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Threat for restaurant sector from cloud kitchens
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Thursday, 16 February, 2023, 08 : 00 AM [IST]
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Shikha Kaushik
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Food-for-delivery only restaurants are beginning to thrive because of food delivery apps. These restaurants are also referred to as cloud kitchens or sometimes, dark kitchens.
Changes in technology and in consumer habits brought the ancient concept of food being sold in a ‘to go’ fashion (i.e. food stalls) into the limelight today. There are several advantages for the cloud kitchen over the traditional brick-and-mortar type of restaurant.
Advantages include paying lower rent prices for space needed for business operations. Other expenses, like having servicing personnel, paying employment taxes, insurance, utilities, and what it costs to furnish a full-size restaurant are also greatly reduced with a cloud kitchen.
There is a certain distinction in the concept and coinage of the term ‘cloud kitchen’-the concept of takeaway or delivery only, without dining, has been around for over half a century globally. While pizza and burger delivery points were prevalent in the West, in India we have the long standing tradition of tiffin/dabba services, these are essentially cloud kitchens and have been around for decades.
However, the term ‘cloud kitchen’ was coined about a decade and a half ago, and new terms like virtual kitchens, ghost kitchens or invisible kitchens which essential mean the same meaning have been coined later.
Convenience and time savings from cooking made the market available for cloud kitchens feasible. Shifts to its popularity began when people were asked to begin social distancing and became considerably more popular when restaurants were asked to close their doors to dine-in customers and only serve delivery orders.
The Indian food and beverage industry is witnessing a major drift from dine in to delivery business and the pandemic has worked as a ‘catalyst’ in the growth story.
The closure of restaurants due to the lockdown has pushed a majority of the population to opt for either home cooked meals or depend on food brought in through deliveries.
Hence, the food delivery industry is witnessing an upward facing graph with a surge in the number of orders and customer awareness around food safety and hygiene is increasing. Increased work-life participation of more members and the resultant paucity of time has made home cooking activity to avoid. The convenience of ordering through apps without the drudgery of going out to eat has driven the demand.
Considering the fact that setting up a cloud kitchen comes with a low capex as compared to setting up a restaurant, it catches eyes of new players. The set-up cost for a medium-sized cloud kitchen falls around Rs 5 lakh.
Traditional restaurants will likely lose business in the delivery business as cloud kitchens grow, unless they optimize, i.e., decide to deliver and advertise more for delivery. For some restaurants that can mean up to 30 per cent or more in their sales.
(The author is partner at Zhinga la la. She can be reached at info@zhingalala.in)
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