What is Cloud Kitchen? | Cloud kitchen Business Model Concept, Pros & Cons

The rapid growth of the online food ordering sector creates new business opportunities for existing & upcoming restaurants to grow their business, one such upcoming trend is the Cloud Kitchen business model. We live in an era where we order food right from our phones and get it delivered right outside our doorstep. Many restaurants have grasped this concept of Cloud Kitchen and collaborated with food aggregators like Swiggy and Zomato to increase their overall profit. The Cloud Kitchen concept is an emerging ideology ruling the food industry recently.

What is Cloud Kitchen?

Dark Kitchens, Ghost Kitchens, Cloud Kitchens, Virtual Kitchens are fully-equipped kitchens that don’t have a dine-in facility. They are takeaway-only restaurants and accept online food ordering only.

Cloud Kitchens cuts down most of the expenses done in dine-in restaurants. It paves more opportunity for the restaurateurs to spend the money on executing a trial version of the cloud kitchen model to see how it works. It foretells the upcoming challenges and risks involved in running the cloud kitchen business plan.

Faasos, HolaChef, FreshMenu, RedBox, some of the famous Indian cloud kitchens that had online food ordering services alone with no storefront have now enabled takeaway services due to the increase in orders. Due to the easy experimentation, low investment, ability to manage multiple brands under a single roof, and space consumption, the Cloud kitchen concept is becoming a hot trend in the food industry.

How does Cloud Kitchen work?

The concept of Cloud kitchen is effortless. Most Cloud Kitchens uses POS Software integrated with the third-party food aggregators to take orders and process them. Customers place orders through the website or mobile application of the food aggregator. Once they place orders, the POS system notifies order details and routes them to the respective kitchen without manual printing of kitchen order tickets. The POS system updates the food preparation status to the food aggregator application. This status is notified to the customer via food aggregators, and nearby delivery agents are assigned. These delivery agents deliver food to customers. The feedback from customers received through the food aggregator applications is used to identify the areas of improvement.

Some successful cloud kitchens include,

The Baker’s Dozen is a dine-in and takeaway bakery that started their business with 4 bakers and with their exclusive handmade sourdough, they have enhanced their business by multiple folds that they are baking nearly 10,000 loaves of bread a day. The Mumbai-based cloud kitchen started serving their best bread all over India.  

Deliveroo is an online food ordering portal that has introduced its virtual kitchens into play by naming them as ‘Deliveroo’s editions’ to focus on delivering the best food to the customers on time without any compromise.

Amadora Gourmet ice cream has initiated their PAN India delivery wanting everyone to experience their unique ice cream flavors. With their wide range of over 250 flavors of ice cream, they have established their taste and brand among the public.

In India, Redbox introduced small kiosks in multiple parts of Chennai, aiming to run as takeaway-and-delivery-only kitchens. With its crisp menu and faster delivery, Redbox became a successful cloud kitchen. Recently, Swiggy and Zomato have started their cloud kitchens to inflate their business.

Why invest in cloud kitchens?

Considering the current scenario, renting a space for a restaurant in any metro city is a huge crux. A minimum of 1200 sq. ft is essential to run a low-budget restaurant. It has to accommodate the kitchen equipment, tables, chairs, billing counters, etc. But you can accommodate a cloud kitchen within a space of 500-600 sq. ft., for which the rental amount will be around 30k – 50k.  With low investment, cloud kitchen business models help restaurateurs gain more profits.

Not just that, a cloud kitchen can easily change the type of food they prepare by hiring the right chef & updating the menu online which is very less investment compared to a classic restaurant where they have to change everything right from the theme of the restaurant to the marketing strategy. Cloud Kitchen equipment list includes the basic kitchen equipment needed for cooking and a POS system that helps in integrating the menu and orders with food aggregators. The Cloud Kitchen POS Software has an integrated Customer Relationship Management that helps maintain a loyal and trustworthy customer relationship by sending customized notifications and updates. 

Cloud Kitchens have an ‘N’ number of opportunities because all it needs is kitchen space and demand to feed its customers. With minimum risks involved, cloud kitchens are one of the safest bids to invest in the food industry.

Should an existing restaurant owner invest in cloud kitchens?

If your restaurant is well established and is running well, investing in cloud kitchens would increase your overall exposure and add more profits at a lower cost. Easy experimentation is the unique selling point of cloud kitchens. Investing in multi-brand cloud kitchens can help you gain more profit and visibility.

Cloud Kitchen Business Model Concept:

At any given time, a cloud kitchen would require less investment compared to the classic dine-in restaurant. You can even handle multiple brands under a single kitchen using the Multi-brand cloud kitchen concept. For example, Rebel Foods is a cloud kitchen brand that manages multi-brand cloud kitchens like Faasos, Behrouz Biriyani, Oven Story, etc. This multi-brand cloud kitchen model proves successful as the profit of each brand goes into the same pocket. To open a cloud kitchen business, you will have to consider the following,

Kitchen space

Depending upon the size of your kitchen, anywhere between 600 to 1200 square feet would be optimal for your kitchen to run. Setting up a kitchen in a prime area would be easier for food aggregators to reach out to you. With the population being higher in metro cities, it is easier for your kitchen to gain more popularity.

Kitchen equipment

Investing in durable cloud kitchen equipment makes cooking easier. The equipment would cost you the majority of your budget. If you want to spend lesser here, investing in used equipment would be a good alternative.

Kitchen staff

There should not be any compromise in hiring the best staff since the best chefs & efficient employees are the pillars behind the kitchen.

Cloud Kitchen POS System

A Cloud Kitchen POS Software is essential for hassle-free handling of orders, sales, and inventory. It is a one-stop source for all cloud kitchen essentials and notifies you of the business insights to expand your business.

Other expenses

Other expenses include  20-30% per order that the online food ordering portals charge, Restaurant licenses & permits, and food packing costs.

Note: Cloud Kitchen costs mentioned above are approximate values. You can cut the cost at various places such as rent, equipment, etc.

Advantages and Disadvantages of Cloud kitchen:

• Pros
  Low operation cost
  High-profit margins
  Less risk

• Cons
  Online only visibility
  Challenging brand building
  Lack of one-to-one customer interaction

How does Gofrugal help Cloud Kitchen Business Owners?

Gofrugal helps the Cloud Kitchen owners by providing a robust Cloud Kitchen Software that offers easy integration with third-party aggregator portals and hassle-free order management. Cloud Kitchen POS Software helps act as a single solution to all your cloud kitchen requirements. Gofrugal’s ServeEasy has an integrated Customer Relation Management that assists you in boosting up your sales and buying more customers.

As Cloud kitchens do not have a storefront, there are chances that the kitchen might not reach the expected visibility. Want to know the quick fix to increase your cloud kitchen visibility? Click here to know more about how Restaurant marketing comes to your rescue.

What are your thoughts on Cloud kitchen? Do you think it’s future-ready? Share your views below.