Cloud kitchens valuation has increased regularly these days due to the changes in consumption behaviors in favor of the online food delivery market.
Obviously, online food delivery has thoroughly reshaped the food and beverage market since it changes the purchasing behavior of customers. In the past 5 years, it was the glory time of physical food stores, while most diners choose to eat-in to enjoy services within the restaurants. However, with the growth of food and beverage software, that habit is seemingly changed.
In 2019, the global cloud kitchens valuation accounted for US$ 43.1 billion in size, which is estimated to reach an increase of 12% annually. Predictably, the cloud kitchen market would reach over US$ 70 billion in 2025, which could seemingly dominate North America and Europe areas. Experts propose that the significant rise of cloud kitchens coming from the motivation of on-demand food delivery and tech-savvy adoption in the market of on demand food ordering systems.
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The cloud kitchen concept
Generally, the concept of cloud kitchen was claimed for food delivery only. With no eat-in services, the cloud kitchen tends to be a unique type of virtual restaurant. As a product of technology innovation, each virtual restaurant needs cloud kitchen software in delivering its services. In practice, the cloud kitchen software could connect three key objects, including food providers, shippers (delivery services), and customers. Accordingly, it keeps the process gone smoothly.
Since the cloud kitchen concept has only kitchen space for preparing food without any brick-and-mortar areas, all the orders would come to the delivery process. Most cloud kitchen businesses work with on-demand delivery platforms to distribute their products. Alternatively, they could have their own delivery team to handle orders.
In fact, the concept of cloud kitchen requires few capitals to set up rather than physical stores. Evidently, owners could save up to 90% cost when running a virtual restaurant instead of offering eat-in areas. Currently, you can find five popular models of cloud kitchen in the market.
1. Cloud kitchen as the concept of ghost restaurant
A genuine cloud kitchen run with delivery services only that it does not provide any food truck or pick-up location. The ghost restaurant refers to the fundamental concept in the cloud kitchen business model. Each ghost restaurant operates as an independent cloud kitchen, which is claimed as a single brand, covering a single kitchen only.
In practice, ghost restaurants have their own commercial kitchen space, staff, facilities, and other operational needs to perform a restaurant. Running as a particular brand, a ghost kitchen is known as a single business, following a typical menu and cuisine styles.
2. Shared cloud kitchen
With a shared cloud kitchen, several brands are settled in a single space, which serves multiple cuisines. In which, there will be a business building a kitchen space that many brands can rent a part of this kitchen for operation. In other words, shared cloud kitchen work in a similar model with co-working space, where food producers have their own corner in a large kitchen.
Accordingly, running a shared cloud kitchen is more economical, that it helps to reduce the rental fee and part of the facility cost, which could be provided by the landlord. Moreover, the space provider also offers additional services like cleaning, equipment maintenance, security, etc. The shared kitchen space is proved to keep the operation cost low while ensuring the diversity of cuisine styles. Like ghost restaurant, shared cloud kitchen offer delivery only
3. Hybrid cloud kitchen concept
The concept of a hybrid cloud kitchen is seemingly combining with a physical store and ghost kitchen that it offers both takes away and delivery. In which it has a storefront for food pick up where customers could see what happens in the kitchen and how their orders are prepared. The hybrid cloud kitchen obviously required higher capital for the operation than the above models. In exchange, this model supports a better relationship with customers, which adds clearer and more trust in the brand.
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4. Aggregator cloud kitchen
This type of cloud kitchen concept is owned by delivery services, which have an online ordering system and delivery infrastructure to handle orders. Whereby they partner up with multiple restaurant brands in a co-working kitchen to provide multiple cuisine styles. Alternatively, the delivery services could also build their own kitchen. Then the aggregator cloud kitchen becomes a full-stack cloud kitchen. Depending on the model of aggregator, this type could have a storefront or not.
With the aggregator cloud kitchen, the kitchens are only responsible for food preparation. All other tasks, such as attracting customers, handle orders, and delivery is belonging to aggregators.
5. Full-outsourced cloud kitchen
The full-outsource cloud kitchen concept is not a real kitchen, acting like an agent, who collects the orders from customers then distributes them to other kitchens. When the kitchen completes the order preparation, the full-outsource cloud kitchen will pick it up then handover to delivery services. Instead of investing in kitchen operation, full-outsource cloud kitchen would spend money on developing on demand food ordering systems, which allow customers to place an order.
Most of the food preparation is outsourced, that the brand could save the majority cost for kitchen operation, staff, and equipment. In which no physical location, chefs, and storefront are required.
|Model||Order source||Space||Selling channel|
|Ghost kitchen||Online sources||Separated Kitchen||Delivery only|
|Shared cloud kitchen||Online sources||Co-working kitchens||Delivery only|
|Hybrid cloud kitchen||Online sources||Separated kitchen||Delivery and take away|
|Aggregator cloud kitchen||From owner delivery app||Co-working kitchens||Delivery and (optional) take away|
|Full-outsource cloud kitchen||All source||Third-party kitchen||Pick-up for delivery services|
How cloud kitchen concept work
The concept of cloud kitchen is seemingly flexible and vary depending on the scale and scope of the business. In fact, one business act like a roof, running multiple virtual restaurants and brands in one typical space for cost optimization. On the other hand, many separated cloud kitchen brands can share the same facility. Whatever the scale, they do follow a similar process in offering their services.
Indeed, the online ordering system tends to be the central market place attracting customers to visit virtual restaurants for food ordering. Those would be collected, processed, and sent to the cloud kitchen software operated by the restaurant staff for distribution in specific brands. Then, food preparation begins within the brand. After finishing, the delivery process would pick up the order for shipping to the place assigned by customers.
Accordingly, as the cloud kitchen concept is a virtual kitchen performing fully on the cloud, it requires technology, especially web and mobile app solution in handling the whole process. On demand ordering systems, on demand food delivery software, restaurant POS system, and cloud kitchen software are the essential technology in the market. Additionally, cloud kitchen owners are required to promptly adopt the technological innovation available in the market to deter lagging behind. With the rapid digitalization in the food industry, they have a high intention to focus on cloud kitchen stock and cloud kitchen menu in digital form.
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Cloud kitchen stock
Only ordering brings immense benefits to virtual restaurants in reducing costs and handle massive orders simultaneously. By contrast, cloud kitchen owners also face many challenges. In online ordering, customers expect fast delivery that every minor delay in the food preparation process could lead to unsatisfactory attitudes from customers.
So, how cloud kitchen brands cut down the executing time for serving their customer? Experts confess that they are leveraging the cloud kitchen stock. It means food would be prepared and stored even when orders have not been placed. Accordingly, the stock or inventory management refers to be essential, and it needs to help restaurant owners answer some key questions:
- How many orders would be handled in one day?
- What is the actual number of foods that need to be prepared for reducing waste?
- When will the cloud kitchen stock need to be filled up?
- What are the lists of recipe needs?
Cloud kitchen menu
In practice, the cloud kitchen menu has some distinct from the menus of physical restaurants. It contains the list of food or dishes that offer for delivery only with the selection of boxes, ingredients, description of recipes, and more. Recently, the cloud kitchen menu commonly displays in digital form or digital menu, which offers convenience with updating and managing. For cloud kitchens running multiple brands, using a digital menu is required to control the massive dish supply.
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Cloud kitchen software
Since online ordering might come from various sources, the cloud kitchen needs a software solution for managing orders from multiple channels. Hence, the cloud kitchen software was born to empower virtual restaurants by combining a set of essential features into one solution.
Must-feature of cloud kitchen software:
- Centralized order taking
- Inventory management
- Sale management dashboard
- Multiple brand tabs
- Realtime data report
- Instant assigning
- Third-party integration
Future of cloud kitchen and the online food delivery market
The very first cloud kitchen launched in the last decade, which became the novel norm in the food tech industry. It was driven by the purchasing behavior of millennials and the trend of digital transformation. In the upcoming decade, the future of cloud kitchen is expected to be leveraging a high level of automation, drone delivery, and smart parcel box. Additionally, cloud kitchen businesses need to be ready for several upcoming trends:
Effective strategies for startup restaurants: Applied automation and IoT would be fundamental in the market, while cloud kitchen startups are required to adapt to the rapid change and management challenges. For survival, the cloud kitchen businesses need to keep on digitization and offer more conveniences to customers.
On-demand contract workers: With the rise of the sharing economy, the world would witness millions of workers working on demand. It means no full-time contracts and full labor welfare need. Instead, it makes businesses unstable while offering low-cost labor.
Reduction in delivery cost: The rapid adoption of technology in optimizing the delivery process predictably lowers the cost and time of delivery. The drone delivery seemingly a possible solution for instant delivery, sending the meal in roundly 10-15 minutes without personnel costs incurred.
In conclusion, from the context of software development, the market of food software solution is seemingly lucrative for software outsourcing companies. With the high demand for cloud kitchen software, dedicated developers in this decade are predicted to handle massive work in this area.