The Advent of Cloud Kitchens on the Food and Financial Palette
Food. The moment this word is read or heard, it evokes a distinct dish in the mind, perhaps even served on an intricately designed platter with an almost visible aroma! Of course, when the preparation of food isn’t possible at home, the next best option (some argue that even the first best option!) is the “Restaurant”. This too evoked a distinct imagery in the mind; accept it.
We all bore witness to a dramatic shift in the way the food industry operated. Suddenly, all meals, however big or small, were served to our doorstep. From the tiniest of items such as a drink of lemon juice to the heavy and elaborate platter meals, all are delivered from kitchens and restaurants of various shapes and sizes. The article of interest here is that the share of cloud kitchen in this gamut of food industry is resoundingly high vis-à-vis the time honoured ‘brick and mortar’ kitchens.
What is cloud kitchen, you ask? It’s merely another restaurant that does everything a regular restaurant does, other than serving food to those who come to it. If you say that’s pointless and absurd, you aren’t wrong…. but the cloud kitchens, also known as ghost kitchens, are doing exactly the same. However, there’s one critical piece of information that is not yet disclosed to you: The cloud kitchens operate solely through take-outs and such assorted online operations and delivery only mechanisms.
There is something distinctive here to ponder over. Barely a decade ago, nearly no cloud kitchen existed in the country; yet, the bulk of online food orders today are entirely by cloud kitchens. If you delve into the working of a cloud kitchen, it isn’t too hard to catch the logic as to why they did it the way they did it. A regular restaurant needs to have two indispensable elements – One, the perfect location; two, the kitchen setup. The second element is usually organised without much hassle but the first one is always a tough pill to swallow. This is because of the exorbitant rents that need to be paid for a restaurant on a prime/good location. It’s not an overstatement to say that the location is what makes or breaks a food business.
Now, the headache of finding an appropriate location and the gut-wrenching rents are done away with cloud kitchen. In fact, they also save on expenditure with regards to serving staff. Some accounts peg the rent to revenue ratio to reduce by 2/3rd the original expenditure! This makes the scaling up of the business model efficient and better placed to gain full benefit of the economies of scale.
One of the biggest names in the food biz – Rebel foods, under whose banner Faasos and Behrouz Biriyani operate; both businesses are valued multimillion businesses and work entirely in the cloud kitchen framework. They’re one among the pioneers of the Online Food Industry of India and they did the same exact thing, utilizing the same exact virtues that were discussed earlier and grew to be what they are today.
Fundvice, having been in the investment domain for many years now, has also had its fair share of involvement in the investment in the Food Industry, more particularly in the scaling up of a ‘Rebel foods’ like cloud kitchen company. Do get in touch with us for more information.