What is a Cloud Kitchen? [Concept & Business Model]

A cloud kitchen, also known as a virtual or ghost kitchen, is a concept to streamline and accelerate online cuisine orders. People were well-accustomed to online orders before the arrival of the pandemic. But, the COVID-19 pandemic has undoubtedly accelerated the online food ordering industry. People sitting idle at home often have cravings for various food items. They can download an online food delivery partner application and order food online from their favorite food joints.

Many food joints have to deal with competition, rising maintenance costs, and high rental rates. Adapting to the cloud kitchen concept can help restaurants overcome these challenges. According to a report, the size of the global cloud kitchen industry will expand by 12% from 2021 to 2027. By the end of 2027, the industry will be worth $71.4 billion.

What is Cloud Kitchen concept? Cloud Kitchen Business Model?

The concept of a cloud kitchen is simple, it is a restaurant kitchen that only accepts orders that have been placed via online ordering software or application. In most cases, cloud kitchens have personalized online ordering systems. However, most Indian cloud kitchens are registered with popular online food delivery apps.

Cutting-edge POS software is a must-have requirement for developing a cloud kitchen. The POS software will receive and process orders. Notably, the tool can perform these tasks without human intervention. An automated process makes the order processing faster, and thus the restaurant can provide a quicker delivery service to the buyers. Nevertheless, the POS system also keeps the restaurant’s inventory updated so that buyers can check the availability of the items before ordering them.

Cloud Kitchen Setup

1. Cloud Kitchen location

Since cloud kitchen does not offer a dine-in facility to people, it does not need a posh location. A successful restaurant needs good accessibility, a car parking facility, large sitting space, and many more. However, a cloud kitchen does not need all these things. You need to find a location that employees can easily and safely access. Additionally, the place should have seamless electric, internet, and water supply.

2. Online food ordering system integration

Every cloud kitchen needs advanced POS software for receiving, processing, and fulfilling orders. The POS tool should be integrated with an online ordering platform. Cloud kitchens have two options in this regard. Firstly, they can develop their own online ordering platforms. Secondly, they can register with popular online food delivery platforms.

Creating an online food delivery platform is a matter of high expenses. Moreover, businesses need to make expenses for the maintenance of these apps. Another problem is that such cloud kitchens should employ dedicated delivery staff. A business can reduce all these hassles and expenses by registering with online food delivery partner apps.

3. Cloud Kitchen licenses

In India, a cloud kitchen business needs to procure a license from FSSAI for a legitimate operation. Additionally, the business needs to obtain clearance certificates from the health and hygiene department of the local municipal authority. Another crucial thing is obtaining a fire license from the state’s fire safety department. Keep in mind that most certifications and approvals come with a certain validity period. When their validity is over, the cloud kitchen must reapply for those certifications and clearances.

You can also read a complete guide on – What are the licenses needed to start a restaurant in India

4. Cloud Kitchen equipment and accessories

The most crucial part of a cloud kitchen is the kitchen, and having modern cloud kitchen equipment is essential for faster food delivery and better hygiene.

Cloud kitchen setup cost in India:

Typically, developing a small to mid-sized kitchen for the cloud kitchen business may take around INR 2-4 lakhs in India. A larger kitchen may have a dedicated freezer room and other sections for different activities. Developing such a kitchen can cost around INR 5-10 lakhs.

5. Packaging

Packaging plays an important role in running a cloud kitchen business. Packing ensures the health, safety, taste, and hygiene of the foods. On the other hand, packaging plays a significant role in branding. Therefore, good packaging is crucial to improve brand exposure and enhance customer retention.

Cloud Kitchen Vs. Traditional Kitchen

A cloud kitchen, sometimes known as a “ghost kitchen” or “virtual kitchen,” is a type of commercial kitchen where food outlets can produce their menu items exclusively for takeout and delivery. While a Traditional Kitchen should ideally be situated somewhere with high visibility and foot traffic, a cloud kitchen is a restaurant without a storefront. Since there is no actual dining area, a cloud kitchen serves as a sort of digital restaurant.

Unlike traditional brick-and-mortar sites, cloud kitchens enable food businesses to make and transport culinary products with minimum overhead. As simple as it is to set up and manage a cloud kitchen, there is no doubt that this is better than a traditional restaurant. In fact, numerous cuisines can be served under a single brand and kitchen. Overall, cloud kitchens outperform the restaurant model in terms of advantages.

As a result of the pandemic, The cloud kitchen concept has reached new heights. The last few years have seen a rapid expansion of the food delivery sector. The cloud kitchen sector is here to stay, with people savoring meals at the tap of a fingertip.

Let’s explore the benefits of Cloud Kitchen

a) Low Operating Costs

The biggest advantages of setting up a cloud kitchen are the low operational expenses because

• they are affordable,
• the need for few staff, and
• the flexibility to easily manage a large number of orders through various channels.

The major benefit of the cloud kitchen idea is the absence of costs like rent for restaurant space, decor, furniture for dining tables and chairs, pricey cutlery, lighting components, etc. All of these expenses are eliminated, leaving only a bare minimum for culinary staff, cooking supplies, kitchen equipment, and basic maintenance costs such as energy bills. It simply leads to higher returns but at lower costs!

b) Focusing Only on Food

A cloud kitchen saves the requirement to manage tables, location, decor, and other aspects of a traditional kitchen. This allows owners to focus on the food and client happiness, which gives them more time to focus on the menu, come up with original ideas, improvisation, etc.

c) Multiple Brands under One Roof

The cloud kitchen business operates differently than a restaurant; it follows a basic strategy: one roof, multiple brands. Without investing a boatload on a site, several brands can collaborate under one roof and offer customers a variety of cuisines.

d) More Productive

In terms of efficiency, cloud kitchens are more successful than restaurants. Restaurants find it challenging to serve both dine-in guests and delivery orders during rush hours. The cloud kitchen business, on the other hand, is typically more efficient because it focuses on the delivery-only strategy. Delivery is carried out more quickly and effortlessly.

e) Streamlined Customer Data

Due to the faster ordering procedure that comes with the technology deployed in a cloud kitchen setup, it is simple to monitor what customers have really appreciated. It also assists in identifying loyal and constantly returning consumers and catering offers and rewards for them as a gesture of gratitude, thereby enhancing the relationship.

f) Hassle-free Expansion

You may host multiple brands under one roof with a cloud kitchen, reducing overall investment. To retain the uniqueness of the foods you serve while employing the same chef for both, you can, for example, place Mexican cuisine under a different brand rather than putting it on the same menu.

g) Reduced Selling Prices

Due to the overhead costs of operating a restaurant, your food will always be more expensive under a restaurant model. On the other hand, you can have food at a reasonable cost that has been expertly cooked in a cloud kitchen business. Customers can have access to popular food items without thinking about high prices.

h) Maintaining Food Quality

In a restaurant-style operation, restaurants are sometimes pushed to sacrifice food quality due to rising overhead costs. Cloud kitchens, on the other hand, guarantee the quality of their cuisine. The only cornerstone of the cloud kitchen concept is giving clients high-quality meals at a reasonable rate.

i) Multiple Menu Selections

The menu can be updated more quickly in a cloud kitchen than it can in a restaurant. Since it can be done digitally in a matter of minutes, there is no need to spend money on changing physical menus. The menu can be changed right away if one item appears to be lacking. It is more difficult to make changes in a restaurant model.

j) Benefits of Data Tracking

Technology makes it possible for you to remove food products that aren’t selling, saving you money and improving menu optimization. This is facilitated by the ability to track data. You make meals according to consumer demand, which leads to reduced wastage.

Conclusion

Opening a cloud kitchen is a cheaper business model than opening a restaurant and café. India’s online food delivery industry is booming, and thus investing in cloud kitchens can be profitable. Top-quality POS software is one of the most crucial elements of a cloud kitchen.