After decades of building trust among users for online transactions and commerce, the last few years have seen internet companies come to the offline market to bridge the gap between retail and online sales. Omni-channel or hybrid sales are becoming the next big thing. From furniture players launching experience centres to Myntra, Nykaa, Lenskart and others — the next phase for online businesses is clearly omni-channel.
The same can be said for restaurants and cloud kitchens. While restaurants cater to the retail market, cloud kitchens are focussed on food delivery. But food and beverage brands are quickly realising that the future could be a blend of both. Rajesh Sawhney-led Innerchef is taking its first steps towards this with a hybrid model for the company’s Bombay Sandwich Company brand.
Founded in 2015 by Sawhney, Sanjeev Singhal and Bal Dighent, Gurugram-headquartered Innerchef started as a raw ingredients kit that consumers could make a meal out of. However as the founders later realised “India is not ready for the box model”, the company pivoted to delivering food through cloud kitchens.
Sawhney told us that the company has built about 33 cloud kitchens that operate as a hub-and-spoke model across six cities with its portfolio including brands such as Healthie, Bombay Sandwich Company, Thalis of India, YumYumDilli and YumYumSouth.
While Healthie contributes to a third of its orders overall, Innerchef is looking to take Bombay Sandwich Company (BSC) towards a hybrid future, combining physical stores with the cloud kitchen model.
Talking to Inc42, Sawhney said BSC has launched four cafes in pilot mode in Gurugram to test the hybrid model. He explained that this particular hybrid model uses a combination of cloud kitchen delivery and outlets or cafes.
At present, the company is using cloud kitchens with a shared model across multiple brands under Innerchef from Bombay Sandwich Company to Healthie. The company plans to take this to 1000 such cloud kitchens.
Sawhney told us that the company plans to add 100 BSC cafes in 2020, with a focus on Tier 1 cities in the initial stages. He added that the brand has seen 20% M-o-M growth of revenue and is looking to expand into Tier 2 and 3 markets as well in the longer run.
Explaining how its hybrid model is different from a restaurant chain and a cloud kitchen-only model, Sawhney said that while restaurant chains mostly focus on walk-ins and cloud kitchens focus on food delivery, the hybrid model leverages the best of both. “In our hybrid model, cloud kitchens take care of all delivery demand while cafe takes care of visitors. As a hybrid business 70% of our business is delivery-driven, while the rest will come from cafes.”
In simple terms, Bombay Sandwich Company is leveraging multi-channel distribution with a multi-format model.
In a recent cloud kitchen analysis, Datalabs by Inc42 found that while wider audience reach and last-mile fulfilment are great in the cloud kitchen-only model, it usually suffers from having no meaningful customer interactions and this impacts customer retention in cloud kitchens.
The low setup cost, lower operational expenditure and rising appeal for home delivery have made the Indian cloud kitchen market very crowded, but it’s still the most affordable option for new restaurants looking at the online delivery space.
Further in terms of unit economics, another Inc42 analysis noted that the cloud kitchens are able to make 10% profit as compared to dine-in restaurants making 3% profits.
Innerchef is warding off this potential threat with its hybrid model, which lets its brands connect with customers directly in cases of walk-ins, and also cater to delivery orders at a lower cost and higher margin thanks to the cloud kitchen model.
Quotes have been edited for clarity