What is Cloud Kitchen? Business Model, Types & Opportunities

If you are a foodie but have a professional life as well, it might not be convenient for you to visit restaurants everyday and try new dishes. In this case, ordering the food online and getting it on your dining table seems the best option. You might think that your food is coming directly from a real restaurant. But, you need to know that most of those restaurants are nothing but cloud kitchens. Let’s talk about the concept a little descriptively. 

So, Cloud Kitchen is the same ecommerce framework for the food industry. You can order the food, and it will be delivered to your doorstep. But, you can not visit the place with your friends for a dine-in.

What Is Cloud Kitchen? 

Cloud kitchen is a new concept for the restaurant business, famous with other names like delivery-only restaurant, virtual kitchen, shadow kitchen, and commissary kitchen. The concept supports only the home-delivery of food eliminating the in-dine facilities. In a cloud kitchen framework, one owns a restaurant, brand name as well as a brand identity but very least physical infrastructure. The latter refers to only a kitchen where the food is prepared and sent for delivery. 

It is the new way of setting restaurant business as it requires meager investment with the chances of higher returns. You can go for the cost efficiency to attract beginner luck and turn it into your fortune. 

How Does Cloud Kitchen Work?

There are different types of cloud kitchens that have their own working principle. However, the one thing shared by all cloud kitchen working models is that it only offers home delivery of food products. To understand it better, let’s work with an example. 

Assume you want to open a restaurant named “Take & Treat”. Cloud kitchen makes it too easy and cost-efficient for you to establish the restaurant by eliminating the infrastructure cost. All you need to find is kitchen space. Assume you got a room of 10*10 and installed all the cooking facilities. Now, you can take the online orders from your customers, prepare them in the kitchen, use the branding on the packaging, and deliver it to the customer in a few minutes. The customer knows you with the name “Take & Treat”, and your food is being distributed with the name “Take & Treat”. 

The most considerable flex of Cloud kitchen is that you can operate multiple brands from a single kitchen to attract a broad consumer base without any further investment. 

Business Model of Cloud Kitchen 

Cloud kitchen is a new concept and burgeoning in the market rapidly. People are experimenting with the new concept in their own way, which has introduced a number of business models for cloud kitchens. Mainly four business models are popular that have helped people start their restaurant business and transfigure the growth to already established businesses. 

1. Brand-Owned Cloud Kitchen

When one brand in one location operates in one kitchen, it is called the brand-owned cloud kitchen. Here, the brand doesn’t refer only to big food chains but also to new entrants setting up their own kitchens. 

2. Additional Kitchen of Well-Established Restaurants

Many restaurants that offer dine-in facilities at one location open the cloud kitchen in other locations. This is basically the side hustles of well-established restaurants to expand their reach in the market. 

3. Side Hustle of Already Established Restaurants 

When a dine-in restaurant adopts the cloud kitchen concept without further investment, they just develop a menu explicitly dedicated to delivery. The order is prepared in the existing kitchen of the restaurant only. This menu is delivered in comparatively farther areas. 

4. Shared or Business Owned Kitchen 

Providing the physical infrastructure has always been one of the favorite businesses for capital owners. So, people are setting up big kitchens in outer areas and renting them to the restaurant owners. Many have different kitchen portions for brands, while others share the same space. 

Pros and Cons of Cloud Kitchen Model

Types of Cloud Kitchen 

The cloud kitchen concept is now broad enough to have its own subcategories. The cloud kitchens in the market now operate in numerous forms having their own working criteria. Following are some of the prominent type of cloud kitchens: 

1. The Independent Cloud Kitchen 

When a single brand having no physical entity owns a kitchen space, it is an independent cloud kitchen. 

Operational Process 

• Order online 
• Dedicated to a particular cuisine 
• Provides the delivery only
• Self delivery as well as aggregators 

Example: UberEats, DoorDash, and Grubhub

2. Multi-Brand Cloud Kitchen

When a single kitchen is being used to operate different cuisines on different brand names, it is multi-brand cloud kitchen. 

Operational Process 

• Order online
• Multiple brands from single kitchen
• Provides the delivery only
• Self delivery as well as aggregators

Example: Rebel foods (Faasos)

3. Hybrid Cloud Kitchen 

Single brand operating from single kitchen having multiple outlets with a storefront as well. 

Operational Process 

• Order online 
• Multi-cuisine seasonal menu
• Delivery and take away
• Self delivery as well as aggregators

Example: Zomato or Swiggy

4. Delivery App Owned “shell” Cloud Kitchen 

The cloud kitchen owned by aggregators with multi brands and no storefront is known as Delivery app owned “Shell” cloud kitchen.

Operational Process

• Online order from particular owner aggregator 
• Multiple brands in partnership
• Delivery via aggregator only

Example: Zomato or Swiggy

5. Delivery App Owned Fully Stacked Cloud Kitchen

The cloud kitchen is owned by Aggregator with multiple restaurant brands and rented kitchens with a storefront. 

Operational Process 

• Online order from particular owner aggregator 
• Option for walk in 
• Multiple brands in partnership

Example: UberEats

6. Fully Outsourced Cloud Kitchen

Cooking as well as Delivery is outsourced in this type of cloud kitchen concept. Kitchen is pre-prepared in the central kitchen and fully prepared in the kitchen nearest to the consumer. 

Operational Process 

• Order from all sources
• Cloud kitchens stores the raw materials
• Pre-prepared food is sent to cloud kitchen in neighborhood
• Food is prepared in secondary kitchen and delivered to customer

Example:  Kitopi

Popular Cloud Kitchens in The Market 

1. Rebel Foods 

Rebel Foods is an Indian online restaurant with around 11 cloud kitchens, including brands such as Faasos, Oven Story, and Behrouz Biryani. Rebel Foods is the biggest cloud kitchen restaurant in the world, with more than 450 cloud kitchens in 10 different countries. 

2. CloudKitchens 

With new investment fund 10100, Uber founder and former chief executive Travis Kalanick has invested $150 million into City Storage Systems. The investment is set to focus on undervalued real estate. CloudKitchen is one of the two businesses of its holding company. Cloud Kitchen is opening large-scale kitchens for the restaurants willing to step into the market with this new concept. 

3. Kitchen United 

Kitchen United is the other big name securing the limelight in the cloud kitchen industry. Former executives at Taco Bell and Mcdonalds’ are the producing minds behind the business. The fast-growing platform has recently added $40 million after its initial funding round of $10 million from GV (investment fund of Alphabet). 

4. Alldaykitchens

Alldaykitchens has announced its formal launch after claiming $15 million of Series A funding from ‘super angel’ investors Andreessen Horowitz and automation-focussed investment firm Base10 Partners. The firm already owns several delivery-only kitchens at different locations in San Francisco and now is planning to open a dozen more in the Bay area. 

5. DoorDash Kitchen 

DoorDash Kitchen is considered the first firm to make a physical move in the cloud kitchen market. The firm has one well-established kitchen near Redwood City to help restaurant businesses scale quickly. 

Is Cloud kitchen and Virtual Restaurant the same? 

Most people misunderstand cloud kitchens and virtual restaurants to be the same thing. But, there is a line of difference that separates the two concepts. In fact, the only similarity you will see in both concepts is take-out culture. Other than that, the internal working process is entirely different. 

Cloud Kitchen 

Cloud kitchen or the ghost kitchen is a colossal commercial kitchen space in which independent chefs rent out their own space to cook the dishes. They sell these dishes via an online marketplace. Chefs pay the rent for these kitchens. 

Virtual Restaurant 

Virtual restaurants, on the other hand, are online restaurant businesses owned by physical restaurant entities. When a restaurant already has a physical infrastructure and decides to utilize its existing resources to the fullest, they introduce a menu available only for take-away and operate it as a virtual restaurant. 

Insight Into Food Delivery Industry with Some Statistics 

The cloud kitchen market was valued at $29.4 billion in 2020. The sector is expected to show a CAGR of 13.12% to achieve a valuation of around $112.7 billion by the year 2030. 

Moreover, the cloud kitchen concept depends entirely on the habit of customers to order the food instead of visiting restaurants. COVID pandemic has catalyzed this habit of people where they prefer to get food at their homes. China has always been ahead of other markets with take-away culture. This habit of the Chinese population has helped the delivery market of China to achieve a valuation of $27.3 billion in 2021. The market is followed by the US, having the food delivery sector worth $22.4 million. The overall food delivery market is expected to exceed $320 billion by 2029. 

So, the growth of the food delivery industry and thus the cloud kitchen concept seems versatile as to current market behavior. It might not eliminate the traditional restaurant culture but can cover a bigger portion of the market share. 

Surging Interests of Businesses in Cloud Kitchen 

Well-established restaurant and delivery businesses have greatly interested in this new concept. UberEats, Zomato, Swiggy, and many other well-established players have tightened their waist to boost performance with this concept. Following news insight talks about it all. 

• Uber Eats is set to introduce 400 virtual restaurants in the UK by the end of 2022. The firm launched its virtual restaurants primarily in the US in January 2017. In less than 5 years of adopting the concept, the firm operates more than 1,600 virtual restaurants in different markets of the globe. 

• The founder of Zomato, Deepinder Goyal, also announced stepping in the concept of Cloud Kitchen. The firm has already introduced one of the cloud kitchens in Delhi under their new project titled Zomato Infrastructure Services. The firm will be working with their existing restaurant partners to help them increase their reach without high cost. 

• Swiggy introduced their new cloud kitchen brand in 2020 called BrandWorks. The firm also owns Swiggy Access, another cloud kitchen brand that offers kitchen space to their restaurant partners to widen their reach in the market. 

Cloud Kitchen Application Advance Features

Substituting the physical infrastructure of the restaurant business requires something that can fill the void. Technology is the subsitutor in this scenario. The human workforce is very limited in the cloud kitchen concept. So, it is a technological tool to perform the tasks for your restaurant. Most of the tasks in the cloud kitchen and virtual restaurants are performed by software and mobile apps. Have a look at the Advance features of apps that ensure the core activities of running a virtual restaurant:

1. POS System (Point Of Sale) 

In a cloud kitchen, you don’t have waiters to take the orders from the customer. So, POS is a system that assists you in taking orders from customers from different channels. Working with other platforms, this feature allows you to analyze the best platform that provides you with the majority of orders.  

2. KDS (Kitchen Display System)

The menu of your virtual restaurant is going to play a significant role in attracting customers. KDS designs the electronic menu of your restaurant to share it with the audience. 

3. Courier Management System

With their AI-Powered chatbots, mobile courier management system record all the information about the food delivery. You can easily track the movement of your delivery fleets, the time they spend in one location, the routes they are taking, and much more. 

4. Inventory Management System 

With an inventory management system, you can easily keep a record of products in your kitchen and ingredients needed to be ordered soon. So, the feature makes sure you have the ingredients to prepare the complete menu you are offering.

Business Opportunity For You 

This article might not interest you as long as you are not benefited from the new concept. No doubt you can very quickly start your restaurant business with this new concept, and it is a great business idea. However, not everyone has the vision to create a restaurant as long as they are looking for a passive income. 

Here you might prefer to build a commercial kitchen and lend it to the restaurant owners or new entrants. But, setting up a commercial kitchen will require handsome capital. 

Developing an app is one of the best business opportunities for you to grow with the concept of cloud kitchen. As you can see in the above section, smartphone applications are substituting the human workforce in visual restaurants. A range of mobile apps plays their role in running the business smoothly. You can develop apps and offer them to virtual restaurant owners at a subscription cost. Having set the app, you can earn a good passive income from the app.

Guide to Develop Cloud Kitchen Apps

It might not be as huge as setting up a kitchen, but developing an app requires a good investment. So make sure you are ensuring all the basic and necessary steps while developing the app. 

To make it easy for you, we have listed some steps you need to ensure while developing the app.

1. Opt for An Integrated Restaurant Management System 

To make the app development efficient and prevent the chances of missing something important, you should opt for an integrated Restaurant Management System. This system will perform a variety of tasks, so you don’t have to instill the individual software. RMS assists you control billing, marketing, loyalty programs, developing online platforms, scheduling shifts, accounting, managing orders, and much more. 

Some of the best RMS you can use are Toast POS, 7shifts, TouchBistro, Clover, CAKE, Oracle Hospitality, etc.  

2. Proper Planning for Inventory Management 

You might not be running a traditional restaurant, but you still need to manage your inventory. Integrating the POS and SCM (Supply chain Management) system in your app will let the user track the inventory. Moreover, they can even go through the previous inventory consumption and order further accordingly.  

3. Focus on Frontend

The person is visiting your app because he is hungry. Rest is your responsibility to insist him to order. Provide mouth-watering images of food and menu that makes users’ fingertips automatically place the order. 

4. Online Food Ordering

Everything we are doing here is to get orders. Make an online food ordering portal in your app that allows the users to add more than one recipe and order it with one tap. 

5. Multiple Payment Methods

One customer might be willing to pay before getting the food, while others might like to pay after receiving the order. To provide the option for online as well as offline payments. Also, keep it flexible between the choice of cards and UPIs for customers. 

6. Feedback Forms 

Maintain a good relationship with your customers through two-way communication. Provide the portal for feedback forms where customers can give their reviews for the food. Whether it is positive or negative feedback, both are going to help the owner improve. 

7. Order Analysis 

Smartphone apps are meant to be smart. It should be able to analyze the eating habits of customers. It will help restaurants to make better decisions in order to succeed. 

8. Option for Advance Orders 

Make room for bulk orders via advance orders. Allow customers to place big orders for upcoming parties, events, or gatherings. These kinds of deals are going to act as a catalyst to performance of your business. 

9. Minimum Order Value 

An order of $5 might not satisfy your cost of hiring the cook, fuel, and delivery fleet. Similarly, it might not be cost efficient to deliver a small french fries pack to someone 10 miles away. So, set a minimum order value both in terms of quantity of the food as well as price.

10. Time-Based Menus 

If you lack the resources, a time-based menu can be one of the best options. You can limit the food availability according to the time. For example, in the morning, you can offer breakfast items. Similarly, mid-day can be the time for lunch-only items, and evening can be dedicated to the dinner menu.

11. SSL (Secure Socket Layer) Certificate 

The certificate makes the online communication on the app secure. Search engines are now penalizing non-secure websites. 

12. Integrate POS (Point of Sale) System 

You can not rely on a single distribution channel for business. However, managing the different distribution channels manually can be really a headache. So, integrate a POS system that helps you manage all the distribution channels in one place. 

13. Integrate the CRM System 

The CRM system integrated into the app will help engage the customers with the brand and make them feel connected. Some of the best CRM systems that you can consider are Apple CRM, Coca-Cola CRM, Amazon CRM, Salesforce CRM, etc. 

14. Testing the App Before Launching 

The app is going to bridge the gap between you and your customers. Ensure to test the app multiple times before launching it. Any error in the app might take your customers away from you. 

15. Promote Your App and Business 

People will not know about your restaurant by passing by your kitchen. You need to inform them directly about the services. Conduct the marketing campaign. Use billboards, social media, and hoardings to let people know about your restaurant. 

Cost of Developing a Cloud Kitchen Supporting App 

The cost of developing the app depends mainly on your choice. As we know, a range of apps carry their core competencies, and the cost of development varies. First of all, you will have to decide about the type of app you want to develop. Moving ahead, the features you want to see in the app are also going to determine the cost of app development. The more features, the higher the cost will be. 

However, you can consider the estimated cost of $20,000-$40,000. 

How Can Emizentech Help You Grab the Business Opportunity?

Emizentech is a leading app development firm with experienced and visionary developers. With an experience of around a decade, we have learned not only to provide the best services but also to understand the client’s idea and turn it into a reality with an app. With constant and quality service, we have enrolled a number of Fortune 500 listed companies in our client base. 

We understand that a price quotation is insufficient communication with a client, and there is a need for guidance and suggestions. We also provide free counseling if you have anything to discuss to make the decision.

Wrapping up 

Cloud kitchen is a new concept for setting up a restaurant. With this new concept, the restaurant brand provides the home delivery of food, not the in-dine facility. The previous decade has experienced a surge in food delivery services, making this concept even more profitable. The identity of the brand is established as a complete restaurant; however, it maintains its presence on online platforms only. 

Having eliminated the need for a substantial human workforce, this new restaurant model relies heavily on mobile applications to perform several tasks. So, not only virtual restaurants but the relevant app development has also emerged as a good business opportunity.