Good Food Fast: Building a Dark kitchen business to Scale

Short Description
Cloud-kitchen or ghost kitchen/ dark kitchen what we may call the model, is projected to become a $2 billion industry in India by 2024
  • Nusra Deputy Features Editor
Dark Kitchen

No one would have ever thought that the concept that would get started as a small budget option would be a global trend in few year. Today, cloud-kitchen or ghost kitchen/ dark kitchen what we may call the model, is projected to become a $2 billion industry in India by 2024, according to RedSeer Management Consulting.

Cloud Kitchen

In the last five years, we have seen brands like Freshmenu, Rebel Foods, Box8, Biryani by Kilo, Cross Border Kitchens, Goila Butter Chicken, InnerChef and many more disrupting the space like never before. In fact, restaurant brands like Speciality Restaurant Group, Lite Bite Foods, Azure Hospitality, Foodlink that has lured the diners for more than a decade now have ventured into the cloud-kitchen space to take a bite of the already flourishing segment and also to overcome the coronavirus losses. With restaurants almost shut for 8-9 months, cloud-kitchen model came as a savior for many food businesses.

Also Read: How Rebel Foods has Built the Largest Dark-Kitchen Business in India

Cloud kitchens have disrupted the food industry the same way Netflix did forhome entertainmentor what Uber did to the traditional taxi industry. “Traditionally, the food industry has seen large QSR chains opening huge restaurants where customers would come and dine-in. For a food business, this model is high on overheads and not very profitable, especially in countries such as India which have very high rent-to-sales ratio. This is where cloud kitchens disrupt the market of food services,” shared Karan Singla, Head of Operations, India.

Rebel

Cloud kitchens enable to save a lot in terms of revenue, but they also enable multiple brands to operate within a centralised system. The pandemic saw a lot of the brick-and-mortar restaurant brands shut down, and pave way for the cloud kitchen brands. With multiple restaurants entering the delivery space, a completely new universe of option opened for the consumers to choose from, giving them an all-new experience, at the comfort of their home.

“With the trend of “ordering out” we realized that delivery was slowly becoming the real king. Considering the same we started to convert some of our ‘dine in’ kitchens to ‘delivery kitchens’, said Anjan Chatterjee who launched 3 cloud-kitchens during the pandemic with plans to add 26 more in coming months.

Low on capex, high on returns

2020 has been a year of surprises and the era of new trends being born. One of them is the introduction of cloud kitchens which is definitely here to stay. Another form of it that already existed was home deliveries from restaurants. The best part about cloud kitchens is that it has given the small players a chance to enter and test the market. The cloud kitchen model has various pros that work best in the industry's favour. For example, Swiggy and Zomato didn't play a big role earlier in the hospitality industry but have now become significant platforms for the growth and visibility of cloud kitchens. Cloud kitchens have lower operations costs along with saving a lot of money as you don't invest in large premises which is definitely profitable than a restaurant. In a nutshell, because of their low-cost maintenance and broader reach via online visibility, they are far profitable than restaurants.

“In terms of driving factors, I believe that cloud kitchens have lesser break-even time and fewer inventories. Although, the exposure to your clientele is almost the same as factors like social media, delivery portals, etc. help in reaching out to your customers and be visible. Not only it is a smaller and easier approach but is also a lucrative business strategy compared to starting a restaurant that takes up to 4-5 years to break-even,” pointed Rahul Bajaj, Director and Conceptualizer at One Tight Wrap.

Top Food Cloud Kitchen

May Interest: 7 Reasons Why Cloud Kitchen

Packaging is the new storefront

“Packaging is becoming the new storefront. People love visiting new restaurants and share their opinions on the interiors, ambience, and customer experience. With social distancing, in-store experiences have taken a backseat and food packaging becomes the new customer touch-point,” added Singla who believed that people will take note of great packaging experience, share it on social media making it a good conversation starter.

Also, it’s not just about packaging, a safe packaging is also a major concern for people these days.  The Masala Story from the house of Punjabi by Nature uses packaging that serves as a sustainable approach to the environment. Catering to hygiene and safety guidelines, The Masala Story didn’t fold and had to sacrifice some of the energy and character that had defined them in order to operate safely during the ongoing pandemic. The delivery kitchen adds additional sanitary and social distancing requirements like checking temperature, sanitising the kitchen etc.  similarly, Rebel Foods has introduced – ‘UV sure bag’. Food which is ordered on any of the Rebel Foods brands will be put in an outer bag, which is run through a UV chamber, deployed at all partner kitchens, before being handed over to the delivery person. The UV chamber disinfects both the outer and inner surfaces of the bags making sure that it’s completely safe.

It’s a global boom

“In many countries, take out or delivery for restaurants has converted from 5-20% of their business, to now, 80-100% of their business. And hot food delivery has, in the last 6 months, increased user penetration from 20% to 80% of the population. When you factor in generational demographics, this sort of user shift would normally have taken 10-20 years to occur. Handling that level of demand increase in such a short amount of time is not an easy feat, especially for restaurants not designed for the significant reversal of demand and distribution channel, from dine-in to take-out / delivery,” shared Kent Wu, COO of Taiwan-based JustKitchen that has grown to 40 per cent month-on-month in just ten months of starting its business.

Backed by the customer support, the segment heavily relies and works on internal feedbacks, loops and interactions as it believed that customer feedback plays a huge part in the success and accomplishing product market fit.

“We're proud to state that 30% of our customers provide feedback and 99.5% of it is positive. We have huge customer loyalty and ultimately, they make us the success we are today,” added Wu of JustKitchen that has decided to go public on TSX Venture Exchange.

Top cities

Similarly, Dubai-based Kitopi that is currently present in the UAE, Saudi Arabia and Kuwait markets, is now operating more than 60 satellite kitchens with more than 1,200 partner restaurants. Also, to cater to the growing online needs, Kitopi launched an e-grocery business by launching ‘Shop Kitopi’ in Dubai last March.

It has also partnered with Kuwait-based KLC Virtual Restaurants for expanding KLC in GCC region last week.

“Our mission is to satisfy the world’s appetite, and partnering with KLC brings us one step closer to achieving that mission,” said Mohamad Ballout, CEO and co-founder of Kitopi by adding that  they achieve this by taking care of the operations – such as sourcing of ingredients, cooking, packaging – and also delivery by partnering with third-party aggregators.

Hence, we can say that with all the numbers and attentions that the cloud kitchens have lately garnered, as consumers have been forced to turn to online for food delivery due to the pandemic-induced lockdowns and movement restrictions, it is surely going to rule the food sector for quite some time.

Looking at the trend, we at Restaurant India are doing the first-ever dark kitchen and delivery summit and awards on 20th May 2021. The virtual-conference will gather top players from India and global markets discussing and debating about the segment and its growth story, demand, consumer trend and why it's important for brands to look into delivery not just as an option but as a necessity today. For more details please visit: www.restaurantindia.in 

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