The pandemic has hit the global restaurant industry significantly. Post-March 2020, the dine-in premises of restaurants shuttered and the customers were compelled to stay at home. The customer preferences have thus experienced a paradigm shift since then. Meanwhile, as brick-and-mortar restaurants lost the scope of making sales, the operators started diversifying their services by introducing online ordering to their operations via cloud kitchens which further drove the growth of online ordering amongst the customers whilst the pandemic.
Now the question is, what are cloud kitchens and why are they repeatedly proving their profitability to the restaurant operators?
Cloud kitchens (virtual kitchens/ghost kitchens/dark kitchens) are delivery-only outlets that have no physical premises. All their sales depend on online ordering, which is a major trend post-COVID-19. This symbiotic growth of cloud kitchens and online ordering became the ultimate means of survival for a million struggling restaurateurs who were trying to save their businesses during the imposed lockdown.
How Popular Are Cloud Kitchens?
Cloud kitchens are no longer a future model and have now gained traction on a global level. According to a report by Businesswire, the global cloud kitchen market is anticipated to reach USD 118.5 billion by 2027, growing at a robust CAGR of 13.5%.
Cloud kitchens have set their foot almost everywhere in the world providing solutions to restaurateurs to enhance operational efficiency, deliver stellar guest experience, and improve the bottom line of their business.
The UAE and MENA regions are currently quite ahead in the world of cloud kitchens. There are more than 400 cloud kitchens in the UAE, mostly based in Dubai, and the numbers continue to rise. Kitopi, a leading cloud kitchen brand in the UAE, currently operates 60+ kitchens in the Middle East and despite the pandemic, the brand witnessed 300% growth in 2020. Other cloud kitchen brands like Sweetheart Kitchen, KLC Virtual Restaurants, etc. are also picking up funding and have expansion plans in upcoming years.
Other regions like the USA, UK, and India have also experienced exceptionally good growth in the cloud kitchen business. Rebel Foods, the largest Indian cloud kitchen brand is rapidly coming up with newer brands and cuisines to serve a larger pool of customers. With 11 brands operating under it, the company stands at USD 1.42 billion as of the year 2021.
What Makes Cloud Kitchens The First Choice Of Restaurateurs These Days?
There are ample reasons why cloud kitchens are becoming increasingly popular, the pandemic being one of them. Pandemic has just fast-forwarded the trend that was already in place. As the restaurants shut down, the importance of saving capital necessitated the switch to cloud kitchens. While some operators solely set up their business as cloud kitchens, some shift to cloud kitchens and some operate hybrid models (physical restaurants as well as cloud kitchen services).
Here are a few reasons why cloud kitchens are more profitable than the other restaurant formats:
- Low operational cost: With no ambiance or dining front, cloud kitchens lower the operational and maintenance costs.
- Low overheads: Staff management is tough in physical restaurants. No ambiance and no customers visiting the restaurant space rids the operators of the worries of hiring staff for serving customers, thereby reducing the labor costs.
- Low rental costs: With the absence of dining areas, cloud kitchens provide the liberty to operators to open their business in suitable kitchen premises, and start their delivery business from anywhere.
- Low startup costs: Cloud kitchens give the opportunity to easily step into the restaurant industry and start the food business for very little investments as compared to physical restaurants.
The advantages that cloud kitchens provide are no doubt huge in number. They are the “tech startups” of the restaurant industry that operators can leverage for an easy entry into the market with maximum efficiency, flexibility, and better profit margins. Therefore, even when the pandemic is over, it is only fair to say that cloud kitchens are here to stay.