How Cloud Kitchens Are Helping Food Industry Scale Up To New Levels

The food industry has always been under multiple technological innovations. Whether it is 3D printing food, On-demand food delivery, Drone, or AR  for generating real like experience, the food industry has always set the bar high for the next technologies to come.

Cloud Kitchen is one such concept that is taking place in multiple countries. And investors and entrepreneurs are really curious to know about this out of the box idea. So basically, these kitchens are not a traditional restaurant or eatery where you could go, order your delectable food, and eat there.

These are just a Kitchen. Nothing else. No infrastructure for attracting foodies, no waiters, no tables, no furniture, nothing. It’s only a pure kitchen. There is just a little space for the chefs and accounting person that collects the order and manage billings and accounts of the kitchen.

According to DataLabs by Inc42, the projected market size of cloud kitchens is expected to touch $1.05 Bn by 2023.

Tech giants like Amazon and Uber have also invested in this space.

 

Image Source: Morgan Stanley

Let’s cover the business models and some popular examples of successful “food in the cloud” based startups. But before that,

How Do These Cloud Kitchen Work?

Let’s start with an example;

Robb is a food lover and he also loves to cook great food. He wants to start a business in the food industry. However, due to a lack of money and other supports, it seems impossible to start this business. He knows he has to rent a place, build physical infrastructure, hire staff for hospitality, and other loads of things.

But financially he is not capable of handling this much of resources. What should he do? Should he give up the dream of cooking and serving delicious food? Is there any idea where Robb does not have to compromise on his desire to become an entrepreneur in the food industry?

What if I say Yes! What if I say Cloud kitchens have been invented for people like Robb.

As mentioned earlier cloud kitchens are delivery only restaurants that don’t need big space (so Robb will have to pay less rent), no staff (so no monthly salary to pay), no infrastructure (no expense in building interior and setting sitting tables) and overhead costs for maintenance.

Starting a simple restaurant in India might take about INR 30 Lakhs to INR 40 lakhs upfront. This amount directly comes to INR 8 Lakhs to INR 10 Lakhs if you want to start a cloud kitchen. In fact, it can be started in any industrial building in the small space rather than approaching for a street-facing costly locale.

What Does It Take To Start A Cloud Kitchen In Your City?

Usually, this new age of restaurants could be started easily if you follow some methodical steps.

To get started with the business, one should just decide on the type of business he or she wants to go with. If you are a chef, then you will not have to worry about hiring another chef. As your business expands and if you think you need to add more cuisines to your menu, you could approach new culinary talents for a particular cuisine.

Explore for space for your kitchen. You don’t need a wider or bigger area for running a cloud kitchen unless you grow at that level where you need that much space. Fassos, an Indian cloud kitchen startup has collaborated with many other restaurant chains that serve a variety of cuisines. Fassos host multiple small brands in one big kitchen. So it needs a huge kitchen. The startup has a variety of cuisines like Italian, Punjabi, Biriyani, Chinese, and traditional Indian.

Since these cloud kitchens are delivery-only restaurants, this kitchen can be started by building a delivery mobile app for doorstep delivery so that users could browse through the app and order his favorite food. So one must consider the cost of developing an app for the delivery boy and the customer. The owner will also require his admin panel for accepting orders and managing delivery boys (Yes, one must hire delivery boys to meet the order requirements) and inventory of food items.

Top Players in the Cloud Kitchen Space

Some of the top players in this segment include Fassos, one of the leading cloud-based startup and the brainchild of Jaydeep Barman. It is currently operational in more than 150 locations across 50 major cities. Other food aggregators like Zomato and Swiggy have also jumped into the cloud kitchen model and has done mammoth investment for small restaurant owners to expand into multiple locations without too much investment.

Zomato Kitchens has opened up a new market for restaurant owners, by removing all hassles from the process of opening up a new restaurant. Owners don’t have to build any infrastructure of the kitchen and do not have to run around for any licenses or utility setup. There is a high tech kitchen which only requires kitchen equipment from the restaurant owners.

It has been touted that Swiggy has established 1000 cloud kitchen for its restaurant partners across India which is way more than its local rivals. The company has invested in million square feet of physical space for its restaurant partners for faster brand expansion in new locations. The company professes that one restaurant partner out of the three partners is expanding its second cloud kitchen within the first 90-days. The firm is further scaling up “pods”  for eateries in a way that they are within 10 minutes from the customers’ address. Pods are small units that house the cloud kitchens.

Not only these aggregators are investing in kitchen space but the established companies that are not in this space also pivoting into the promising business idea.

Giants Are Turning Toward Ghost Kitchens: Tough Competition in Future

Ex Uber co-founder Travis Kalanick has also been working in starting up a cloud kitchen in the potential markets. There are some reports on Kalanick’s investment in the cloud kitchen space in India as well. Kalanick raked $400 million of funding from Saudi Arabia for the San Francisco cloud kitchen startup.

As per the recent media reports, ecommerce giant Amazon also forays into the cloud kitchen domain looking at the bright business opportunity. The company has decided to start its first kitchen in the Bengaluru. Amazon may initiate its joint venture with catamaran ventures under Prione business services.

Ola Foods (earlier Foodpanda), a food delivery service owned by Ride-hailing service Ola has also forayed into the cloud kitchen. The company currently runs a network of cloud kitchens across India through which they offer a range of own food brands like its flagship Khichdi Experiment and a range of other brands. Currently, many of these facilities can be availed through the Ola app as well as Swiggy and Zomato.

It remains to be seen where the food tech is going with myriads of big companies are pivoting to Cloud kitchen looking at its promising business potential. Not only these big players but any individuals who want to fulfil their desire to start a food business could start this app-based idea if the food idea is unique.