Gone are the days of restaurants and dining out being the only option to travel beyond the everyday home food and the kitchen. If you look around these days, seeing food aggregators such as Zomato and Swiggy running round the clock to deliver the freshest food right at the customer’s doorsteps, is a common sight.
Not only has this driven a trend among consumers, but it has also left the food entrepreneurs, the small restaurant owners, and people in the food industry, gaping at the growing trend of the online ordering business. The number of users of the online food delivery system is expected to grow up to 2.9 million users by 2026.
Now imagine a sector completely dedicated to these consumers and the online delivery system.
That’s where cloud kitchens come in. If you’re a foodie, a food entrepreneur, a food truck owner or someone interested in gaining revenue by tapping into the online food delivery market, this is the blog for you.
Our team at Foaps have considered industry trends, experience and statistics to curate the ultimate guide consisting of cloud kitchen business models, plans, examples and cost of setting up a cloud kitchen in India.
So, let’s get to the basics first.
What is a cloud kitchen model?
A cloud kitchen or a ‘ghost kitchen’ is called so, due to the physical visibility it lacks, to the public.. Unlike restaurants that offer dine-in, cloud kitchens are devoid of all the setup. In fact, cloud kitchens require minimum equipment, such as space and kitchen equipment, compared to the lavish decor that restaurants use.
So, how does the cloud kitchen business plan work in India? Actually, the entire concept of cloud kitchen is reliant on online delivery. The cloud kitchen is essentially the entire set-up, with no space for dine-in. Being delivery oriented, a cloud kitchen either sets up its own website for online delivery or ties up with Zomato, Swiggy or other food aggregators etc. With minimal investment, a cloud kitchen saves money, can be expanded to different outlets, utilizes technology for customized and personalized offers, and offers competitive pricing to customers.
In short, orders come in, the chefs are informed, the food is ready, packed and placed at the hands of the delivery executive who lands it at the customer’s door.
Starting a cloud kitchen business model in India: Types of cloud kitchen model
The operation of a cloud kitchen is uniquely different, compared to traditional kitchens. Cloud kitchens maximize their use of technology for marketing, customer acquisition, delivery and so on. For instance, multiple restaurants can be run in the same space, as different cloud kitchens. Or, one cloud kitchen can run under multiple brand names, creating ‘virtual kitchens’. A cloud kitchen’s menu is optimized such that it is easy to prepare, and retains the best quality when it reaches the customer’s doorstep.
As a commercial virtual kitchen that decides it’s working hours, menu and the type of customers to cater to, here are some cloud kitchen models to assess before getting started,
1. Independent cloud kitchen
As the name suggests, behind the cloud kitchen is a single brand that is dependent on an online ordering system for their orders. With a small team of chefs, definitive operative hours and a brand name, independent cloud kitchens have a business model that is self reliant, and is hosted on different food aggregators as a means to acquire customers.
2. Hybrid cloud kitchen
Being a hybrid of takeaway and cloud kitchen, a hybrid cloud kitchen can be visualised as an extension of the regular cloud kitchen. Instead of being tucked away in a space with kitchen equipment, hybrid cloud kitchens also have a storefront that allows customers to receive their takeaway parcels. In short, a single brand with a single kitchen, can have multiple outlets in a hybrid cloud kitchen. The delivery is either through the in house staff or through food aggregators.
3. Food aggregator owned cloud kitchen
If you thought the competition was tough among food entrepreneurs, in recent times, we have food aggregators entering the cloud kitchen game. Aiming at the revenue and growing popularity of cloud kitchens, there are several food aggregators that lease out or purchase a convenient kitchen space to a growing food brand or one that’s new in the market. This is a win-win situation for both, as the food brand acquires customers and has a sponsored delivery by the food aggregator. In turn, the company received business by only having invested the rent space for the cloud kitchen and avoiding all other costs.
4. Multi brand cloud kitchen
This cloud business model is a combination of different brands under the same kitchen. Imagine a menu with assortments from pasta to desserts, but outsourced from a single kitchen, under different brand names. This form of cloud kitchen utilizes resources effectively and keeps operational costs low. Flexibility is an important part of such multi brand cloud kitchens as they cater to the local food demand in any area and uses marketing data insights to include different type of cuisines and to maximize profits.
5. Outsourced cloud kitchen
As the newest entry to the cloud kitchen game, this cloud kitchen business model is solely dependent on outsourcing of the food and the delivery services. A restaurant or any other business can outsource almost part or all of the menu such that the prepared product is recieved at the restaurant. The restaurant then packs the item and hands it over to the delivery personnel. The operational cost for the in-house team is greatly reduced as everything from preparation, to delivery is handled by the outsourced group.
How to set up a cloud kitchen business model in India: 7 steps to follow
With the right budget, the required resources, and the right marketing a cloud kitchen model can soon be bringing in profit for anyone if it is a startup. Some cloud kitchens examples in India include Faasos by Rebel Foods, Freshmenu, Behrouz Biryani and so on.
One can gain considerable insights by assessing the journey of these cloud kitchen startups and how they managed to rise to popularity. That apart, here are the main investments, licenses, location and other aspects of a cloud kitchen model to keep in mind, while considering a cloud kitchen startup in India.
1. Choosing the right rental space
Cloud kitchens pride themselves on the reduced budget required to set one up. The main reason for the low investment is the rental space. However, choosing the right rental space, that is, ensuring that there is proper sanitation, water supply and maintenance is very crucial. The location of the cloud kitchen matters, and is mostly based on the demographics of food ordering and the type of food the cloud kitchen caters to. Cloud kitchen startups in India are usually deployed on the basis of the demand, customer demography and the type of food produced by the cloud kitchen. In short, it is advised to choose a place with the best demand for the services your kitchen offers.
2. Licenses and trademark registration
Licensing is a crucial part of any set up due to the legal regulations and to keep a worry free business running. Having the proper license can save the cloud kitchen model from any legal difficulties and also let customers know of the high quality of the food and sanitation offered by the cloud kitchen. Showcasing the licenses or badges on websites boosts customer trust. Some of the licenses to procure before starting out with a cloud kitchen business model include,
- GST registration
- Trade license
- Fire and safety license
- FSSAI (Food Safety and Standards Authority of India) license
- Trademark registration
Having these licenses can assure any owner that their cloud kitchen startup can sustain any legal difficulty, hence allowing them to focus more on business operations. Compared to cloud kitchens, the owners require more licenses to open a traditional restaurant. Having a trademark registration is crucial in a competitive environment, as the brand name, and logo are extremely crucial for developing customer and brand loyalty.
3. Deciding the cuisine
The competition among cloud kitchen startups has a huge difference with respect to traditional dine in kitchens. Often, cloud kitchen models are known for a particular type of cuisine they offer and the quality of the food. Deciding the main type of cuisine to be prepared is a crucial factor. This decision should be backed by proper analytics, resource analysis, ease of procuring raw materials, staff management and so on.
4. Kitchen space, equipment and raw ingredients
The type of equipment required depends on the cuisine offered by the cloud kitchen. One can save costs by setting up a kitchen with the right electronic equipment for preparation, and acquiring second hand or old tables. In the case of multiple brands under the same kitchen, there could be cost saving due to shared kitchen equipment such as chimneys, burners and so on. One can even outsource a cloud kitchen with basic equipment and upgrade on the basis of needs.
In terms of quality of food and packaging, these form the hallmark qualities that customers look for, in cloud kitchen startups. Due to the lack of in-house dining and dish presentation, packaging plays a crucial role. Invest in sturdy packaging that preserves the quality of the food and uniquely sets your brand apart. If possible, it is advised to go for eco-friendly packaging. It is also best to source local ingredients or have a separate budget for procurement of raw materials that have a good quality. Better the ingredients, better the quality and your chance of retaining customers in the cloud kitchen business model.
5. Online Order Management System
The majority of the business model of a cloud kitchen startup is based on food delivery aggregators like Swiggy or Zomato. It is heavily dependent on the number of orders, proper tracking and preparing and apt delivery. Imagine having to manually write down each order from a different food aggregator, and convey it to the staff. This can disrupt the smooth functioning of your cloud kitchen due to the possible errors, lack of proper information and so on.
Before this drawback hurts your rush hours, we recommend having a restaurant online order management system that best fits your restaurant.
Here’s how Foaps, online order management system, helps manage your business:
- Centralized dashboard for management of online orders- Manage, track and analyse orders from Zomato, Swiggy and other food aggregators, all in one dashboard
- Track orders- Update the progress and delivery updates of individual orders in one click
- Menu availability on all platforms- Update and have your menu distributed on all platforms
- Revise pricing and update menus with one click- Inform customers of any dishes that are sold out, bestsellers of the day, and revise pricing, across different platforms with one click on the dashboard
- Manage multiple food delivery partners- with any new food delivery service in the game, forget all the hassle of a tie up, as Foaps helps you tie-up with any food aggregator easily
6. Staff requirements
While starting out, it is recommended to have a basic staff setup of 1-2 chefs, one person to manage the billing, any queries on telephonic calls and one for marketing. Having 1-2 people for housekeeping and maintenance of the cloud kitchen is necessary. As the profits rise, the staff can be scaled up on the basis of need.
With a cloud kitchen business model, the only limitation lies in physical marketing, but these industries are free to tap into the potential of online marketing. There’s no fixed platform that works best for marketing and it is advised to deploy a mixture of marketing methods to find what works best for your cloud kitchen’s discovery. Some marketing methods to deploy include,
- Online listings- apart from the listing on food aggregator platforms, it is beneficial to have your listing on Google, Yelp and other websites that can help increase visibility
- Social media- the target audience of this generation is mostly on social media, and is drawn towards creative, smart marketing. Ensuring your brand’s presence vocally and visually on social media guarantees a chance for brand recognition
- SMS and email marketing- the era of personalized offers drives the competition market today, and despite having no physical location, ensure that your SMS and email marketing campaigns include online discounts, rush hour discounts and so on to boost frequency
What are the costs associated with a cloud kitchen business model in India?
The costs of starting cloud kitchen in India can vary depending on the city chosen, the demographics, the type of cuisine offered and so on. Here’s a rough outline of the costs that might come up and a rough estimate of how much they amount to.
The resources one would have to be spending in a cloud kitchen business model include,
- Rent: This mainly depends on the location and the land prices. A space of 600-800 sq feet is considered sufficient for a cloud kitchen model and may range from ₹25,000-50,000
- Licences: The basic and necessary licenses cost around ₹15,000-20,000
- Staff: Having a basic set of staff can cost around ₹50,000-85,000
- Kitchen and equipment: This is solely dependent on requirement and can range from ₹5 lakh from scratch to around 8 lakh. Basic kitchens can also be outsourced.
- Online ordering system: Many ordering systems allow customisation on the basis of features required, and these can range from ₹4,000/year to around ₹6000
- Customer acquisition and social media presence: Based on paid and organic marketing, this may cost around ₹40,000-80,000 per month
- Branding and packaging: As packaging is the crucial thing with cloud kitchen startups, branding across social media, food aggregators and effective packaging can cost around ₹50,000-70,000
To go virtual or not to: Tapping into the potential of the cloud kitchen market in India
The changes in customer food ordering trends saw a rapid rise due to the pandemic, but the trend is only projected to continue in the years to come. Cloud kitchens have their own set of advantages and disadvantages, and it is wiser to compare the pros and cons before jumping on setting up a cloud kitchen business model.
In India, the average annual cost of setting up a restaurant is almost 3x more than the set up of a cloud kitchen, steering good entrepreneurs and food aggregators alike to jumpstart on this side of the competition.
Regardless, it is always recommended to not follow the herd and go with the requirements your business needs to succeed. Assessing market trends, costs required, estimating the funding required, security, profitability in the long run are topics to consider before getting started on a cloud kitchen model.
Here at Foaps, we pay attention to the most minute parts of your business to assure you an easy order management system. With Foaps, you can manage more orders at a time from different food delivery aggregators which will make your job a lot easier, and will eventually help in increasing the revenue.
Would you like to learn more about Foaps? Start your 30-day free trial now.