Want to run a cloud kitchen? Avoid these 5 pitfalls

Want to run a cloud kitchen? Avoid these 5 pitfalls

Easy to set up, cloud kitchens are not always easy to sustain if you don’t get the formula right

For those who can crack the right code, cloud kitchens provide a high-growth business model. For those who can crack the right code, cloud kitchens provide a high-growth business model.

Three ingredients – a great menu, a kitchen space and smart packaging is everything you need to cook up a cloud kitchen. Because of their simplicity and low-cost model, hundreds of people over last two years have jumped on to the band-wagon.

Delivery-only restaurants that offer no dining or takeaway and service orders via apps like Zomato or Swiggy are called cloud kitchens. 

While cloud kitchens can start with an investment as low as Rs 10 lakh, market trends show, only a fraction of this is able to sustain business. For those who can crack the right code, cloud kitchens provide a high-growth business model. Zorawar Kalra, founder of Massive Restaurants which owns Made In Punjab, Farzi Café, Pa Pa Ya and who is working on making Massive one of the largest internet food companies of India, shared his insights with Business Today.  

5 mistakes to avoid while setting up a cloud kitchen

Overall, keeping costs low and the food quality high and a thorough understanding of the market is the basic formula to run a cloud kitchen. However, it is easy to fall into the following traps.

Not working on the product well enough

Cloud kitchens are popular because of the food they offer. Unlike a dining experience where people go for the service and ambience, a cloud kitchen’s only value is its food. So, the food on the menu is the most important ingredient of a cloud kitchen and not working well enough in creating a good menu could lead to unpleasant feedback from the market and before you know, your clientele could lose interest in you. “Work on your food, stand out,” said Kalra.  

Spending too much on packaging

Cloud kitchens, to be able to sustain, need to keep costs low. Kalra, who runs kitchens all over India, suggests that the cost of packaging for cloud kitchens should not be more than 5 per cent of total expenses. The cost of goods sold (COGS), kitchen experts suggest should ideally be around 25 per cent of total costs. However, food packaging is also the most important part of a cloud kitchen and one has to ensure that the packaging ensures safe travel of the food from the kitchen to the consumer. 

Being a location snob

Location may be the most important factor while setting up a restaurant, but is of least importance when it comes to a cloud kitchen. Profitable cloud kitchens are now beginning to flourish in tier – 2 cities more than in fancy urban hubs. Kalra says, “The profitability of a could kitchen in a tier-2 city is as much as anywhere else and the prices too do not have to be cut down for the B-town as people are happy to spend as much as their urban counterparts do.” 

Not finding a niche

It’s tough to stand out in a market when every other cloud kitchen is serving the usual suspects. To be able to retain customer interest and to ensure they return to you again and again, you need to create a niche with flavours and taste that’s not the same as another kitchen in the vicinity. “One has to create a distinct product from start to be able to keep customers returning for more. Spend time on the product, make it habit-forming,” Kalra said.

Investing too much on equipment 

Different kinds of cuisines require different kinds of equipment and many cloud kitchens make the mistake of over-investing in the initial infrastructure. “It is right to get equipment which can be repurposed for various cuisines," Kalra says. The biggest spend of a kitchen should be on the food ingredients itself and not on peripherals. 

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