Despite the year 2016 being a tumultuous year for the restaurant business, Online Food Delivery witnessed a 150% growth, as per a report by the RedSeer Consulting. Online ordering and delivery platforms accounted for 30-35% of the total restaurant business.
The industry had its lows in terms of investments, receiving a total funding of less than $80 million in 2016, as compared to $500 million in the year before, yet the demand for Online Delivery has only increased in the past year.
The food delivery business is further pegged to grow more and more due to various factors such as
1. Growing Disposable Income– With the growing Urbanization, the disposable income of the consumers has also increased. Now people spend a significant amount on luxuries such as eating from restaurants.
2. Time Scarcity– Young professionals prefer to order from outside instead of cooking or going out to eat to save time and money both.
3. New Eating Habits- Globalization has impacted our eating habits as well. Consumers have moved from the regular Indian and Chinese cuisine to global as well as regional food. Customers are now more focused on eating healthy and trying out new varieties.
4. Ease of Availability- The ease of availability of readymade food quickly is perhaps the most defining factor that has resulted in the growth of the Food Delivery sector. In Metropolitan cities, there are food outlets which deliver breakfast, lunch, and dinner with a monthly subscription package at the desired time adding more convenience to their customer’s life.
It is also expected that the foodservice market in India will grow to 5, 00,000 INR by 2021 from 3,09,110 INR in 2016. The sheer demand from the customers has led to a golden era of the FoodTech industry. However, it is not as easy as it looks. The number of businesses that have shut their shops is significant.
Also Read: How to Open a Cloud Kitchen Restaurant
Things to Keep In Mind While Running a Cloud Kitchen Restaurant
1. Managing a Large Number of Orders at the Same Time
Contrary to popular belief, acquiring new customers isn’t as difficult for new age internet kitchens, as is processing a large number of orders at the same time. During rush hours, managing 50-70 orders, in two hours, where the ideal delivery time per order is 45 minutes, becomes extremely tedious for small scale restaurants.
To scale up the operations, it is better to have a concise menu, with smart, efficient staff members to deliver maximum output. When there are limited items, a number of repeat orders is also high, which helps improve efficiency and quality.
2. Maintaining Consistency
While starting a Tech venture, often companies go overboard, trying to integrate the best technology. While technology is necessary to facilitate the operations, quality and taste of food remain of prime importance. Maintaining consistency, especially as you branch out becomes critical to retain customers.
Maintaining hygiene and following Food Standards is also important for all Online Food Businesses. A Cloud Kitchen can be successfully run through a small and unappealing location; however, you must ensure that the FSSAI Guidelines are followed to avoid any legal issues.
3. Customer Retention vs Customer Acquisition
While acquiring new customers is important for the business to grow, retaining existing customers is extremely important. It is six to seven times more expensive to acquire a new customer than to retain an existing one. Also, the average price cover of the old customers is significantly higher than that of new customers.
New restaurants tend to blow up the money in marketing and acquiring new customers by offering exorbitant discounts and offers. This is especially true in the case of Online Food Businesses. While marketing is necessary to spread the word about your restaurant, luring customers by offering obscene discounts only hampers your margins. Attaining Customer Loyalty becomes crucial as once you withdraw the offers, the number of orders also drop.
4. Managing Margins
One of the core business basics in Food Delivery is achieving economies of scale, that is, one should know “How many orders one has to deliver or serve to get profitable”. Let’s suppose your average order size Rs 100 out which Rs 40 is the cost of goods sold, Rs 20 per cost of delivery. The cash in hand comes out to be Rs 1, 20,000 on 100 orders per day churning out Rs 40 per order. The margins need to be sufficient to meet the Fixed Cost of the kitchen.
Technology comes helpful in this case. Orders are routed through the Online Ordering and Delivery so that maximum orders in a particular area are delivered by one delivery person. This optimizes the time and cost of Food Delivery.