Decoding the Emerging Concept of the Cloud Kitchen Business Model
The concept of cloud kitchen, which is still at the nascent stage in many parts of the world, is currently the greatest transformational force for the food-tech industry. The delivery-only business model of a cloud kitchen proves highly lucrative for food businesses, with the surging consumer inclination towards online food ordering. A cloud kitchen is a virtual restaurant that does not provide on-premise dine-in facilities to customers and is entirely dependent on food orders placed online through online food aggregators or food ordering-enabled websites or mobile apps. The intensifying competition in the ever-evolving food-tech space has led to a significantly higher demand for online food delivery, thereby giving rise to the concept of cloud kitchens.
Cloud Kitchen Foreseen as the Future of the Foodtech Space
Cloud kitchens, also dubbed as ghost kitchens or virtual kitchens, have gained massive popularity in the food & beverage space over recent years, with restaurateurs immensely lauding the concept and considering it the smarter, more lucrative way to run the restaurant business. The unique cloud kitchen business format offers flexibility to the restaurateur and allows them to launch more than one brand through the same kitchen infrastructure. The new business model is appealing to online food delivery companies as it eliminates overhead costs in terms of rent and dine-in equipment. Moreover, restaurants are increasingly adopting the cloud kitchen model as the takeaway-only concept helps them evade additional capital investments.
The establishment of a cloud kitchen requires a robust online presence, reliance on third-party delivery apps for digital menus, efficient marketing, and promotional strategies, promotional offers, strong food delivery, and supply chain, digital payment gateways for payment collection, and above all, a major focus on customer satisfaction. The cloud kitchen market is poised to gain unprecedented traction over the upcoming years. The growing adoption of online food delivery platforms, lower costs of establishing these platforms, rapid urbanization, higher living standards, and the expanding workforces fueling the demand for online food delivery, subsequently propelling the market growth.
How COVID-19 Is Steering the Cloud Kitchen Market Growth
The COVID-19 pandemic has prompted a sudden major spike in demand for online food ordering and delivery options, which, in turn, has spurred the growth of the cloud kitchen market. The coronavirus pandemic mandated the imposition of severe lockdown restrictions worldwide. Amid all this, the restaurant business is one of the many sectors that suffered a major financial blow, mainly owing to the fear of human contact with food. However, research has shown that the virus is unlikely to spread through food.
Cloud kitchen companies have been capitalizing on the significant shift from in-restaurant dining to home delivery of food observed during recent times. The cloud kitchen’s viable concept has made it possible for people to enjoy restaurant-like food delivered at their doorsteps. It has thus helped restaurateurs and food entrepreneurs pull through the previously incurred losses. The Philippines-based fast-food company, Jollibee Foods, announced its plans in May this year to invest around USD 139.4 million in its cloud kitchen development. The Filipino restaurant chain witnessed a major dip in dining demand during the COVID-19 peak, which encouraged it to tap into the cloud kitchen business.
Online Food Delivery Giants Involved in the Cloud Kitchen Segment
The leading food aggregators like UbetEats, DoorDash, Rebel Foods, Deliveroo, Kitchen United, Starbucks, Ghost Kitchen Orlando, Zuul Kitchen, Cloud Kitchens, and PostMates are increasingly developing cloud kitchens. Moreover, online food delivery platforms like Swiggy and Zomato play a pivotal role in India’s cloud kitchen market.
Rebel Foods, which pivoted to a full-fledged cloud kitchen business, has over ten robotics units and kitchen automation set-ups across its kitchens at present. The company currently houses over 15 virtual brands, including Oven Story Pizza, Sweet Truth, Mandarin Oak, Slay every day, and Behrouz Biryani.
Marriott International recently inked a deal with food aggregator Swiggy to expand its 2020-launched ‘Marriott-on-Wheels’ doorstep food delivery service to several cities across India. As per the agreement, more than 20 hotels across Kolkata, Delhi, Bengaluru, and many other states, with a compact Marriott-on-Wheels menu, would be listed on the Swiggy app.