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5 Things You Should Know About Cloud Kitchens

Cloud kitchens aren’t exactly a new concept.
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Did you know that many of the well-loved restaurants featured in various food delivery apps today are cloud kitchens? 

What are cloud kitchens

Also known as virtual kitchens, ghost kitchens, or ghost restaurants, cloud kitchens have been making waves nowadays as an offshoot of the current food delivery revolution. However, this business format is not an entirely new concept as it has been around even before the pandemic hit.

Since cloud kitchens expand and optimize food delivery services at minimal cost, this format has become even more viable during the pandemic. Mainly utilized for the purpose of food preparation for delivery, cloud kitchens have been allowing restaurateurs to save on overhead costs spent on the dining area, parking, store interiors, client-facing staff, and more.

Many new businesses have also entered the market via the cloud kitchen route because of its low startup costs and its ability to ride on existing delivery options. Moreover, cloud kitchens take advantage of the online buying/selling platform. Customers don’t have to be physically present at the store to purchase the product. They can easily buy online and have it delivered to their location.

Indeed, cloud kitchen has been an avenue for existing restaurants to expand their brand or even create a virtual brand at a low cost. In addition, cloud kitchens can be utilized to experiment on new concepts, explore emerging markets, and scale up the business. 

Here are 5 things you should know about cloud kitchens:

1| Cloud kitchens can be franchisable

As long as cloud kitchen concepts meet the criteria for franchisability, cloud kitchens can expand through franchising. For this particular format to be manageable as a franchise though, it is preferred that they be operated in commercial locations and not at franchisee’s homes.

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This way, it will be easier to conduct compliance/quality visits to the franchisee’s place of business and not at his/her residence. It will also be easier to separate business activity from those of the home. It may also be difficult for some residential locations to be given a business permit. 

Indeed, cloud kitchens are franchisable since they provide lower costs on start-up and operations compared to full dine-in restaurants. Moreover, the system is simpler and easier to replicate since it focuses on food preparation and delivery only. 

A great example of a cloud kitchen franchise is The Six Pack Chef. As the first healthy meal subscription delivery franchise in the world, The Six Pack Chef offers chef-created, premium diet-certified meals delivered fresh daily from their cloud kitchen on a subscription basis. On average, The Six Pack Chef delivers over 17,000 meals every month and receives over P21,000 on orders per customer per year. 

2| Cloud kitchens can serve several types of cuisine using the same facility

Full dine-in restaurants only serve the meals and dishes of their brand. They usually promote a single cuisine, whether it’s Filipino, Chinese, American, Italian, or others. 

However, cloud kitchens offer more flexibility when it comes to the types of cuisine they can serve. A single cloud kitchen facility can offer different types of meals and dishes in order to expand customer base and increase profit. 

Cloud kitchens are not restricted by a single set of menu or a single type of cuisine. For example, a single cloud kitchen can provide the requirements of both an online Italian food delivery service as well as a Filipino-themed service, even if these have distinct branding online. 

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This means that when it comes to cloud kitchens, the opportunities and possibilities are limitless. It is up to the owner how he/she will maximize the potential of his/her cloud kitchen concept.

3| Cloud kitchens are not only for lockdowns

As mentioned earlier, cloud kitchens have been around even before the pandemic hit. Hence, this business format is not only viable during times of lockdown. Cloud kitchens grew in popularity during the pandemic because, although people’s movements were restricted, they still wanted to enjoy the cuisines they used to enjoy prior to the quarantines, as well as try new dishes.

This buying behavior will continue to a certain extent when lockdowns are lifted. Customers have learned that they don’t always have to go out of the house to enjoy their favorite dishes or partake of their comfort foods. Instead of travelling through traffic, looking for parking, and waiting in line, they can enjoy these foods in the comforts and convenience of their own homes.

In fact, due to its many advantages, particularly in terms of minimizing costs and simplifying operations, cloud kitchens are considered one of the crisis-proof concepts that can flourish through the years. 

4| Cloud kitchens can be operated at different types of locations

Cloud kitchens can be operated at aggregator sites (or those hosted by delivery apps), at commercial locations, or even at home. Locations operated by aggregators offer low rent (or no fixed rent) but collect a percentage of the brand’s sales.

For brands with high volume orders, this can be quite substantial compared to a fixed rent. Moreover, all orders will have to go through the aggregator’s delivery app.

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Cloud kitchens operated at home or at commercial locations not connected with the aggregator allow the brand owner to accept customer orders directly and deliver the orders through their own fleet or through the pickup services of delivery apps. They also only pay a fixed rent, or as in the case of home-based kitchens, no rent at all.

As mentioned in No. 1 above though, when cloud kitchens venture into franchising, commercial or pay-to-use franchise locations are recommended over home-based ones for a more professional and manageable setting.

5| Cloud kitchens can have storefronts, too

Some cloud kitchens that are in locations with good customer traffic may take advantage of this by also building storefronts so customers can buy takeaway. Over-the-counter sales can provide additional revenue for cloud kitchen operators and give customers another buying option. For true cloud kitchens though, bulk of sales still come from online orders.

Is your cloud kitchen ready to take the next level? Understand more about checking your concept’s franchisability with Francorp’s HOW TO FRANCHISE YOUR BUSINESS Webinar. Visit this link for more information - https://www.francorp.com.ph/how-to-franchise-your-business

Noel Siggaoat is the Managing Director of Francorp Philippines; Co-author of 12 Strategies for Franchising and Vice Chairman for ActionCOACH Philippines.

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