Taking a leaf out of the Internet first restaurants such as Yumist, HolaChef, Petoo, etc, several restaurants are now shutting down outlets and moving towards cloud kitchens. Mast Kalandar has shut down its restaurants in two of the four cities it was operating in, and Ammi’s Biryani has converted some of its outlets into cloud kitchens to cut down on the cost. Faasos credits its high profits and survival in the F&B Industry to its idea of shifting to a cloud kitchen business model.
A cloud kitchen is basically a takeaway outlet that provides no dine-in facility. They function as a production unit with a space for the preparation of food. The food can be ordered online, hence, the name cloud kitchen.
Stiff competition in the restaurant industry, along with decreasing margins result in the shutting of restaurants as they are not able to cover their costs. It has been noted that the number of dine-in customers has decreased significantly over the last few years, with customers mostly opting for home delivery of food. Because of the shift in customer preference and an increased sense of hassle in dining out, the home delivery option has gained momentum and along with that has brought a shift in the restaurant industry as now food overpowers dining experience. This has given a path to new entrepreneurs and more competition.
As the number of delivery orders increases, restaurants are now moving towards cloud kitchen operations. According to a report, the market share of delivery restaurants in 2013 was 15%. The rise of food tech startups has made it much easier for consumers to order and pay for food online, thus increasing food delivery orders. Earlier, the market share of delivery orders was 35%. Moreover, the size of online food delivery market reached Rs. 30 Crore by the end of 2016. This is a growth rate of 150% from the previous year.
Cloud kitchen restaurants focus on maximizing the number of orders per day, by focusing on the mass production of food and decreasing the overall production and packaging time. Restaurants are now also looking to automate the preliminary aspects of food production to cut down the time. This would be achieved by adopting the Hub and Spokes model and Central Kitchen Management. Food is prepared preliminary at the central kitchen, called the Hub, and then delivered to the spokes, or the food outlets, where the remaining cooking is done.
Zomato with its Infrastructure Services is operating on this model but unlike most of its competitors, under this cloud kitchen arrangement, instead of cooking its own food, it is giving various restaurants its kitchen space to cook and get the food delivered. In a sense, Zomato is tapping the cloud kitchen market by creating cloud kitchens for different entrepreneurs.
The packaging of the food is also an important aspect of food delivery, as they take about 25% of the time. Food businesses are also looking for tools and methods to automate and optimize packaging.
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