Cloud Kitchen Future Model For The Global Food Industry 1587223115 [PDF]

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Cloud Kitchen:

Future model for the global Food Industry

What is Cloud Kitchen ? • A cloud kitchen is a production unit where food is prepared. There is no dine-in facility. The food can be ordered online, hence, the name cloud kitchen. • It relies entirely on third-party integrations or home delivery orders placed on call or through a website • The cloud kitchen format adds more flexibility and customer reach by using various food delivery aggregators and social media • One can create multiple brands and cuisines from the same kitchen

How it works ? The orders come in from the customers

Kitchen receives the order details

The meal is cooked

The cooked food gets packed properly

The entire process of order execution can be tracked online by the customers

The parcel is delivered to the customer by delivery person

Cloud Kitchen vs Dine-in Restaurants Basis

Cloud Kitchen •

Does not need parking space or footfall to be

Dine-In Restaurants •

generating revenues. •

Location

Thrives on online ordering and is generally located

among other things. •

around residential localities or corporate areas. •

Need less investment in terms of kitchen area, rent and

Located in areas where there is high footfall and visibility

Need to be highly accessible, have ample parking space. And comply with the local zoning laws.

•

staff cost.

Requires relatively higher investment in terms of rent, layout planning, safety approvals, interior set-up and so on.

•

Property Cost

•

The restaurants need to be located in an up-market locality.

space for customer seating, the rent component is

•

To cater to a large clientele, the restaurant needs to cut-out

minimal and completely depends upon the locality.

•

Staff Cost

Since cloud kitchens need less area and does not need

•

dine-in area and a large kitchen. •

These two factors add substantially to the rent component.

The number of staff required in a cloud kitchen is very

•

Restaurants require higher number of staff.

less as compared to dine-in restaurants.

•

This model generally needs a head chef, kitchen staff and

The model generally requires a head chef, 4-5 kitchen staff and a housekeeper (depending on scale of operations)

servers. •

Staff strength depends upon the number of guest the restaurants is catering to.

Cloud Kitchen vs Dine-in Restaurants Basis

Cloud Kitchen •

Cloud kitchens usually offer different cuisines, which is

Dine-In Restaurants •

why the operational costs could vary widely for different

Operational Cost

•

the variety of the menu the restaurant is offering. •

brands.

The cost is directly proportion to the number of cuisines and

Rebel Food which owns Faasos and Behrouz Biryani,

The restaurants also need to stock up high inventory to account for unforeseeable demand.

for instance, which serve wraps and biryani, respectively may incur additional expenses than a single cuisine food service. •

Profit Margin

•

Operating a cloud kitchen is much more profitable in

•

The average profit margin for any restaurant, taking the

comparison to dine-in restaurants.

basic considerations like rent, payroll, utilities,

Generally it is seen that could kitchen can make up

advertising, equipment repairs, and general

to 15% profit margin, depending upon their

maintenance into account, is anywhere between 3% -

allocation across the cuisine offered.

5%.

Cloud kitchens are easy to set up, and have high profit margins

Some brands operating on Cloud Kitchen Model

Many brands have created a niche depending on customer convenience and requirement

Pros and Cons of a Cloud kitchen

1. No personalized touch to build customer relations. 2. Limited audience: can only reach out to tech-savvy customers 3. Limited brand presence compared to traditional outlets

1. Streamlined order process 2. Low investment 3. Low operational cost

4. Better expansion opportunities 5. Scalable and customizable sue to greater digital interaction

Types of Cloud Kitchen Business Models

1

The Independent Cloud Kitchen Single brand, single kitchen, no storefront.

How it works

Order comes from online sources

Single cloud Kitchen

Specialized cuisine

Delivery only

Delivery via existing delivery aggregators

No. of Brands Brand A

This concept has only one kitchen and one brand name. One of the preferred ways to start business and enter into the F&B Industry

2

The Multi-brand Cloud Kitchen Multi-brand, multi-cuisine, single kitchen, no storefront

How it works

Order comes from online sources

Single cloud Kitchen

Multiple brands

Usually have multiple cuisines

Delivery only

Delivery via aggregators

No. of Brands Brand A

Brand B

Brand C

etc…

This concept has single kitchen with multiple brands. This model has seen lot of interest from PE/VC players as it generates more revenue, scalable model, targets different audience and cost effective

3

The Hybrid Cloud Kitchen Single/multi-brand, single kitchen, multiple outlets with a storefront.

How it works

Order comes from online sources

Single centralized cloud kitchen

Single/multi-brand

Usually have multiple cuisines

Delivery & take away from multiple outlets

Self delivery & delivery via aggregators

No. of Brands Brand A

This model has one centralized kitchen and one brand name. It however introduces the concept of take away delivery; thereby creating an impact with respect to branding among its customers

4

Delivery App-owned Rented Cloud Kitchen Aggregator-owned, multi-brand, rented co-working kitchens, no storefront

How it works

Takes online order from only owner delivery app

Multiple cloud kitchen partners

Multiple brands

Usually have multiple cuisines

Rented space can be provided by delivery app to cloud kitchen partners

Delivery via aggregators

No. of Brands Brand A

Brand B

Brand C

etc…

The aggregator OWNS different brands which are showcased on its app, and the food can only be ordered through the owner delivery app. The aggregator can provide rented co-working kitchen to startup kitchen partners and give access to capital via equity.

5

Delivery App-owned Cloud Kitchen + Takeaway Aggregator owned, multi branded, rented co-working kitchens with storefront

How it works

Online order from only owner delivery app

Multiple kitchen partners

Multiple brands

Usually has multiple cuisines

Rented space can be provided by delivery app to cloud kitchen partners +Take away

Delivery via aggregators

No. of Brands

Brand A

Brand B

Brand C

etc…

The aggregator OWNS different brands which are showcased on its app, and the food can be ordered through this owner delivery app or available for takeaway.

6

Fully Outsourced Cloud Kitchen Cooking and delivery fully outsourced

How it works

Take orders from all sources

Cloud kitchen buys and stores the raw material as per requirement

Outsource to cloud kitchens

Prepares the food at its centralized kitchen

Delivers it to end customers

No. of Brands

Brand A

Brand B

Brand C

etc…

In this model, everything is outsourced from purchase of raw material to cooking of dishes. The promoter focuses on curating the right menu and can have different brands for different target customers

Cost of Opening a Cloud Kitchen

Breakup of Cost

Rental Since the area required is very small, the rent component can cost approx. INR 25,000-35,000 per month

Kitchen Equipment Depending upon the cuisine, the equipment cost can be estimated to INR 2.50 Lac (when 50% of the kitchen equipment is bought second hand)

Licensing FSSAI, Health Trade License, Tax Registration License cost INR 15,000-20,000 per annum

Marketing

Staff Since the headcount is very low in such models. INR 40,000-70,000

Misc.

Marketing includes various digital and social media channels.

Design, Interiors and Furniture & Fixtures, POS software, staff uniform

INR 15,000-20,000 per month

INR 75,000- 1.00 Lac

Economics of Cloud Kitchen

Typical Size of a setup

• 300-1,200 sq. ft

Cost to setup a cloud kitchen

• Rs. 80 Lacs-1 Cr

No. of orders per day

Service radius Margin Source: Industry

• 10,000 orders is usual business

• 3-8 Kms

• 35% gross margin, against 15% from conventional restaurants

Recommendations to Hotel owners

Strategy for Hotel Owners

Use of under utilized kitchen space

▪ The hotel can lease out under-utilized kitchen space to online aggregators • Profit sharing on revenue share also possible

Launch food brand

▪ Hotel and online aggregator can come together to launch multiple new food brands for different target audience. ▪ The top seller dishes can be part of the hotel’s F&B menu.

Operational 24*365

▪ Hotels kitchen are operational 24 hrs*365 days ▪ Can be utilized for late night delivery ▪ Being inside a hotel, safe & secure surroundings

Win-win situation Delivery Model Approvals

▪ The aggregator brings technology platform on the table ▪ Hotel owner is utilizing the dead area ▪ Both are creating revenue for each other • With home delivery , food can be delivered within 8-10 km of the hotel radius • Helps in brand promotion of the hotel • Special discounts and loyalty program to use hotel facilities i.e gym. spa etc • All approvals are in place • No additional cost involved

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