4 important things you need to know about cloud kitchen

Cloud kitchen, the new trend after food trucks, is still in its infancy in Australia. But with the ‘New Normal’ setting in and the drive to minimize operational costs while offering better value to the customers, the industry is ready to try something new. It is not difficult to predict that Cloud Kitchen is going to grab a considerable market share in the near future.

If you are planning to launch your new venture in the foodservice industry, but the investment and associated risks are making you take a step back, it can be the answer you are looking for. If you don’t want to spend your time understanding which stainless steel hood – ducted or ductless – will be the right option for your cooking room, and any other similar critical questions, it is best to opt for this new model.   

This article will discuss the most important things you need to know about cloud kitchen before considering it as an option for your next venture.

What is cloud kitchen?

Cloud kitchen, also known as Ghost kitchen, is a takeaway only F&B business model where multiple brands share a kitchen space. The model is, essentially, delivery or take-out only, without any facility of dining-in.

The foods are ordered online, through third-party food service applications or the business website of the brand. Instead of walking into the restaurant, the customers search the web or the application to place their order of choice. The delivery can be carried out by a third-party partner or by the company directly through their own staff. 

There is a new category of businesses that use cloud kitchen to share the cooking space and equipment but sells the product from a brick-and-mortar outlet along with or without online home delivery options.

The different cloud kitchen models

Cloud kitchen is a broad term. It covers more than one model, each of which prioritizes the flexibility of the businesses starting out or experimenting with this new style of operation. The popular models are,

        1. The satellite model 

Here the shared kitchen is mobile like a satellite and travels to different locations. There is always a central, stationary cooking unit associated, and the satellite truck is used mostly to experiment with new cuisines and market. If the dish works, the business might decide to introduce it in their existing, brick and mortar restaurant’s menu. 

This helps brands to move closer to their target customers and try out the market at different locations. It is an effective way to improve market reach. Also, it gives the scope of experimenting with new dishes for minimum financial risk as it is spared from significant investments associated with buying new equipment like gas cooktops etc. and space.  

        2. The stationary model

In this model, the kitchen space is stationary and often located in a less expensive, non-commercial area. The two models under the stationary category include,

Shared Space

In the shared space model, space as well as the equipment are provided by a third party and shared between several businesses. Here, the restaurant owner employs its own staff and uses its own products to prepare dine-at-home food as per the orders received. This model often works on specific time slots allotted to specific owners.   

 

Dedicated Space

In this case, a big kitchen space is segmented into small sections, and one section is rented out or sold to a specific business. Here a particular section is dedicated for the sole use of a particular brand. While the range of smaller equipment is usually dedicated to one specific business, the larger systems, like the walk-in refrigeration solution might be shared to cut down on cost.   

Advantages

Cloud kitchen has a bunch of advantages over the traditional model. The most prominent benefits are,

  • Low investment – You save the expenses of procuring the space and new equipment. Complete freedom from interior decoration, buying dinnerware, bearing the overhead cost for serving staff – the list of savings is long. As it works on a shared model, even the cost for the things that you still need is reduced considerably. Instead of a huge investment to start the business, you can kick off the new venture through a small monthly rent.   
  • Less hassle -- Starting a new, independent dine-in restaurant from scratch can be overwhelming even for the experienced professionals of the industry. CK minimizes the hassle to a great extent. You get the space and the equipment quickly through a monthly rent. As you need much less staff to operate a CK, the hassle of hiring a fleet of staff is abolished entirely.

 

  • Great flexibility – Flexibility is an important aspect of any business. Be it the menu or the way you operate, in the cloud model, you can change quickly. If you need more resources to serve the demand, you can quickly increase it without going for significant additional expenses. At the same time, you always have the scope of scaling down the resources when you don’t need them. Instead of serving one or two specific cuisines in a brick-and-mortar establishment, here you can easily introduce multiple cuisines to increase your target customers, for minimum investment. You can also improve or modify quickly, depending on the feedback.
  • Minimal risk – Risk is an intrinsic part of any business. In the cloud model, the total investment is reduced, and it offers excellent flexibility to scale down your resources to a bare minimum, which reduces the risk to a great extent. This also makes it possible for the brands to experiment more and be versatile in their menu and service. 
  • Better knowledge about your customer – Knowing your customer is the key to success in business. The information enables you to understand what your customers like or dislike and modify or upgrade your services accordingly. In this model, the customer journey, starting from the initial search to order placement, fulfilment, and feedback – everything is completed online (unless you are selling from a physical outlet). This gives businesses precise, measurable data to know their customers better and offer better services.             

Disadvantages

This business model also has its share of weaknesses, and before you go for it, it is essential to know the other side of the coin,

  • Fierce competition – The online marketplace is overcrowded and grabbing the customers’ attention can be a challenge for new businesses. Customers can quickly scroll through several options before making their pick.  
  • Area restrictions – A cloud-based restaurant can deliver food only within a limited area to ensure the best food quality and in-time delivery. It significantly restricts the number of target customers.
  • Profit-sharing – If you are using a popular third-party app to get orders like most other cloud restaurants, you might have to share as much as 30% of your profit with the application provider. This can be a challenge for start-ups.
  • Higher investment in packaging -- Packaging is very crucial when it comes to home delivery of food. You need to ensure that the dish reaches the customer in the best condition, at the right temperature for good feedback and repeat order. This can lead to more investment in packaging.

Cloud kitchen has its advantages and limitations. Suppose you want to experiment without investing a lot and going into the hassle of finding the best commercial kitchen equipment and stainless steel hood supplier in Sydney, Melbourne, Perth, or Brisbane. In that case, a cloud kitchen is the best option.