"Physical restaurants with Delivery only brands and delivery only kitchens is the way forward"

In an e-mail conversation with Restaurant India, Ravi Gupta CEO Nukkadwala talked about his cloud kitchen brands, what challenges he faces in operating them and how the additions of these new brands will help leveraging the existing capacity without increasing any additional cost.

Edited excerpts;

With the launch of two new brands in the cloud kitchen model, how are you   operating it? Is it in a centralized kitchen format or multiple kitchen formats?

 We have a centralized kitchen in Gurgaon with modern equipments. It has the existing capacity to service 1,00,000 plus monthly orders and presently we are doing approx 20,000 monthly orders for Nukkadwala. The whole idea of coming out with multi-brand was twofold, one that we utilize the centralized kitchen capacity for initial processing or cooking for all three brands, which are Dum-Nukk Biryani, Nukkadwala and the burger brand where final processing happens at the existing seven outlets. Secondly, since the two new brands are exclusively marketed by the online delivery platform partner which will enable us to have a significant visibility and sales push without increasing any fixed cost. This will leverage our outlet capacity to deliver these 3 brands and ultimately adds significantly to the bottom line as well.

Currently, how are you delivering your product? Do you have your own delivery platform or you have partnered with some delivery platform?

For Nukkadwala, the Indian Street Food cuisine, we are using Swiggy and Zomato for delivery. For outlets where we are facing riders availability issues, we have our own riders and an internal team taking orders.  For the new brands, we have entered into an exclusive tie-up with the largest online delivery platform as delivery only brands, where we will supply the food from our outlets and platform will market to generate the orders and deliver it to the customer.

How have you designed your menu? How is it different from your physical restaurants?
 

If you are asking about the new brands, they are completely different offering than what we offer to our dine-in customers under Nukkadwala brand, the Indian street food menu comprises of north, south, west and east India Street food specialties serving all 4 meals, Breakfast, Lunch, Hi-Tea, and Dinner. Whereas under our biryani brand ‘Dum-Nukk’, which has already gone live on January 1, 2020, we have a full range of Dum biryani both veg and non-veg with authentic flavors from the street of Hyderabad, along with that we have given options to the customers for variety of range of starters, few meals with bread and a choice of dessert to complete the offering. We are keeping biryanis and burgers as delivery-only brands.

Why did you think of foraying into this model? Do you think in the coming years, this model will take over the physical restaurants in terms of making a profit?
 

This was a natural expansion mode that struck the board and senior management, as I had mentioned earlier these new brands will help us leverage our existing capacity without increasing any additional cost or maybe a nominal cost resulting in a significant increase in revenue and margins. Also, it will give us a bigger footprint to compete or have an edge over the competition. We are a food heavy brand with a clear differentiated taste, adding two more brands to the armor will give us an exponential growth path.
 

Whether the delivery-only model will take over physical restaurants in terms of making a profit? As a casual dining chain (CD-R) we believe that a blend of the physical restaurant with a Dine in brand, complemented by multiple delivery brands and delivery only kitchens is the way forward. The dine-in brand helps in getting visibility and is very important for customer experience and thereby drive delivery from the physical outlet. Whereas multiple brands delivered from the outlet brings additional revenue per square feet without any additional costs and boost the bottom line. There is a further advantage to complement the physical outlet with cloud kitchens set up. The low CAPEX and OPEX increases the reach of delivery for multiple brands giving a further boost to the margins.

What are the opportunities you see in this model? How are you planning to expand it?

We have a threefold strategy to expand. We are planning an asset free expansion from our current outlets with these two new delivery-only brands. We have already signed up one new outlet in south Delhi in a great location with a daily footfall of 7000 to 8000. We are planning an asset light expansion by adding 3 to 4 delivery only kitchen per outlet, to increase the delivery reach of outlets from 5kms to 15kms distance with all 3 brands.

What are the challenges in running this model?
 

We see two key challenges, with multiple delivery brands and comprehensive offering, one has to keep a close tap on the potential wastage, which ultimately impacts the food cost and thus margins. This will be mitigated by putting strong internal controls and the use of technology to ensure it stays within acceptable limits. Secondly, for delivery only brands there is complete dependence on how well it will be marketed by the delivery platform and how will the algorithm ensure the brands stay on the top. Since the platform is co-investing with us on marketing, we are very confident of its success.

What are your expectations with these new brands?

We believe that delivery based sales will increase to 40% of the total sales value for us in the next 18-24 months from the current 20%.