2 Minute Summary
With the rapidly growing online business, the market that is gaining momentum now is Food. A cloud kitchen is a virtual restaurant. You cannot physically go there and order food. You have to order online and the food will be delivered to your home. There is no need for dining and no need to take an exclusive place. It saves a lot of investment. According to a recent survey, 67% of the restaurant owners would want to open a cloud kitchen as their next outlet. Faasos was launched in 2011 by Jaydeep Burman and Kallol Banerjee in Pune. Due to Online players, The rent-to-sales ratio dropped from 15% to 4% over the next 2 years. Today, Faasos has 160+ kitchens that produce delivery meals for four distinct brands. This include, Faasos, Behrouz, Oven Story – a pizza brand, and Firangi Bake. Their main focus is on UAE, Indonesia, Thailand, and Vietnam. Rebel Foods has raised a total of $124.6 M in funding over 10 rounds. There most recent investors are Sequoia Capital and Go Ventures.
Cloud Kitchen Business Model
In this digital age, everything is becoming digitized and technologically advanced.
The internet has become a faster source of earning revenue.
From clothes and shoes to gadgets and cosmetics, everything is available for sale online.
With the rapidly growing online business, the market that is gaining momentum now is Food.
The online food business has now gradually transformed itself from traditional outlets to cloud kitchens.
But what exactly is a cloud kitchen?
What is cloud kitchen, business model?
If you are a foodie or a food entrepreneur, this blog is a must-read for you!
What’s in it for you?
WHAT IS A CLOUD KITCHEN?
A cloud kitchen is a virtual restaurant.
You cannot physically go there and order food.
You have to order online and the food will be delivered to your home.
There is no need for dining and no need to take an exclusive place.
Cloud Kitchen owners can take place anywhere and deliver food at your doorstep.
This means you can also deliver food even by cooking at your home.
It saves a lot of investment.
There is no need for proper setup or an exclusive furnishing and interiors.
This reduces your operational costs.
All you need is chefs to cook food.
|Streamlined order |
|No personal touch to build a |
|Low operational cost||Limited Audience|
|Easy Expansion||Limited brand presence |
compared to traditional outlets.
According to a recent survey, 67% of the restaurant owners would want to open a cloud kitchen as their next outlet.
One of the best examples of Cloud Kitchen in India is Rebel Foods.
Rebel Foods owns numerous companies including Faasos, Oven Story, etc.
ABOUT REBEL FOODS (Faasos)
Rebel Foods cloud kitchen was launched in 2011 by Jaydeep Burman and Kallol Banerjee in Pune.
At that time the concept of cloud kitchen was new and only a few people knew about it.
Jaydeep Barman didn’t set out to create a new food tech category.
He was just tired of burgers and pizza.
He was craving a more Indian take on fast food.
Jaydeep and his friend Kallol Banerjee set up Faasos, an Indian wraps chain.
They had built Faasos as a tech-friendly brand and was an early adopter of online ordering platforms.
This gave them a front-row view on how technology was reshaping the food services industry.
The shift from a traditional fast food format to a cloud kitchen business model changed the economics of the entire venture.
The rent-to-sales ratio dropped from 15% to 4% over the next 2 years
It took away the need to solve the #1 problem of retail – finding great locations!
Today, Faasos has 160+ kitchens that produce delivery meals for four distinct brands.
This include, Faasos, Behrouz, Oven Story – a pizza brand, and Firangi Bake.
This cloud kitchen business model is clever because it showcases their separate brands as individually established.
|BRAND||TYPE OF SERVICE|
|FAASOS||Wraps and Rolls|
|Firangi Bake||Italian Cuisine|
|Mandarin Oak||Chinese Cuisine|
|Sweet Truth||Sweets and Confectionary|
|Nav Saram||South Indian Food|
|The Good Bowl||Bowls like Rajma-Rice|
|Slay Everyday||Coffee & related items much like a |
Café Coffee Day
|Lunch Box||Tiffin Service|
The same customer can order a wrap for lunch and a biryani dinner, or something different for every member of the family.
The team is always experimenting, fielding a few new concepts at any given time.
Rebel Foods has 4 current team members, including Co-Founder & CEO Jaydeep Barman.
Jaydeep Barman – Co-Founder & CEO
Kallol Banerjee – Co-Founder
Sagar Kochhar – Chief Marketing Officer
Soumyadeep Barman – Chief Technology Officer
Rebel Foods is expanding its presence within the country and in overseas markets.
Their main focus is on UAE, Indonesia, Thailand, and Vietnam.
They also have taken a bigger kitchen and have opened multiple kitchens within it to suit multiple brands.
In one restaurant, various speciality restaurants are functioning.
They are working under one management which reduces its cost.
MARKETING STRATEGY OF FAASOS
Faasos has an amazing marketing strategy.
Faasos launched its mobile app in 2014.
It is one of the first companies that took orders on Twitter.
People had to just tag Faasos and they could order anything.
Barman shares that the strategy fetched good social media presence and new customers to the brand. Faasos is spending around Rs 400 – 500 for acquiring new customers.
Another special feature of Rebel Foods is their amazing packaging.
The type of packaging of all the verticals of Rebel Foods is special and there is a special vision behind it.
Rebel Foods has raised a total of $124.6 M in funding over 10 rounds.
There most recent investors are Sequoia Capital and Go Ventures.
|GO Ventures||Yes||Series D – Rebel Foods||—|
|Sequoia Capital India||Yes||Series D – Rebel Foods||—|
|Lightbox||Yes||Series D – Rebel Foods||—|
|Evolve India Fund||—||Series D – Rebel Foods||—|
|Lightbox||—||Debt Financing – Rebel Foods||—|
|Alteria Capital||Yes||Debt Financing – Rebel Foods||—|
|Sequoia Capital India||—||Debt Financing – Rebel Foods||—|
|Sistema Asia Fund||Yes||Series C – Rebel Foods||Kirill Kozhevnikov|
|Lightbox||—||Series C – Rebel Foods||—|
|Evolve India Fund||—||Series C – Rebel Foods||—|
Their main competition is Fresh Menu which works in similar services.
Fresh Menu provides offline and online services.
You can go to a restaurant or order food online.
Currently, OYO Rooms is looking to acquire Fresh Menu.
The reason is that they are thinking of launching their cloud kitchen.
With Fresh Menu they are getting a readymade platform to deliver food.
Disadvantages Of Cloud Kitchen
Nothing is perfect in this world, everything has its pros and cons is a very popular quote. This also happens to be true in the case of cloud kitchen. There are a lot of drawbacks that you may face if you are planning to start a cloud kitchen. Various disadvantages of a cloud kitchen that one may come across are discussed below in detail.
- Very High Competition
Restaurant or the food industry has always been very competitive. Talking specially about the cloud kitchen, there are no entry barriers in the business. Anyone who has a little amount of investment and some knowledge and skills can enter into this business. The new entrepreneurs who wish to start a cloud kitchen must be ready to face the competition.
There are two modes of launching a cloud kitchen business. One is through your platform, it may be either a website or an app or through the other mode that is depending on the food aggregators. The first option may not be a good one because it will require a lot of initial investment and marketing which may not be a good idea in such a competitive industry.
With the other option that is depending on different food aggregator platforms, there comes a lot of restrictions. Unless and until you don’t have any issue with the terms and conditions provided by the food aggregator, you can stick with the second option.
- No Direct Customer Relation
In a cloud kitchen business, except for the delivery of food, there is no direct relation with the customer. This may act as a disadvantage because you cannot directly know the taste and preference of your customer. And if you are working with a food aggregator, then you might not even know the basic details of your customer.
- Only Online Presence
Whatever sales a cloud kitchen generates is all through the online medium. Since the concept of cloud kitchen does not involve any physical presence, it becomes a little difficult for the customers to develop trust in the brand, and any business whether online or offline needs to gain the trust of its customers.
- Dependence On Technology
A cloud kitchen or ghost kitchen business is one hundred percent dependent on technology. Any small hurdle can disturb the business. This is a very big disadvantage as all the sales of a cloud kitchen depends on the technological environment.
- Marketing Cost
Many newcomers into the cloud kitchen business start with a very low investment. This is one of the reasons they do not spend a lot or barely any minimum amount on marketing. But the ultimate growth hack in this business to beat the high competition is a good marketing strategy. Marketing comes with a cost.
These are a few disadvantages that you may face in the business. However the list is not finite, you may face various challenges that may come as a disadvantage. Like any other business, if you overcome these challenges there are a lot of scopes associated with the business.
HOW TO START A CLOUD KITCHEN?
I am sure that you have started thinking about how you can start a cloud kitchen.
Following are some things that you will have to keep in mind before starting a business.
First, you need a place, a location where you will set up your internet restaurant.
Suppose you rent a place at a monthly expense of Rs. 10,000.
It is also assumed that the company would not achieve breakeven until five months.
So you need at least Rs. 50,000 to pay the rent.
#2 Kitchen and Equipment’s
Rs. 2,50,000 is required for all the kitchen equipment like utensils, gas stove, etc.
The cost also includes Power costs, Water bills and machinery costs.
You would need four licenses to start your business.
This is a food security license that is compulsory for every business.
GST is Goods and Services Tax which is levied on online companies as well.
Online businesses need to register themselves under GST as part of the law.
The people will be paying you online.
A fire safety license is compulsory to acquire for every business.
This license permits you to trade goods or services in the city.
The cost of taking all the licenses can range from 15,000- 20,000.
Suppose you are employing 2 staff members as chefs at a salary of Rest. 20,000 each.
After multiplying with 5 you will know how much you need to pay for the next 5 months.
A cloud kitchen needs to have good chefs who cook delicious food.
This is because food is the only thing that will build your reputation and bring the customers back.
#5 Inventory Management Software
The point of sale software will cost you around Rs. 15000.
Convenient software is required for easy calculations and printing bills.
#6 Working Capital
Initially, I assume that you would require Rs. 50,000.
Working capital will keep your business running when the company hasn’t received payments.
In my opinion Rs. 1, 00,000 should be invested for marketing as it is the only thing that will help in growing the business.
It includes costs like:
Online Customer Acquisition
Cost – Rs.40,000-Rs.1,55,000
In the beginning, it is important to acquire online customers through advertisements and offers.
Cost – Rs.20,000-Rs.40,000
Social Media has become a force where you can promote your brand widely at a lower cost.
Today in the age of Facebook and Instagram it has become important for a brand to have a great social media presence.
Check out our Blog on Social Media Marketing
Branding & Packaging
Cost – Rs.50,000-Rs.60,000
When your business depends entirely on delivery, packaging can make it or break it.
The packaging is one of the important things that is being delivered to customers.
The Business Model of a Cloud Kitchen is Hyper-Local Business.
Hyper-Local Business means that you deliver within the radius of up to 5-6 kilometres.
You rent different outlets around the city and deliver the food to the nearby areas.
It means to create a cluster network of virtual restaurants and spread.
The Delivery Cost is estimated to Rs. 20-40 per order.
MARKETING STRATEGY OF CLOUD KITCHEN
#1 Run advertisements on social media platforms like Facebook and Instagram.
#2 Offer coupons and discounts
#3 If you are thinking of opening an app then use social media for advertising.
SERVICES THAT SHOULD BE PROVIDED
#1 Elite Pass
Elite Pass gives you some special services and benefits which is different from normal.
The customers can acquire an elite pass by paying some amount.
#2 Bolt feature
A Bolt feature means that if the company does not deliver food in a stipulated time then the order will become free.
PRECAUTIONS TO BE TAKEN WHILE PLANNING
#1 Disadvantages of third party discounts
Often the orders increase due to third-party discounts.
This leads to buying more equipment and hiring more people.
When that discount gets over, the orders stop and you are left with higher costs.
#2 Food cost management
The company should take care of the food costs that is the actual cost of the ingredients that go into a dish.
As a standard, your food costs should range between 30-33%.
#3 Food Safety
The Food Safety and Standards Association of India (FSSAI) has been quite visible in the news ordering aggregators to de-list restaurants.
They are taking measures to ensure a high standard of food safety.
The cloud kitchens should train the staff according to these rules.
MY IDEA OF A CO-KITCHEN
Most of you would have heard about co-working space.
In a co-working space, there is a big space in which multiple offices are established.
In a Co- kitchen, similarly like offices kitchen can be set up in this big space.
The equipment’s like utensils and gas stove and basic services like electricity, gas will be provided by us.
Anyone who wants to open a kitchen will give you a certain amount to work there.
It is a low risk and high-profit business.
Build your company Branding
Now it is over to you.
Do share your ideas and queries regarding cloud kitchen business model in the comment section.
Also you can go for some cloud kitchen franchise Model available in Market.
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