The future of cloud kitchens: Efficiency, growth, expansion?
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The future of cloud kitchens: Efficiency, growth, expansion and more

The future of cloud kitchens: Efficiency, growth, expansion and more

Customer demand for outstanding food delivered directly to their door is rising

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Naji Haddad_Deliverect_Middle East General Manager

It’s no secret that the on-demand food industry is booming and has significantly capitalised on the shift in consumer behaviours driven by the global pandemic and mobile technology expansion.

Customer demand for outstanding food delivered directly to their door is rising. According to a report by Business Wire, the global delivery industry is now projected to be a potential market that will cross the $154.34bn mark by 2023.

And that’s big news for cloud kitchens (also known as dark kitchens), a new business model that’s also booming and has six different models, each with its pros and cons.

Let’s have a quick look…

  • Traditional cloud kitchen: When a single brand owns or rents a single dark kitchen location, typically specialising in a single type of cuisine. It relies on third-party delivery channels.
  • Multi-brand cloud kitchen: Multiple brands share a single cloud kitchen under the umbrella of a parent company. While sharing the kitchen and equipment, brands offer different cuisines and dishes. This ecosystem enables them to maximize efficiency while minimising operational costs.
  • Takeaway cloud kitchen: Similar to the traditional ones, except they allow customers to wait and collect their orders.
  • Aggregator-owned cloud kitchen: When delivery service providers (Zomato and Deliveroo) offer a fully equipped kitchen for restaurants to rent. These dark kitchens can concentrate on meal preparation while the place owner handles everything else.
  • Aggregator-owned cloud kitchen plus: Similar to the prior, this model provides an extended service. Aggregators provide more infrastructure and optimise the kitchen process. This may also include a storefront similar to that in the takeaway model.
  • Outsourced cloud kitchen: This model outsources anything they can, so people working there only have to add the finishing touches to the meals. It is more customer-facing as it allows the team to focus on delivering a perfect order.

This diversity in such a new business model is at least fascinating and opens new opportunities, but it also raises a big question…

Is there a future for cloud kitchens?
Thanks to millennials being the driving force, by 2026, the restaurant-to-home delivery industry will be a $500bn market globally with an annual growth rate of 8.29 per cent.

Millennials spend most of their income on online food ordering because they like to taste different cuisines that offer a quick and smart solution to save time. They also have high purchasing power and prefer third-party delivery sites (with over half – 54 per cent- ordering this way). As a digital-first generation, millennials are critical of their experiences and enjoy sharing reviews and feedback online.

That is why a brand’s strong digital presence is essential, and providing excellent services is crucial. And that implies an evolving relationship with customers and their new habits, leading to more considerable revenue in an industry expected to be worth $1tn by 2030.

But to do so, brands need to be in the right place at the right time, which means adding channels and virtual brands. Even when the dark kitchen market is booming and has a promising future, not all of its players will take advantage of it.

Cloud kitchens can move further and capitalise on the wave by expanding their channels and looking for efficiencies. Through optimisation and more visibility, sales will grow.

In fact, recent research shows that restaurants lose 20 per centaverage profit by not having an online presence. By adding new channels and working with virtual brands, the same space is optimised to operate efficiently. That means more reach, more market share, and more revenue.

Naji Haddad is the general manager at Deliverect, Middle East

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