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3 Cloud Kitchen Companies Comparison

To understand the concept and its dynamics, we will use as examples three cloud kitchen companies. But before we begin, let’s do a simple check.

If you do not know about cloud kitchens, read our article here and read about the six generic models that a cloud kitchen can adopt here.

Cloud kitchen’s concept started to turn heads around the mid-2010s when people realized that food deliveries are rising fast, and their fulfillment can be provided from a modest setup of kitchens. This provided an opportunity for existing chains to expand their market shares and offered a new model for new entrants to enter the market by reducing the capital requirement.

The three Cloud kitchens we would discuss are from three countries. They are CloudKitchens from the US, Faasos from India, and JustKitchens from Taiwan.

CloudKitchens, US

Cloud Kitchens is the venture of ex-Uber CEO Travis Kalanick; he was part of Uber while they launched UberEATS. UberEATS was a sub-service of ride-hailing service Uber that provided food delivery from the restaurants on orders acquired via their app. This background in the online food market set him perfectly to understand the dynamics and barriers of the industry.

With Cloudkitchens, he opted for a delivery and takeaway model from a location that itself is cheap; however, it is nearby to high dense and high demand locations. The idea is that since people are not going to experience the food on-site, there is no need for premium expense on providing that experience. This helps transfer most of the saved cost to the customer. The business model of acquiring cheap properties and leveraging their high-demand neighborhoods’ is one of the core philosophies of cloud or ghost kitchens.

Faasos, India

Rebel Foods, the parent company of Fasoos, owned by Jaydeep Burman and Kallol Banerjee, launched their brand in 2011 from Pune, India.

Although they started their journey in 2011, before 2014, their model was entirely cloud kitchen. Fasoos provides cloud kitchens for their food and as well as other brands for food preparation. Later, they realized they could leverage their infrastructure for other brands by adding kitchens in 2016. The new brands that work in their ghost kitchens include Behrouz, Oven Story, and Firangi Bake.

The idea that led the expansion of Fasoos into a multi-brand cloud kitchen formed when the founders heard the advice of Doug Leone of Sequoia Capital that the primary job for a founder is “to find and eliminate the friction in their business.” They reformed their approach to eliminating all friction-producing elements in their scaling processes. By 2019, Fasoos has added upwards of 160 cloud kitchens in their umbrella and four brands, including one of their own.

JustKitchens, Taiwan

JustKitchens started recently in 2019 by Kai Huang and Kenneth Wu. They build their food-delivery-only brands and provide their infrastructure for other popular brands to use. Their operation differs from the two businesses discussed above as they have the “hub and spoke” model.

Click here to read more about the different models for cloud kitchens.

In the short span of just two years, they have expanded to 14 locations, with two further in construction as of April 2021. They have their research and development for building in-house brands. So far, they have made 13 brands in-house, licensed four brands, and partnered with 17 other brands. Their growth is proof of the vast benefits that the cloud kitchen model can offer.

They have another online grocery delivery service, and their key partners include food aggregators such as UberEATS and Food Panda. This allows their hub kitchens to delivering supplies from their grocery service and their spoke kitchen to fulfill last-mile delivery using their partners’ services.

Conclusion

One of the challenges that led to the concept of Cloud Kitchens was the high service fees of delivery services by third parties. However, this is not critical as many cloud kitchens still use such aggregator services and pay their high prices. It could be because such aggregator services have become marketplaces, which bring big audiences to the listing without any additional marketing or cost. Especially for introductory phases of the new restaurant when awareness is very costly and using such a service does it effortlessly and cheaply.

Another reason that led to the concept of Cloud Kitchens was the high profit margin. By removing the cost for providing an essential exquisite dining experience, the same restaurant could sell the same food at a higher profit margin. It turns out that it is great for restaurants, but it also has brought more competition for them. The cost of setting up only the kitchen is much less than when restaurants also have to set up the experience setup. Also, since the customer doesn’t need to visit the location in most models, this lowers the cost barrier to entry for new entrants.

One key advantage that people who use services of cloud kitchen providers can avail themselves of is importing and using built-in systems of inventory, order management, staff management, and more. These built-in systems are of great value, as they are selected from many professionals’ experience and thus reduce the margin of error for new and inexperienced people by providing a sort of blueprint. They can also help you connect with key suppliers, which might help you with friendly payment terms from the get-go. Most importantly, all of this will be incorporated into their software.

Cloud kitchens will become more mainstream as the growth rate for meal and grocery deliveries, which Statista predicted to be around 9% (Pre-pandemic), was 13% in 2020 and is expected to grow to 21% by 2025 in the United States. This colossal shift is definitely because of the pandemic; however, it is expected to grow further.

The existing restaurants were able to expand their sales by adding new kitchens for servicing recent locations. The new players can start their venture with lower capital & a blueprint. Customers are happy as more competition meant they now have more choices of high-quality food at low prices. In the end, everyone in the industry wins.

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