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Cloud Kitchens in India

Cloud Kitchens in India

What is a Cloud Kitchen?
The food industry has experienced several technical advancements due to increasing competitiveness and ever-evolving technology. One such idea that recently sneaked into the food industry and swept the world restaurant scene by storm is Cloud Kitchen. According to reports, the cloud kitchen concept is one of the fastest growing segment in the restaurant industry and is regarded as the more intelligent restaurant operation method.

A cloud kitchen is a type of delivery-only restaurant that doesn't have a physical space, a dining area, or a takeout counter. It is a restaurant kitchen that only accepts delivery orders and does not have a traditional restaurant or eating space. It is only a functional kitchen that manufactures food and prepares meals. The option for clients to place online orders using the restaurant app or an internet food aggregator app is called "cloud kitchen." Other names for these kitchens are virtual kitchens, ghost kitchens, and dark kitchens. There are already over 20,000 active cloud kitchens in Delhi, and their number is increasing by over 20% annually. These kitchens support a sizeable amount of direct and indirect jobs. Faasos by Rebel Foods, Hoi Foods, and Biryani By Kilo are some famous examples of Cloud Kitchens in India.

Types of Cloud Kitchen Business Models
Every cloud kitchen follows the same operational procedure: food is made and delivered to the customer's door after receiving an order. However, the manner in which their operations are carried out differs. For these delivery-only restaurants, there are various business models. Some of them are mentioned below:

  • Standalone Cloud Kitchen: These are independent kitchens that lacks a dining area and are owned or rented by a single brand. These restaurants typically specialize in a single cuisine and use a variety of food distributors or delivery services.
  • Multi-brand Cloud Kitchen: This business model reduces operational expenses by having numerous brands under one parent company that share one kitchen. Each brand/restaurant offers unique cuisine and attends to various client needs while sharing a sizable kitchen space all under one roof.
  • Commissary (Aggregator) Kitchen: Making use of the booming online delivery market, numerous delivery aggregators have launched their cloud cooking models, renting out vacant kitchen space and basic infrastructure to restaurant operators. On a shared basis, restaurants can utilize one of these wholly stacked or a shell kitchen, depending on their needs. In other words, multiple restaurant brands can cook simultaneously in a vast kitchen, accommodating many small kitchens.
  • Outsourced Cloud Kitchen: As the name implies, this concept enables a restaurant to outsource all except the final touches of nearly every process. Before the food is delivered, the chef gives it one final touch. All other tasks, including those involving the preparation of meals and interactions with customers are outsourced.
  • Co-Working Cloud Kitchen: A co-working cloud kitchen is an extensive kitchen infrastructure that many different restaurant companies can rent and use for their operations. These spaces are strategically placed, and each brand's kitchen unit is equipped with the essential tools and amenities.

Advantages of Cloud Kitchens
A virtual kitchen is an excellent substitute for the conventional brick-and-mortar restaurant, often known as a cloud kitchen or a ghost kitchen. Ghost kitchens give users the freedom to concentrate on food preparation and product promotion while reducing the administrative complexity and logistical challenges that frequently impede the food industry's success. Some of the advantages of cloud kitchens are:

  • Low Operational Costs: For a cloud kitchen, many of the expenses associated with running a typical restaurant are eliminated. Cloud kitchens theoretically incur lower expenses and offer an advantage over traditional brick-and-mortar restaurants in all cost areas, including infrastructure, overhead, logistics, etc.
  • No Investment Business: With less labor and infrastructure, a cloud kitchen can be designed to be a very lean business, allowing for a low-risk venture. In comparison to a traditional brick-and-mortar restaurant, a cloud kitchen requires much less capital to get started.
  • Less Human Resources Required: Opening a cloud kitchen requires one-third of the time and resources of opening a traditional dine-in restaurant because there is no need to rent a restaurant in a prime location or recruit people to serve customers.
  • High-Profit Venture - Starting a cloud kitchen is feasible with little to no staffing requirements, basic cooking supplies, furniture costs, or décor expenses. This makes it a successful venture by allowing restaurant operators the freedom to experiment, reduce costs, and gradually reach operating breakeven.
  • Easy Expansion: Since the operations are confined to a kitchen, the total Capex cost is considerably lower than that of a full-fledged restaurant. Without spending money on equipment, restaurants may use the size of cloud kitchens to test new markets and consumer perceptions.

Road Ahead
The rising demand for online food delivery services is one of the main factors driving the cloud kitchen market in India. Rising disposable incomes, widespread smartphone usage, easy internet access, and changing consumer preferences contribute to the growth of cloud kitchens in India. Additionally, the unanticipated COVID-19 pandemic outbreak and the subsequent statewide lockdowns have forced restaurateurs to switch to a delivery-only business structure to serve their clients better. The industry is expanding as more people have become aware of cloud kitchens' benefits over traditional kitchens, such as improved profit margins and greater flexibility in operating ghost restaurants from any place. Additionally, the extensive integration of point-of-sale (POS), kitchen display systems (KDS), and inventory management technology to expedite various kitchen operations, enhance communication, and prevent delays in order-taking processes is fueling market expansion. A favorable outlook for the market is also influenced by other reasons, such as the rapid development of cloud kitchens and strategic alliances between significant businesses to improve ghost kitchen services.

By the end of 2023 and 2024, the domestic cloud kitchens market is projected to increase from US$ 400 million in 2019 to reach US$ 1.05 billion by the end of 2023 and US$ 2 billion by 2024. Due to the wider public growing preference for online food delivery services, the market is likely to grow. The younger population's rising disposable income and change in lifestyle will also contribute to the growth of the Indian cloud kitchen market over the next five years. The rise in consumers' preference for fast food and snacking over home-cooked meals contributes to the growth of online delivery services. The corporate culture, long hours, and lack of interest in cooking at home are all factors that influence the population. In the next five years, more accessible payment alternatives, cloud payments, and secure payment routes will contribute to the expansion of the cloud kitchen industry in India.

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