The food industry is undergoing transformation. High start-up
costs, onerous regulations, and now COVID-19 have all put the restaurant
industry and traditional food business models in jeopardy.
What Is A Cloud Kitchen?
A cloud kitchen, also known as a "ghost kitchen"
or "virtual kitchen," is a commercial kitchen space that allows food
businesses to prepare menu items for delivery and takeout. Cloud kitchens, as
opposed to traditional brick-and-mortar locations, enable food businesses to
create and deliver food products with minimal overhead.
According to recent data, meal delivery orders increased by
more than 150 percent from 2019 to 2020, and UBS expects the food delivery
market to grow more than tenfold over the next ten years, from $35 billion per
year to $365 billion. As the demand for food delivery grows, more restaurant
owners and food entrepreneurs are turning to cloud kitchens as an ideal
business solution.
Who Makes Use of Cloud Kitchens?
Cloud kitchens are quickly becoming the ideal solution for
expanding businesses, from beloved local restaurants to name-brand national
chains. Here are a few examples of businesses that are incorporating ghost
kitchens into their expansion strategy.
Delivery-Friendly Restaurants: Cloud kitchens that are
optimized for delivery allow you to accommodate orders without additional
overhead or hassle. Cloud kitchen restaurants source orders and facilitate
delivery logistics through online food delivery platforms (such as DoorDash,
Postmates, and UberEats) or their own white-label platform. Customers can then
order food from their mobile devices and have it delivered to their home or
office.
Caterers: Do you own a catering business and require a
private kitchen as well as plenty of cold and dry storage without breaking the
bank? Cloud kitchens are an excellent option.
Meal Prep Businesses: Meal prep businesses frequently
require kitchen space for only a few days per week. This flexibility can be
provided by virtual kitchens.
Packaged Food Producers: Cloud or virtual kitchens can
provide an ample warehouse space and equipment for packaged food producers
looking to scale.
Food Product Testing: A cloud kitchen is a low-risk,
low-capital solution for marketing testing new food products and brand
concepts.
The Advantages of a Cloud Kitchen
Virtual kitchens (also known as cloud kitchens or ghost
kitchens) are an excellent substitute for traditional brick-and-mortar
restaurants. Ghost kitchens allow users to focus on food preparation and
product marketing while reducing administrative and logistical burdens that
often plague food businesses.
Here are a few more of the numerous advantages of cloud
kitchens:
1. Low Initial Investment
Cloud virtual kitchens help food businesses save money.
Leasing a commercial kitchen from a ghost kitchen provider lowers start-up costs
because food businesses no longer have to invest in building inspections,
costly building construction, zoning compliance, and so on. Cloud kitchens also
enable food businesses to get up and running in a matter of days or weeks,
rather than the months or years required for traditional leases or building
mortgages.
2. Reduce Overhead
Traditional restaurant owners have struggled to stay afloat
due to high property taxes, costly staff payroll, and pesky maintenance costs.
Cloud kitchens take care of these costly and time-consuming administrative
tasks. Restaurants in cloud kitchens frequently employ one to two cooks and
share communal expenses with other tenants.
3. Additional Convenience
Consider running a food business and being able to
concentrate solely on your customer and food product. This is made possible by
ghost kitchens! The following administrative tasks are frequently handled by
ghost kitchen providers so that you do not have to: I health inspections; (ii)
equipment repairs; (iii) janitorial services; (iv) security monitoring; (v)
property taxes; and (vi) utility bills.
4. Improved Delivery Experience
Do you have a physical restaurant that is essential to your
brand? Cloud kitchens enable you to grow your brand by facilitating deliveries
from a single location and increasing revenue streams. Cloud kitchens enable
your physical restaurants to meet increased demand without overburdening
kitchen staff with online food delivery orders.
5. Satisfying Customer Demand
Cloud kitchens enable you to meet the needs of your
customers. As consumers demand quick meal options at an affordable price, the
popularity of online food delivery has skyrocketed. Cloud kitchens help to meet
the growing demand for online food delivery by improving the delivery
experience through better logistics, lower costs, and technological
advancements.
6. Broader Reach
Cloud kitchens enable your company to broaden its focus on
food delivery and reach a broader audience. Delivery-optimized restaurants
promote their services via delivery apps and social media rather than
traditional marketing channels. Cloud kitchens can help your brand grow by
fortifying new marketing channels and increasing exposure.
Cloud Kitchens versus Traditional Kitchens
Cloud kitchens take the traditional restaurant model and
enhance it with modern convenience and cost savings. The following are some key
distinctions between traditional restaurants and cloud kitchens:
1. Traditional restaurants necessitate a greater investment and administrative burden.
Traditional restaurants frequently require a dining area, a
host stand, a bar, a waiting area, and employee and patron restrooms. More space
entails higher costs and more maintenance. Cloud kitchens provide users with
private commercial kitchen spaces while sharing the costs of communal elements
such as bathrooms and hallways. There is no need for as many areas as a
traditional restaurant. Instead, that space could be used to create functional
areas for your chef staff.
A ghost kitchen can be rented in sizes ranging from 250 to
680 square feet. Kitchens in standard restaurants can be as small as 300 to 400
square feet. In a ghost kitchen, you can test multiple concepts, take on a
large number of orders, and have a more comfortable working environment.
2. Traditional Kitchens Will Always Require More Staff
Traditional Kitchens Will Always Require More Staff, Hosts,
servers, chefs, bartenders, maintenance personnel, and restaurant managers are
all required in traditional restaurants. A ghost kitchen requires only staff to
prepare food and managers to oversee the facility. You will not have in-person
customers to take care of unless you offer order pickup, and the rental
facility will provide maintenance personnel for you.
3. Low Startup Costs for Cloud Kitchens
Opening a traditional restaurant necessitates a significant
investment in payroll, kitchen equipment, furniture, and utilities, in addition
to high lease rates or burdensome mortgages. Flat-fee pricing for
administrative features such as janitorial fees, waste collection, and kitchen
equipment is common in cloud kitchens.
4. Higher Profit Margins in Cloud Kitchens
Profit margin is the amount a company earns after deducting
expenses such as rent, employee wages, monthly utilities, and general
maintenance. Because traditional restaurants have so many additional overhead
costs and startup expenses, their profit margins are typically lower than those
of cloud kitchen restaurants.
The Benefits of Renting a Cloud Kitchen
Because of the booming food delivery industry, cloud
kitchens are quickly gaining popularity. UBS, a multinational investment bank,
predicts that online food delivery will grow at a compound annual growth rate (CAGR)
of 16 percent. This represents a projected increase from $49.4 billion in 2018
to $365 billion in 2030. Cloud kitchens have been embraced by restaurants as a
low-cost, low-risk way to capitalize on rising demand.
Here are a few more compelling reasons to consider cloud
kitchen rentals for your food service:
1. Withdraw from the Expensive Real Estate Market
Due to high mortgage payments and onerous lease agreements,
an increasing number of restaurants are closing their physical locations. Cloud
kitchens can be rented by food service operators for a fraction of the cost of
purchasing or building traditional restaurants. When you invest in a cloud
kitchen, you are only paying for storage and preparation space.
Don't compete for a high-priced rental space or let a
high-interest mortgage in your city weigh you down. Instead, rent a cloud
kitchen. When you consider the cost of renting commercial kitchen space versus
a traditional restaurant, it's easy to see why the concept is attracting a
growing number of local, regional, and national restaurant brands.
2. Profit from Home Delivery Trends
Life is hectic. People are increasingly turning to food
delivery services at the end of long workdays and instead of bringing lunch to
work. As a result, delivery food services are gaining popularity, and the
demand for cloud kitchens is increasing.
In 2018, American consumers placed $10.2 billion in food
orders through third-party services. By leasing a cloud kitchen and having an
online presence for food delivery orders, you, too, can tap into this massive
market.
3. Increase Your Profitability
Cloud kitchens are profitable, low-risk business ventures
for restaurant owners, caterers, food entrepreneurs, and other food service
providers. The food delivery service market is expected to grow from $107.44
billion in 2019 to $111.32 billion in 2020, and then to $154.34 billion in
2023, representing a 43.6 percent increase in only four years.
The rapidly expanding market and rising costs of traditional
restaurant models highlight the potential role of cloud kitchens in the food
industry's future. Cloud kitchens are an appealing way for your food business
to capitalize on changes in the food delivery market due to their efficient
operations and low entry barriers.
