Cloud kitchens to completely change the face of restaurant biz

The future of cloud kitchens looks brighter than ever. If the past two decades saw people increasingly dining out to celebrate or break the monotony, the present times, and perhaps the next 10 years, will see a gradual shift towards ordering food at home. Because of Covid-19, the complete economics of the restaurants business has changed. While dining-in will continue to remain a focus area, a lot more time will be spent by the industry on the food delivery side.

So what’s fuelling this growth? Let’s look at the trends. In India, a person on average orders 6-7 meals per month at home, which is far lower than the global average of 16 orders a month. Hence, the scope to expand this segment is huge.

As per RedSeer Management Consulting, the domestic cloud kitchens market is expected to grow from $400 million in 2019 to $2 billion by 2024. Cloud kitchens are leading from the front to bring about this change. But what exactly are cloud kitchens? Unlike brick-and-mortar stores, cloud kitchens don’t have a dine-in facility. They take orders via apps -- in-house or Zomato or Swiggy -- and operate single or multiple food brands.

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In a conference by NRAI (National Restaurant Association of India), an industry body with over 5 lakh members, the general belief of the panellists was that Covid-19 is a watershed event for the food services industry. “Everybody had predicted the food services industry will die. But here we are, resilient as ever. Every restaurant out there has started taking delivery a lot more seriously. Most dine-in restaurants oscillated between 5 and 10 per cent of their total business coming from delivery. Everybody, in the last 5-6 quarters, has tripled that amount. Delivery forms a larger percentage of their business,” said Riyaaz Amlani, CEO and Managing Director of Impresario Handmade Restaurants.

Restaurateur Kabir Suri, NRAI President, said that prior to Covid-19, delivery as a business was 5-6 per cent of the total revenues. “We believe that delivery as a business in our total revenue stream has become 40 per cent. We have managed to sustain that even with unlocking and restaurants opening up, we are pushing the pedal on both [dine-in and delivery],” he said, adding that his company Azure Hospitality has already opened 10 cloud kitchens, and is in the process of opening 10-15 more in FY22.

Suri says the biggest mistake that cloud kitchens do is to operate 6-7 brands from one asset (cloud kitchen). “When there are 10 different cuisines in one kitchen, the manpower has to be trained specifically. The equipment used for one cuisine might not work for the other. That’s why a lot of cloud kitchens have a problem making money. Every cloud kitchen doesn’t make money,” he says.

So what model is being followed by Azure? It’s using its existing brands to build a cloud kitchen vertical. How? For instance, Azure operates the dhaba brand. It has started a sub-brand Maalgaadi by Dhaba, which has the same staff and same kitchen as dhaba, but it’s priced differently. “We have built brand equity. Why should we create 15 new brands? We have the heroes. We can create sub-brands because everything new needs marketing, personnel and tech spends. If we already have the infra, product, and fan following, why not just expand them [existing brands]. That’s easier to do than having seven brands in one kitchen, which are difficult to monetise systematically, and also to keep their product quality consistent,” said Suri.

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