Mar 2019

What are Cloud Kitchens? How can they Benefit Restaurateurs?

  • By Ribbon
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Amongst the recent trends to emerge along with online food delivery is the concept of cloud or ghost kitchens. Not only are they cheaper and more efficient for existing restaurateurs, but also present an excellent opportunity for first-time entrants into the F&B industry.

Before we delve deeper into this topic, let us briefly explain the concept of a cloud kitchen and how you, as a restaurateur, can make the most of this technology and logistics driven opportunity.

The ‘Cloud Kitchen’ model

Cloud Kitchens are essentially fully equipped centralised kitchens, not including any front of house operations. Its main objective is to prepare food for multiple brands and deliver it directly to the consumer. Delivery kitchens are another similar concept as cloud kitchens, except they operate under only one owner or a single brand.

With cloud kitchens, you do not need to have separate kitchens for every restaurant brand. Neither are the chefs restricted to preparing meals for a single brand. They can be involved with multiple brands operating from the same cloud kitchen.

How can a cloud kitchen benefit you as a restaurateur?

Taking into consideration the current market conditions, operating a full-service restaurant could be challenging for new entrants in the food and beverage industry. The growing trend of online delivery aggregators has made the F&B segment more competitive, making it harder for restaurants to increase footfall and maintain margins. 

Operating out of a cloud kitchen allows restaurateurs to lower their risks, by providing them an opportunity to cut down on several operational costs that are associated with having a complete front of house and a dine-in experience. We have listed below a few benefits of using cloud kitchens to expand your restaurant business.

  1. Lower Investment Risk for New Entrants: High real estate costs and upfront investments make it challenging for new entrants to set up restaurants in Tier I locations. This budget could instead be allocated to marketing initiatives to ensure people are familiarised with the brand and what it has to offer. It also allows the owner to test the brand’s performance in the market before making a decision to invest in a brick and mortar store.
  1. Allows for easy Expansion: One of the most important opportunities offered by a cloud kitchen to a restaurant is that it allows the restaurant to be able to cater to a much wider and newer target audience than the existing customer base. Tying up with a cloud kitchen in an untapped area, for example, is far easier and most cost-effective for a restaurant, than having to set up a new branch. This has a direct impact on the financial stability of your business.
  1. Simplified Management and Logistics: Restaurants also benefit from orders processed through the cloud kitchen, as the burden of the majority of the process from order placement, food preparation, food delivery and managing payment, shifts to the cloud kitchen team. For small format restaurants, this means they only have to focus on their direct customers. Through the cloud kitchen, the restaurant can cater to a much wider audience without having to invest in additional back of house manpower or an extended delivery infrastructure (including delivery drivers, bikes, etc).  
  1. Benefits of Economies of Scale: As cloud kitchens work with multiple brands, the volume of production and hence the amount of ingredients procured would be much higher than a single restaurant’s. If managed correctly, the cloud kitchen would be able to lower its overall food cost through a more streamlined supply chain process, a benefit which would trickle down to the brands it caters to. As such, it would be much easier for restaurants to improve their margins as the business grows, compared to what they might experience as a standalone unit.

While expanding a restaurant’s reach through cloud kitchens comes at a price, the benefits far outweigh the associated costs. Restaurants get an opportunity to expand their reach and increase their customer base with lower investments and better margins. Existing restaurants can focus their efforts on their store operations, while new restaurants get a chance to ‘test’ their concept before incurring a heavy investment.

If you would like to understand more about how to tie-up with a cloud kitchen for your restaurant brand, Ribbon Consulting can help you. Our restaurant consulting solutions are tailored to each clients’ needs. From concept development to project management and execution, we can help you connect with the right cloud kitchen or even successfully launch your own cloud kitchen operations.

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