle everything together and so it can affect the quality of work.
4. No Customer Loyalty
Even though with the pandemic, the online ordering did increase, people still prefer ordering from the restaurants they are familiar with. Customers have a hard time trusting the quality of food coming from a restaurant they can’t really see or visit. Adding to it the tough market competition, it can be hard to cloud kitchens to build customer loyalty.
5. Heavily depended on Technology
Cloud kitchens are heavily dependent on technology. The business would suffer heavy losses if something as simple as an internet connection is weak or third party servers crash. Along with that, the system itself can crash anytime and the cloud kitchen has the threat of losing all its data. To avoid such situations a smart POS is essential which works even in offline modes to help cloud kitchen function effectively.
Cloud kitchen was the reformation of the traditional kitchens models. Despite their unique appeal, Cloud kitchens have previously existed in India in form of Dabba services and catering services. With Cloud kitchen’s rise, even the restaurant billing software has made technological developments and have become equipped to help in managing online deliveries. With the major shifts in the F&B industry from dine-in to online delivery, Cloud kitchens have become the most conducive model.
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