If you were to look at any person’s smartphone, chances are they have an online food delivery app or two installed. Online delivery has made it much easier to bring both new and familiar tastes closer to home, and a lot of restaurant owners are starting to take notice. Online food delivery is here to stay, and customers are always willing to try new dishes from just about anywhere.
To meet this demand, investors are starting to look into “Cloud Kitchens” as a way to serve customers while keeping operation and labor costs low. Efficient, effective, and easy to set up and maintain, cloud kitchens are one of the best ways for independent restaurants to challenge larger chains without needing a physical location.
For business owners, cloud kitchens give them the opportunity to expand their services effectively while maintaining brand identity. For customers, the more good choices, the better.
It’s no coincidence that cloud kitchens are becoming more and more popular around the world. In a market-driven industry like F&B, business owners are constantly innovating to get ahead of the competition. Through cloud kitchens, taking advantage of those innovations becomes easier given their tech-reliant nature.
What is a Cloud Kitchen?
Cloud kitchens (also known as Ghost Kitchens, Virtual Restaurants, or Dark Kitchens) are different from typical brick-and-mortar restaurants. They do not have a physical store where customers can dine in. No servers, no physical menus, and no storefronts. Instead, cloud kitchens follow a model that includes:
A shared kitchen for different brands to experiment with new items without the real estate costs of a physical store.
An online presence to cater to marketplace orders through either third-party online food delivery apps (think Uber Eats, Foodpanda, or GrabFood) or custom websites.
Shared labor and equipment costs that allow business owners to minimize the need to recruit and train new staff as well as eliminate the need to invest in new equipment.
To give an analogy, you can think of cloud kitchens as food factories that an investor can commission to make their food for them. Multiple restaurants can commission the factory to make their products for them and brand them as their own. And just like factories, production becomes more streamlined and efficient while retaining every restaurant’s brand identity.
These virtual restaurants allow consumers to have a seamless ordering experience. The customers’ orders are prepared by the respective kitchens, while restaurants take advantage of shared resources and real estate to cut down costs.
Cloud kitchens are usually strategically located to cater to the widest range of customers. Their physical locations often include parking spaces for third-party delivery drivers and check-in stations for seamless pick-up. This ensures that the food is produced and delivered in the shortest time possible while maintaining the quality that customers expect of their restaurant of choice.
Additionally, the nature of cloud kitchens being tech-driven allows it to take advantage of a lot of innovations that can help the business flourish. Sophisticated restaurant POS systems allow cloud kitchens to run their business efficiently with intuitive interfaces that enable managing inventory, sales, and delivery on a single platform.
Leading POS systems integrate features with popular food delivery apps to help gather area and time-based information. Automation in key aspects like order taking and delivery routing keeps the order cycle running smoothly. As technology continues to evolve, running a virtual kitchen has become a viable option for investors.
From inventory to delivery, the cloud kitchen industry will continue to find new ways to make the processes more efficient while keeping both business owners and customers happy.
Cloud Kitchen Business Models
Cloud kitchens can approach their services differently to cater to different demands. Their approach relies on factors such as accessibility, location, and customer demographic. To better understand how each model works, let’s delve into the different cloud kitchen business models.
Independent Model – One Brand, One Kitchen
The independent model is the earliest cloud kitchen model that was developed. This model focuses on serving a single brand’s customers. Still popular today, the independent model is a go-to for those who wish to get into the F&B industry without having to worry about the overhead costs of real estate rent or front-of-house service.
Orders are solely online and are delivered directly to the customer. This allows the restaurant to have a greater focus on specific cuisines and higher control over the quality of their meals. The downside, however, is the need to invest more in equipment, given that the kitchen runs independently.
Multi-Brand Model – Multiple Brands, One Kitchen
Like the independent model, the multi-brand model sidesteps real estate costs as it also does not have a physical storefront. The main difference is the number of brands that share the same kitchen to produce their dishes.
In the multi-brand model, the kitchen, equipment, and staff are shared among multiple brands. This allows numerous business owners to cut down the equipment, staff, and rent costs if they choose to share a communal kitchen.
Alternatively, a business owner may want to experiment with multiple brands in just one location. Let’s say a BBQ restaurant intends to try its hand in the seafood sector. Instead of offering seafood under their BBQ brand, they can create a new brand with seafood at its focus, all with an entirely different menu and theme, by developing only one kitchen.
The multi-brand model allows a more significant market share as the kitchen can serve multiple cuisines. A craving for BBQ today might be a craving for seafood marinara tomorrow.
Multi-brand kitchens allow business owners to experiment with different offerings and gain more insight into market demand. That, in turn, helps owners decide which parts of their business they want to expand and increase their brand’s local popularity.
Mid-ground or Pick-up Model – Pick-up Only Service
Again, the mid-ground model is almost the same as the independent model. The key difference here is that customers must pick up the order from the kitchen location themselves rather than relying on delivery.
Although less common compared to the other two models, a strategically placed mid-ground cloud kitchen can benefit from a lot of foot traffic in prime locations. This is because most cloud kitchens are located in low-density areas to keep land and space rents low.
Hub & Spoke Model – One Brand, Multiple Kitchens
The Hub & Spoke model has a framework that looks like a spoked wheel. In the middle is a central production unit (the hub) that branches out (the spokes) to different pop-up locations. This model works best for larger scale companies with one or more brands.
This cloud kitchen model divides production to keep the supply chain running smoothly. All items are prepared ahead inside the central production unit first before shipping them to smaller locations. These locations are usually pop-up stores and add the finishing touches to the product before delivering them to the customer.
To keep production costs lower, the centralized hub is usually located in low-rent areas. To mitigate the remote location of the production hub, business owners will invest in smaller but well-placed stores to cover more ground and cater to more people.
Although the upfront costs of employing this model are high from the central production facility, the hub & spoke model makes it easier for businesses to scale up considerably. Once your central facility is running, you only need to invest in small pop-up stores to scale up over time.
The flexibility of cloud kitchens allows investors to adopt a model that’s right for them. Business owners may look to have different combinations of cloud kitchens in multiple locations to maximize income or focus on refining certain aspects of their business and giving the customer the best experience possible.
Benefits of a Cloud Kitchen
With rapidly evolving technology and ever-changing taste palates, cloud kitchens are a way to cater to the customers’ needs both efficiently and effectively. For business owners, cloud kitchens enable them to experiment and scale their business to fit the market demand. For the consumers, getting a delicious meal as fast as possible is always worth the money.
Many advantages come with investing in the cloud kitchen business as online ordering continues to ramp up year on year.
Easy to Start
Once you get the restaurant essentials out of the way (equipment, staff, licenses, etc.), starting a cloud kitchen is easy and is more cost-effective compared to traditional stores. Aside from the lower rent, investors get to save on hiring wait staff as well.
Technology has come a long way to make the market more appealing to new investors. Leading POS software allows businesses to manage their online channels and connect to partner stores and keep every aspect running from inventory to delivery, all in one place.
Dynamic Marketing and Service
While still a viable investment option, traditional brick-and-mortar restaurants come with many headaches regarding marketing and service. When a chain wants to rebrand or update its menu and services, all locations must follow suit. All printed menus have to be changed, all furniture and brand signages need to be replaced.
When it comes to cloud kitchens, having a digital storefront makes it a whole lot easier to deploy changes within your business and adapt goods and services to what’s in high demand.
A good example would be how easy it is to change the order of items within a menu. Unlike printed materials that are costly to reprint and distribute, cloud kitchen POS systems allow for flexibility in how they display items in their menu. They can be rearranged any number of ways, divided into any number of categories, and changed any time in real time. All menu changes can also be synced to all ordering channels with just one press of a button.
Knowing the Customer (is Always Right)
As mentioned before, cloud kitchens take advantage of multiple technologies to understand the market better. Customer Relationship Management (CRM) systems allow the restaurant to get information from a customer when they order online.
Information gathered by the CRM include previous transactions, customer details, and delivery addresses. This can not only save time in taking orders, but can also be useful information for targeted marketing campaigns.
Leveraging customer data makes it easier to establish a connection between the brand and the customer. On the other hand, customers will benefit from a more personalized experience when ordering online.
Knowing the customer means knowing what to offer, what to change, and what to keep. With cloud kitchens, it’s easy to keep track of all that and even predict market trends with special analytics.
Optimized Efficiency
As with any other market, there is a supply, and there is a demand. When there is a lag between when that demand is met, customers are likely to avoid those channels altogether.
If you’ve ordered in a dine-in restaurant before, chances are you’ve experienced a waiter getting your order wrong or requesting to be placed at a different table because the background music is too loud where you are. Traditional stores often struggle with queue times, tabling services, and miscommunication that can introduce that lag between supply and demand and ultimately drive customers away from returning.
Through technology, businesses get to cut all of those down. Online ordering makes it impossible for the system to misinterpret a customer’s order. No dine-in option means no need to worry about tabling. No physical queues means all the focus goes onto serving quality food quickly and efficiently.
The Technology You Need for a Successful Cloud Kitchen
Cloud kitchens rely on online food aggregators, websites, and social media to get orders. Technology is no small part of the business as it keeps everything running from suppliers to delivery personnel.
Having a robust tech provider is important to keep your business flourishing. Not only do they give you the tools to optimize your
Here are some technologies you should consider if you want to run a successful cloud kitchen:
Centralizing Orders from Multiple Aggregators
A successful restaurant utilizes multiple revenue channels to keep orders going in. If you want to maximize those channels, chances are you will have to list your restaurant in online food aggregators like Zomato and Uber Eats to gain more market visibility.
Having to keep track of each channel will have more headaches than there are aggregators. Thankfully, investing in a fully-integrated POS system makes managing orders from multiple platforms through one centralized system easy.
Instead of having to rely on proprietary systems to keep track of orders from partner stores, all orders from all channels can be sent directly to your POS for ease of mind. Any changes you want to make in the menu can also be done through the POS and synced to all menus across all ordering platforms.
From preparation to delivery, a sound POS system allows you to know exactly how much time each order takes and gain information on which revenue channel serves you, and the customer, best.
Customized Website for Online Orders
While food aggregators help improve your business’s online visibility, they typically charge commission ranging from 12-25% per order.
You can avoid those fees with your own ordering platform. With your POS, you can create your own online store that you can manage and customize to your liking.
You can create your own online website that you can customize to fit your branding and give your customers a smooth ordering experience. Alternatively, you can opt to utilize social media orders through Instagram and Facebook to get your customers from your page directly to an ordering site. This makes it easier for them to order as soon as they see something they like from your posts.
Either option is viable and commission-free. Having your own platform makes it easier to take control of your online revenue and grow your brand.
Call Center Panel for Telephone Orders
Telephone orders have been around for quite a while and are unlikely to disappear anytime soon, even with online ordering becoming the norm. If you want to maximize this platform, you should make sure to have a call center on standby.
An integrated call center within your POS system makes it easy to combine online and telephone orders in a single channel and gather reports and data across all platforms. All telephone orders can also be recorded into the CRM, which is beneficial for several reasons as we will see later on.
A Customer Relationship Management (CRM) System
CRM gives an overview of your customer database, making it easy to keep track of their contact information, delivery address, and order history. Leading CRMs utilize data analytics to get a 360-degree view of your client demographic and market specific content to them accordingly.
Information on every interaction, request, and contact details are instantly available with CRM, and business owners get a better idea of cross-selling and up-selling opportunities.
By making the user experience personalized, concise, and clear, customers are more willing to give positive feedback and become repeat customers. CRM helps keep your business ahead of trends and competition and eventually makes customers more loyal to your brand.
An Integrated Kitchen Display System
For cloud kitchens, an integrated kitchen display system (KDS) makes meal preparation more streamlined. Once an order is placed from an app, the KDS lets the kitchen know the order details almost instantly.
KDS route orders to predefined kitchen stations where chefs can prepare the orders accurately every time. From there, the items will go to expedite screens where the kitchen can track item completion across all stations to keep work seamless.
Lastly, the KDS also has a Kitchen Aid screen that gives useful insights on the top-selling items for the day and tracks the kitchen’s overall performance. Having a KDS is a huge boon for any restaurant as it minimizes bottlenecks that often occur from manual order taking.
A Complete Inventory Management System
Kitchens are a dynamic workplace. Even with recipes and formulae, inventory and waste can become harder to keep in check as more and more orders pile up.
With a robust inventory management system, keeping track of stock becomes a whole lot easier. These systems include complete inventory trackers that update stock after every order, as well as food-cost analytics to make sure your business stays profitable.
Not only that, but smart inventory management systems also include wastage control and data, so you can make sure to keep only what your customers need and have an overall view of your menu performance from the background.
Order Fulfillment Delivery Manager
No order is complete until the customer gets what they paid for. The same is true for cloud kitchens. Each order has to be prepared and delivered at the quickest time possible to keep kitchens running smoothly.
For that, cloud kitchens would need an order fulfillment manager to oversee the progress of each order. Using data analytics, these trackers can pinpoint which part of the delivery chain lags behind the rest, the approximate time it takes for orders to reach the customer, and optimize its path from the kitchen to the customer.
Your Business at a Glance
Gone are the days when you had to check and balance a bunch of printed and written receipts to get an idea of how well your business was doing. Cloud kitchen technology has made it a lot easier to understand your business’ performance at a glance.
A fully-integrated POS system that comes with a live business dashboard can help you do just that. This dashboard contains all the relevant information to understand your business’s performance.
Some insights and analytics that you can take advantage of include sales by location, orders by location, real-time reports, number of customers served, order modifications and reprints, and top-selling items.
The dashboard can also generate automated reports between any date range, so you can focus on making the right decisions for your business. If you want a more in depth look into your sales, the dashboard also includes a Business Summary. This feature shows sales by category, cancelled orders, discounts, surcharges, and more at a single glance.
The Future of Dining in Cloud Kitchens
As the world continues to evolve at a rapid pace, food and technology will continue to adapt alongside it. The global market is changing, with online ordering at its focal point.
For the F&B industry, cloud kitchens are here to stay, and for good reasons. From its easy-to-adopt models to the low cost, cloud kitchens give aspiring business owners the chance to challenge bigger food chains and revolutionize the industry.
Customers will continue to grow in diversity, and new experiences will always be in demand. While people are scrambling to bring those experiences to their doorstep, for the F&B industry at least, cloud kitchens can do just that.
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