Cloud Kitchen Operational Analysis

Jorge Yeshayahu Gonzales-Lara

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 Cloud Kitchen Operational Analysis
Jorge Yeshayahu Gonzales-Lara

Introduction

Company Overview

Cloud kitchens, sometimes called ghost kitchens, dark kitchens, virtual restaurants, or restaurant-
as-a-service, are designed exclusively for online ordering and delivery. There is no brick-and-
mortar location. There are no servers. There is just a shared kitchen, with staff cooking top-notch
meals and a delivery crew distributing the food to hungry patrons at home or at work

Cloud kitchens are better suited to the needs of socially distanced customers than traditional dine-
in restaurants. They are also able to minimize some costs, such as rent, and without wait staff
require fewer people on the payroll.

The pandemic has made cloud kitchens a more urgent need in the gastronomic market. This is a
new style of eating, in a new style of normality. Dark kitchens can take many forms. These virtual
kitchens, also known as ghost restaurants, have the same operational process: orders come in,
meals are prepared, packaged meals go out to the customer. However, there is a difference in the
way your operations are executed.

And this configuration is the standard operating model of dark kitchen. It is when a brand owns or
rents a single kitchen without offering a dining room. With a brand that uses a kitchen, these
companies generally focus on a single type of kitchen and rely on delivery channels and employees
to handle orders and deliveries.

Cloud kitchens

• Shared commissary space. There is a shared kitchen space for restaurants to experiment with new
menu items without upfront real estate costs.
• Delivery-only, without the front of house. Cloud kitchens are designed to cater to delivery
marketplace orders — either from third-party platforms or a custom website — without a
traditional front of house or even fast casual dining experience.
• Shared labor costs and equipment. Reduce recruiting and training costs with access to specialized
labor that is shared across multiple restaurants.
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Types of kitchens in the cloud

• Model Hub and Spoke – In the hub and spoke model, a central kitchen prepares the food,
and then the semi-cooked dishes are sent to the last smaller outlets where they need to be
cooked before shipping. It translates into cost savings due to scale and standardization.

• Pod Kitchen – These are small containers that can be placed anywhere, such as parking
lots. Due to their size and mobile nature, they are easy to set up and operate. They have
had their own share of controversies as mentioned above.

• Commissary (Aggregator) Kitchens - These are the kitchens that are owned by a 3rd part.
Many restaurants will use them in a shared way, from the kitchen space to the refrigerator
space.

• The City Storage Systems, which transforms old warehouses into kitchens. A comparison
can be made with shared workspaces where different companies share the same public
services and rent office space to a service provider. These kitchens can be completely
stacked or simply have a kitchen with shell. These are also called a kitchen as a service.

• Outsourced model – As the name suggests, here all operations, food preparation and
customer-oriented operations are outsourced. The chef only provides the final touch before
shipping the product for delivery. This is not a popular model.

• Independent Kitchen – Independent kitchens with no offline presence. They can deliver
the product themselves, through a food aggregator, or through both.

Market opportunity

• The ease of getting food delivered at a reasonable price and in record time has led to an
increase in the number of orders placed online. Instead of going out to dinner, people prefer
to ask. Online food delivery is not only eating in the market share of traditional restaurants
but is also replacing home cooking. Due to the change in customer preference and a greater
sense of discomfort at dinner outside, the home delivery option has gained momentum and
along with that has brought a change in the restaurant industry, as food now dominates the
dining experience.
• An urban average, professional work orders online 3-4 times a week and this number can
go up to order daily in certain cases. Online aggregators are also expanding operations in
Tier II and III cities, further increasing market size.

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Low investment

• Cloud kitchens require less investment to open, as you no longer need a prime location
with a high number of steps, reducing the cost of real estate. Also, since there is no front
to the house, you do not need luxurious interiors and hospital waiting staff to ensure a great
guest experience. These two factors play an important role in reducing the cost of opening
a cloud kitchen business.
• You can open a cloud kitchen to a third of the investment needed to open a traditional
restaurant.

Ease of experimentation

• The cloud kitchen business model allows restorers to experiment with multiple concepts
without much investment. You can operate multiple brands from a single kitchen using the
same infrastructure and kitchen resources. Opening a new brand is as easy as simply getting
the new brand that appears on online food aggregators. Because the ad is free on online
food aggregators, and they charge a certain percentage per order, you just need to spend on
order preparation. In case the brand does not do it right, you can simply delete the list of
the online food aggregator.
• The success or failure of a brand does not affect the other brands that operate from the same
cloud kitchen in this case.
• Read how multi-brand cloud kitchens allow restaurateurs to experiment with more
concepts with minimal risk.

Ease of scaling operations

• Scaling operations are much faster and easier for the cloud kitchen business. Because the
investment required to open a cloud kitchen is significantly less, you can open more cloud
kitchens in the same period.
• Shared cloud kitchen spaces and operator-managed cloud kitchens are playing an integral
role in helping cloud kitchen companies reach scale. These cloud kitchen spaces are already
located in high-demand areas and act as a food production center by including multiple
brands. A restaurant that is trying to expand the business and enter a new market can simply
take space in such shared kitchen spaces and start operations without any hassle.

Product and Services. The Impact of Cloud Kitchens

1. In a recent report, Limetray found that 67% of restaurants would prefer opening a cloud
kitchen over a dine-in restaurant as their next outlet. There are a few advantages to this
model:

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 2. Improve operational efficiency. Restaurants are enabled to prepare their delivery orders
offsite during busy lunch and dinner hours without disrupting the dine-in guest experience.

3. Help scale and growth. Restaurants can leverage the scale of cloud kitchens to test new
geographies and consumer adoption without investing in expensive real estate.

4. Drive exclusivity for delivery marketplace. Cloud kitchens are like Netflix original
content; marketplaces are curating unique concepts on their network, so consumers stay
engaged.

5. Lower real estate and upfront costs. Without the need to attract customers to your location,
there is no need to invest in real estate or pay high rent for a location with high foot traffic.
There is also no need to invest in signage outside, eye-catching interior restaurant design,
or other bells and whistles like furniture, dishes, or cutlery.

6. Manage a more efficient labor force. A cloud kitchen’s labor force consists of head chefs,
sous chefs, dishwashers, managers, and delivery drivers. Servers, cashiers, hosts, and front
of house managers become obsolete. As a result, labor costs — which usually absorb 50-
70% of the average restaurants monthly revenue — decrease, and staff focuses on
delivering the best product.

7. Offer competitive menu prices. Cloud kitchens can invest most of their financial resources
into creating delicious dishes, testing new menu items, and expanding their digital
footprint. They can price menus more reasonably as they do not need to generate additional
revenue to cover investment in other areas of the business.

8. A cloud kitchen utilizes a commercial kitchen for the purpose of preparing food for
delivery or takeout only, with no dine-in customers.

9. Cloud kitchens enable restauranteurs to expand an existing restaurant or start a virtual

brand at minimal cost. This provides restauranteurs with the opportunity to scale, explore
new markets, or trial new concepts. Many restaurants use cloud kitchens as an experimental
space, optimizing staff and inventory while testing new ideas.

Business structure

A small, standalone cloud kitchen brand can very well start off with a minimum of 6 people– a
head chef, two junior chefs, two helpers, and a housekeeper. However, even though minimal staff
is required, practicing proper staffing will enable your restaurant to handle the food production
volumes at any level.

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Create a staffing plan wherein you can adjust your employee’s schedule according to the sales
trends or on a timely basis.

Also, vital to the long-term success of a restaurant is having competent staff. Hire well-trained and
highly skilled employees who will assist in improving the service speed, food quality, and the
overall quality of your operations.
Lower real estate costs

Since you are removing table servicing out of the equation and offering a delivery-only service,
you will save a huge amount on real estate costs.

Cloud kitchens release you from the obligation of having space in a high-visibility area. Rather
than paying for accessibility, better-developed complexes, or even a large parking space, you can
concentrate on having enough kitchen space in a decent area near to your target market.

Better expansion opportunities

The best thing about cloud kitchens is that you do not need heavy investments to begin. You can
start small but expand fast. Once you build a brand and get loyal customers, expanding to new
localities and even new menu variety gets easier. Let’s take the example of Faasos, today it runs
160+ kitchens and 4 brands including Faasos, Behrouz Biryani, Oven Story and Firangi Bake.

Saving on overhead costs

With a cloud kitchen, you save so much on overhead costs. You do not need client-facing staff,
decoration or space entrance, parking area etc. Even if you have lower-priced menu items, your
profit margins are likely to be better.

Supply Chain Process

The rise in popularity of food delivery has born a concept—dark kitchens. Also known as delivery-
only restaurants, ghost kitchens and virtual kitchens, dark kitchens meet the demand of a new
generation who feeds off food delivery services. This concept enables restaurants to open in more
industrial and affordable parts of cities without the need for front of house furniture and fixtures
because these kitchens streamline the culinary process by delivering directly to customers’
doorsteps. With more kitchen space for back of house equipment than traditional restaurants, these
kitchens offer more output for 24-hour food preparation. While this new trend saves restaurants
money, it also creates new challenges, including potential impacts to a restaurant’s supply chain.
Brands looking to capitalize on dark kitchens will need a supply chain partner that is up for the
logistics involved with kitchen technology and equipment moves. It changes supply chains for
restaurants drastically as they shift to focus more on partnerships with delivery service providers

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with the end-consumers satisfaction always in view. In lieu of greeting patrons, ensuring their
dining in service experience goes well and is not disrupted with bustling take out services, these
kitchens are focused on speed and accuracy, and need technology that gets orders out the door
promptly. These industrial locations also have more parking spots for delivery services to support
traffic flow in metropolitan areas they are serving. The concern for restaurants is that some 3PL
providers may shy away from meeting the challenges of dark kitchens.
However, Brad Liddie, Senior Vice President of Global Logistics Operations at Suddath, says a
trusted provider should be flexible and scalable enough to meet the demands of the marketplace.

“If your third-party logistics partner acts more as a project manager then they bring more to the
table than transportation and delivery such as staging replacement equipment,” Liddie says. “We
saw this with the rise of retail e-commerce and pivoted quickly and we can do the same with cloud
kitchens. If any equipment goes down, we stage it strategically to minimize any output disruption.
The trends of e-commerce are still impacting the globe but companies like ours, with a legacy
business in moving, have scaled seamlessly into omni-channel distribution and B2C fulfillment.”

Kitchen Management
During the initial setup, keeping an estimate of inventory can be a challenging task. Procuring and
storing raw materials is often a problem. Therefore, it is essential to keep a steady record of all the
items and implement a well-developed tracking system. Based on the frequency of orders and raw
materials requirements, source your inventory by factoring in enough lead time.

Maintain strict inventory controls by tracking the inventory regularly, aligning the food and labor
costs, and keeping them in line with the budget. One effective way of ensuring proper stock
utilization is to adopt the FIFO system that not only provides stock rotation but also curbs any
possibilities of spoilage.

The cloud kitchen model has several advantages

Lower Operational Costs: the restaurant industry is known for having remarkably high
operational costs. Real estate costs are burgeoning across every city. This is severely impacting
the bottom line of restaurants. Also, the culture of going to restaurants is slowly fading away.
Nowadays, both spouses are working. Families want to spend their weekends in the comfort of
their homes, away from the traffic as well as hustle-bustle. This is the reason why more than 35%
of all meals from now restaurants are now delivered to the customer’s homes. The cloud kitchen
model allows the restaurant to bypass expensive real estate costs and focus more on the food.
Competitive Pricing: On one hand restaurants are struggling to make any money whereas on the
other hand, customers find the food to be extremely expensive. If the food were priced and
prepared in a homely manner, many customers would prefer to order daily. Once again, this is
because of the rise of working spouses who have no time for cooking. Cloud kitchens can keep the
real estate costs low. This is because since customers never visit these kitchens, they do not need

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to be at prime locations. This allows the restaurants to cut costs. They can provide good quality
food to the customers for a fraction of the costs.

Automation: Cloud kitchens also tend to have a limited menu. Instead of offering many items,
cloud kitchens focus on simplifying the menu so that more automation can be introduced. Cloud
kitchen companies have successfully automated all the packaging activities. These activities
contribute to about 25% of the total workload. A lot of pre-preparation activities have also been
fully automated. Cloud kitchen startups are also trying to aggressively explore more technologies
that will allow them to automate the entire operation.

Food Quality: Traditional restaurants face a lot of overhead expenses. This is the reason why they
have little money left to incorporate good quality food items in their dishes. This is the reason why
restaurant food has traditionally been unhealthy. However, cloud kitchens are changing that. The
objective of these kitchens is to add value to the customers. Many of these customers buy daily
from these kitchens. Hence, they are concerned about the quality of inputs that are used since it
directly impacts their health. This is the reason why cloud kitchens focus on food quality. In fact,
many of these kitchens have built their entire marketing programs around the promise of better-
quality food at the same or lower price.

Flow Chart: Kitchen Business Model

A cloud kitchen is a delivery-only restaurant that has no physical space for dine-in. It relies entirely
on online orders placed through online food aggregators or an online ordering enabled website or
mobile app.

The cloud kitchen format gives the restaurant the flexibility to launch more than one brand
using the same kitchen infrastructure. Multi-brand cloud kitchens allow the restaurateur to
utilize the same kitchen infrastructure and resources to operate multiple brands.

For example, a restaurateur who owns a delivery-only kitchen and delivers South Indian food can
start offering Mexican food as well. But instead of adding Mexican to the menu of his current
band, he can begin to operate a different brand that sells Mexican from the same delivery-only
kitchen.

Cloud Kitchens Managing Suppliers and Chain Network

A cloud kitchen is not too different from a regular commercial restaurant kitchen, you must still
look for a combination that is the best for you. If your brands have the same base ingredient but
some different ingredients, you can order the base ingredient from the same supplier and the
various ingredients from different suppliers.

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If your supplier has a diverse variety of ingredients, you can order for all your brands from the
same supplier. Just like in the case of a restaurant supplier, you need to ensure that the supplier for
your cloud kitchen is only as punctual and with the orders.

While finalizing the supplier, also ensure that you can dictate your terms well. As a cloud kitchen,
you might be tempted to order from different suppliers even when it is not needed to keep
accounting simple, but remember that if you end up ordering small units from different brands, it
will cost you more. Not just that, but you will end up being a small customer for the supplier,
which means that you will never be able to leverage your terms.

We would say that before finalizing your supplier, you should make a list of all the ingredients
you would need across brands and try to order as many as possible from the same supplier. It will
make it easier to keep track of inventory, you will be able to hold a single person accountable, in
case of changes it would be far easier to coordinate, and you will save money.

Managing Inventory

Managing the inventory in a Cloud Kitchen is thought to be the most complicated task of running
a cloud kitchen. That is not entirely true. Yes, having multiple brands under the same roof can
make managing inventory a little tedious, but by developing a system of checks and numbers, you
can handle it without much problem. A smart POS system allows you to manage the stock and
inventory requirements of multiple brands with ease. You will be able to view and manage the
daily stock consumption and requirements of each brand from a single dashboard.

Based on the requirements, you can raise Purchase Orders for the stock items for each brand and
manage the purchase with ease.

Role of Technology

How to Market A Cloud Kitchen Restaurant?

Cloud Kitchens have no such physical outlet, the marketing needs of a cloud kitchen are vastly
different from those of a regular restaurant. Since there is no outlet where the customers can just
walk-in, a cloud kitchen permanently loses out on visibility. To compensate for this, a powerful
marketing and branding strategy is required. Here are some things that you can do to market our
cloud kitchen.

Technology plays a crucial role in cloud kitchens, as most orders are made online through a
website, app, or delivery aggregators. A cloud kitchen requires an integrated technology system

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for accepting online orders, processing payments, and efficient kitchen management. A key
requirement for a cloud kitchen is a point of sale (POS) system that accepts orders from various
channels, such as delivery aggregators and online ordering platforms.

Having an integrated restaurant POS system means you can maintain records of orders from each
platform and have visibility into which platform is working best for you.
Having access to sales data is critical to developing strategies that maximize your sales.

While partnering with online food aggregators is important, it is worthwhile to consider

implementing your own restaurant website or mobile app for accepting orders as an additional
sales channel.
In a fast-paced cloud kitchen, order preparation time is usually around is 10-12 minutes if you
want to deliver the order within 30 minutes. An integrated Kitchen Display System (KDS) will
optimize order preparation time.
As soon as the order is received, it gets updated in the KDS. Kitchen staff can view the order
details and the order pickup time immediately and can prepare the order accordingly. This
streamlines kitchen management, maximizes efficiency, and enables you to identify any lags to
further optimize the preparation time.

Effectively managing inventory is essential for any restaurant, and the same stands true for a cloud
kitchen. A smart inventory management system enables you to track daily stock consumption and
prompts you to order more stock when needed. It helps you reduce wastage and keep control of
your food costs.

Technology plays a critical role in the smooth functioning of a cloud kitchen business and ensures
operational efficiency.
Having a comprehensive technology platform with seamless integration between POS, KDS, and
inventory management will ensure operational efficiency and the smooth functioning of your cloud
kitchen business.

Major issues affecting supply chain: Challenges Facing Cloud Kitchens

Technological Expenses: The biggest problem with cloud kitchen model is that it has replaced real
estate costs with technological costs. Cloud kitchens have astronomical technical costs. This is
because these kitchens must communicate with a lot of food delivery apps. The orders must be
received and communicated to the kitchen which is the nearest to the customer’s location. There
are cloud-based solutions available which allow restaurants to go high tech without any major
upfront costs. However, the monthly subscriber fee also burns a hole through the wallets of many
startup kitchens. Hence, the costs end up being like traditional restaurants. However, the number
of the users is severely restricted since these outlets do not provide the dine-in facility.

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Hygiene: The cloud kitchen model is difficult to scale. The problem is that many times companies
build their kitchens in unhygienic conditions. This is done to lower the costs as much as possible.
Customers do not really want to be served from prime real estate. However, any chosen kitchen
needs to be hygienic so that the food is edible. There have been many cases reported on social
media wherein the food served to customers was unhygienic.

To sum it up, the restaurant industry has undergone a major transformation. Cloud kitchens are a
relatively invention. However, they help serve an important market niche which was earlier being
neglected by traditional restaurants. As a result, they are not taking market share away from current
restaurant owners. Instead, they are expanding existing markets thereby benefitting the industry.

The life cycle of Cloud Kitchen project.

The Project Life Cycle refers to the four-step process that is followed. The Project Life
Cycle provides a framework for managing any type of project within a business

Initiation

1. A Cloud Kitchen. A cloud kitchen, ghost kitchen, virtual restaurant, satellite kitchen is
a delivery only restaurant format that offers no dine-in facility. Cloud Kitchens accept
orders online or through telephone.
Planning

2. Types of Cloud Kitchen Business Model. The cloud kitchen business model has undergone
many variations and has diversified
Execution

3. Starting A Cloud Kitchen Business. Since a cloud kitchen does not have a dine-in facility and
only relies on online and telephonic food orders, it is essential that you spend on marketing your
food delivery brand, at least in the initial days. Without a storefront with no display boards and
signages for creating a brand recall, online marketing becomes critical in this case

4. Generating Online Orders and Marketing. A cloud kitchen typically relies on online food
aggregators, websites, and mobile apps to generate orders, technology plays a crucial role in this
business. A cloud kitchen requires an integrated online restaurant ordering system for accepting
online orders and for aiding operations.
Closing

5. Optimizing Online Food Delivery. Generating orders and preparing food is just one part of the
food delivery business.

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A project life cycle is the sequence of phases that a project goes through from its initiation to its
closure.

Total quality management (TQM)

A core definition of total quality management (TQM) describes a management approach to long-
term success through customer satisfaction. In a TQM effort, all members of an organization
participate in improving processes, products, services, and the culture in which they work.

TQM can be summarized as a management system for a customer-focused organization that

involves all employees in continual improvement. It uses strategy, data, and effective
communications to integrate the quality discipline into the culture and activities of the
organization. Many of these concepts are present in modern quality management systems, the
successor to TQM.

Here are the 8 principles of total quality management:

Customer-focused: The customer ultimately determines the level of quality. No matter what an
organization does to foster quality improvement—training employees, integrating quality into the
design process, or upgrading computers or software—the customer determines whether the efforts
were worthwhile.

Total employee involvement: All employees participate in working toward common goals. Total
employee commitment can only be obtained after fear has been driven from the workplace, when
empowerment has occurred, and when management has provided the proper environment. High-
performance work systems integrate continuous improvement efforts with normal business
operations. Self-managed work teams are one form of empowerment.

Process-centered: A fundamental part of TQM is a focus on process thinking. A process is a series

of steps that take inputs from suppliers (internal or external) and transforms them into outputs that
are delivered to customers (internal or external). The steps required to carry out the process are
defined, and performance measures are continuously monitored to detect unexpected variation.

Integrated system: Although an organization may consist of many different functional specialties
often organized into vertically structured departments, it is the horizontal processes
interconnecting these functions that are the focus of TQM.
Micro-processes add up to larger processes, and all processes aggregate into the business processes
required for defining and implementing strategy. Everyone must understand the vision, mission,
and guiding principles as well as the quality policies, objectives, and critical processes of the
organization. Business performance must be monitored and communicated continuously.
An integrated business system may be modeled after the Baldrige Award criteria and/or
incorporate the ISO 9000 standards. Every organization has a unique work culture, and it is
virtually impossible to achieve excellence in its products and services unless a good quality

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culture has been fostered. Thus, an integrated system connects business improvement elements to
continually improve and exceed the expectations of customers, employees, and other stakeholders.

Strategic and systematic approach: A critical part of the management of quality is the strategic and
systematic approach to achieving an organization’s vision, mission, and goals. This process, called
strategic planning or strategic management, includes the formulation of a strategic plan that
integrates quality as a core component.
Continual improvement: A large aspect of TQM is continual process improvement. Continual
improvement drives an organization to be both analytical and creative in finding ways to become
more competitive and more effective at meeting stakeholder expectations.
Fact-based decision making: To know how well an organization is performing, data on
performance measures are necessary. TQM requires that an organization continually collect and
analyze data to improve decision making accuracy, achieve consensus, and allow prediction based
on history.

Communications: During times of organizational change, as well as part of day-to-day operation,

effective communications plays a large part in maintaining morale and in motivating employees
at all levels. Communications involve strategies, method, and timeliness.0

Cloud Kitchen SWOT Analysis

A SWOT Analysis is primarily identifying the Strengths (S), Weaknesses (W), Opportunities
(O), and the Threats (T) of the restaurant that you can use to plan your business strategies. A
SWOT analysis is usually represented in the form of a two by two graph, with Strengths in the top
left side, Weaknesses in the top right side, Opportunities in the bottom left side, and Threats in the
bottom right side.
Pros of Cloud Kitchen
Strengths

Low operating cost

• For a cloud kitchen, a lot of the operating costs incurred by traditional restaurants are
eliminated with. These include renting a larger space, which could be anywhere between
$40,000 to $150,000 a year, labor cost, decoration, and remodeling costs, etc.

• Let us take the labor cost, for example, which occupies 50% (or more) of the average
monthly income of restaurants. On the other hand, a 500 ft2 cloud kitchen space can
efficiently serve the same number of customers as a full 1500 ft2 restaurant. In addition,
anyone on a modest budget can start making money from a cloud cooking concept.

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Opportunities
Low risk
• Due to the lower upfront costs needed to launch your businesses, this could be good for
start-ups. Cloud kitchens are especially worth exploring for smaller businesses like food
trucks, home cooks or even those who are interested in stepping into the business but have
no previous restaurant experience.
• Cloud kitchens can also be explored as a potential option for existing brick and mortar
restaurants looking to scale up but are concerned about high expansion budgets.
•
Competitive prices
• Another direct advantage of having a lower cost of operation is that cloud kitchens can use
some of the profit margins to offer much more competitive pricing. Since there is no need
to invest in several areas that a traditional restaurant business would normally have to do,
virtual kitchens can price their menus more reasonably.
• Not only through prices, but these kitchens can improve overall customer satisfaction by
focusing entirely on two main areas: food quality and delivery services.

Cheaper advertising
• Since cloud kitchens are exclusively online businesses, the most efficient marketing
channels for them are social media. With a smart social media strategy, these restaurants
can reach their core audience.
• The fact that now most online ordering services allow the ordering of social networks can
also work in your favor. Email and SMS marketing are other effective channels. These are
more profitable compared to traditional advertising as billboards and can help further reduce
expenses.

The expanding delivery markets

• These new-age restaurants, the report suggests they can further reduce costs with robotics
and AI. The fact that you could be one of the winners in this segment, which has the potential
to reach $365 billion over the next 10 years, is a big positive.
•
Cons of Cloud Kitchen
Weaknesses
Online-only visibility
• Because it is an online-only company with limited customer interaction, cloud kitchens
might have a hard time building your brand at first. Reaching out to customers and finding
that all the overly important trust and loyalty of them will undoubtedly be a big challenge,
especially with the previous generation because Millennials’ and Get Z, being digital
generations, will continue to be easier to address.

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 • Trust and loyalty are essential to the growth and livelihood of any brand and cloud kitchens
will need to think out of the box and adopt innovative strategies to attract a dedicated
customer base.

Threats
Technology dependence
• The business model of a cloud kitchen depends entirely on technology. With more advances
in the field such as artificial intelligence, voice assistants, augmented reality and virtual
reality, customer productivity and convenience are expected to increase for both businesses
and customers.
• However, no matter how advanced technology is put, one cannot rule out inconveniences,
large or small, and any such disruption will cause difficulties even in the basic operations
of a cloud kitchen such as taking orders and accepting payments.
• Cloud-based solutions are available that enable restaurants to avoid these problems. Online
ordering platforms such as UBR eats, Menu Drive, Chow now, etc. offer a complete set of
solutions for restaurants that plan to run your business online.

Forecasting

A new market research report is predicting the rise of cloud kitchens – fully equipped shared
kitchen spaces dedicated to foodservice delivery – will accelerate further due to coronavirus.
Allied Market Research’s Cloud Kitchen Market Report states that the sector garnered $43.1bn in
2019 and is estimated to reach $71.4bn by 2027, registering a CAGR of 12.0% from 2021 to 2027.

The US-based research firm believes the rise in demand for online food delivery, an increase in
demand for international cuisine, and adoption of tech-savvy ordering systems across will drive
the growth of the global cloud kitchen market.
However, it cautioned that the increase in health issues due to consumption of fast food and
competition from fine dining and quick service restaurants (QSRs) could hinder the market growth.
On the other hand, increase in internet penetration and rise in adoption of social media marketing
are anticipated to offer new opportunities in the coming years, according to the report.
Based on type, the independent cloud kitchen segment is claimed to have contributed to the highest
market share with around two-thirds of the global cloud kitchen market in 2019, and is estimated
to maintain its leadership position during the forecast period. However, the kitchen pods segment
is estimated to generate the fastest CAGR of 13.9% from 2021 to 2027.

Based on region, North America accounted for the highest share based on revenue, representing
more than two-fifths of the global cloud kitchen market in 2019, and is projected to maintain its
dominant position throughout the forecast period. But Asia-Pacific is estimated to generate the
fastest CAGR of 14.4% from 2021 to 2027.

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Global Positioning

Kitchen spaces can be used by a single brand or be shared between several brands. This allows the
stakeholders to decrease their capital and operational costs, thereby increasing the profit margin.
Some cloud kitchens also provide door-to-door delivery themselves, apart from the collaboration
with other online food delivery companies. Once an order is placed through its website or an online
food delivery platform, food is prepared and dispatched. The companies need not focus on front
house activities, which allow them to fully focus on the food preparation process. They can also
expand to other cities with ease due to the absence of heavy investments. Furthermore, with the
outbreak of the COVID-19, the cloud kitchen market will be a lucrative investment in the coming
years. As social distancing has become a necessity, people are relying more on virtual kitchens for
a variance in cuisine, thus increasingly contributing to the growth of the cloud kitchens, which is
likely the future of the restaurant industry.

Based on region, North America accounted for the highest share based on revenue, holding for
more than two-fifths of the global cloud kitchen market in 2019, and is projected to maintain its
dominant position throughout the forecast period. This is attributed to rise in population, improved
lifestyle, and growth in purchasing power of consumers in this region. However, the Asia-
Pacific is estimated to generate the fastest CAGR of 14.4% from 2021 to 2027. This is attributed
to increase in number of youngster's population and rise in demand for online food delivery in this
region.

However, the increase in number of fine dining and quick service restaurants such as Subway,
McDonald, Starbucks, KFC, Pizza Hut, Restaurant Brands International, and Dunkin Donut, are
one of the major factors that hampers the growth of the cloud kitchen market. In addition, this
quick service restaurant has a global presence along with high amount of liquidity owing to which
smaller cloud kitchen are unable to compete with this giant. Moreover, these giant quick service
restaurants have large product offering, world class infrastructure along with best food delivery
services, which attracts consumers. And hence, it affects the survival of cloud kitchen in the
market.

The cloud kitchen market is segmented into type, product type, nature, and region. By type, the
market is categorized into kitchen, commissary/shared kitchen, and kitchen pods.

By product type, it is categorized into burger/sandwich, pizza/pasta, chicken, seafood,

Mexican/Asian food, and others. By nature, it is bifurcated into franchised and standalone. By
region, it is analyzed across North America (U.S., Canada, and Mexico), Europe (UK, Germany,
France, Italy, Spain, and rest of Europe), Asia-Pacific (China, Japan, India, Australia & New
Zealand, ASEAN and rest of Asia-Pacific), and LAMEA (Latin America, Middle East, and Africa)

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Green Initiatives

The Green Initiative has as its main objective the offsetting of Greenhouse gases emitted by human
activities that can range from complex industrial production processes to simply driving a car, with
reforestation projects in riparian areas that need to be recovered. Sustainability and serving locally-
grown and organic food are two big food trends in the restaurant industry, as suggested by the
National Restaurant Association. Restaurateurs are actively responding to such trends by
implementing various green initiatives in operations.

There are many quick and easy ways that your business can reduce its impact on the Earth and
ensure that its natural resources will last for future generations. So, whether your restaurant's goal
for the New Year is to be eco-conscious or you want to reduce waste for Earth Day, here are seven
ways that your restaurant can go green.
1. Reduce Your Water Usage

From dishwashing stations to bathrooms, just about every aspect of a foodservice establishment
requires water. But, sources of fresh water are quickly depleting, making it important that
restaurants do their best to conserve water. One of the best ways that you can reduce your water
usage is to use low flow spray valves, which allow you to use less water when washing dishes.
Another option would be to outfit all your restrooms with water-saving toilets and urinals, which
use less water per flush. Additionally, many restaurants give every customer a glass of water when
they sit down. You can reduce your water usage by only serving customers water if they ask for
it.
2. Invest in Energy-Efficient Appliances

The foodservice industry uses a lot of electricity, mostly with appliances. One of the best ways to
cut down on your restaurant's energy usage is to switch from standard appliances and equipment
to energy-efficient models, such as Energy Star Qualified appliances. Additionally, there are many
small changes you can make to reduce energy consumption:
Clean the coils on your refrigeration equipment. Dust accumulating on your refrigeration
equipment causes it to work harder and waste electricity.

3. Restructure Your Food Shipments

Getting regular or weekly food shipments delivered to your restaurant results in a higher carbon
footprint, because the delivery truck must drive to your establishment more frequently. There are
two excellent ways that you can ensure that you always have fresh food on hand while reducing
your establishment's impact: buying local produce and ordering food in bulk.
Buy Local Produce
One of the best ways to reduce your establishment's carbon footprint is to buy food from local
sources. If your food comes from nearby farms, it has a shorter distance to travel, so it spends less
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time on a truck. Additionally, if you are serving your customers local food, you can market your
business as a farm-to-table business and offer your menu items at a premium. Another option, if
you have a lot of outdoor space, is to grow your own food and offer your customers hyper-local
foods.

Order Food in Bulk Shipments

If you are in a city or do not have easy access to fresh and local foods, another option would be to
restructure your food orders, so you get food less frequently but in bulk quantities. And because
you would be receiving orders less regularly, you would be reducing your environmental impact.
When re-structuring your food orders, consider what foods you need to use first and which items
you can store in your freezer to prolong their shelf life.
Use Eco-Friendly Disposables

Fortunately, there are many great eco-friendly alternatives to traditional plastic disposables. For
example, instead of plastic utensils and dinnerware, you can use biodegradable or compostable
options. that are made of renewable materials such as sugarcane, bamboo, or PLA plastic. Many
restaurant owners are wary of eco-friendly disposables because they perceive them as being flimsy
and low quality, but many new types of eco-friendly options are just as durable as their plastic
counterparts.

Additionally, many cities are now considering banning plastic straws, so it is an excellent time for
your business to make the switch to eco-friendly alternatives. PLA plastic and paper straws are
two great substitutes for traditional plastic straws. Some cities have also banned the use of plastic
bags, so you should consider switching to eco-friendly bags as well.

Minimize Food Waste

If your portions are too large, customers can end up throwing away large amounts of food.
Additionally, if you do not carefully manage your inventory, your food may expire before you use
it, resulting in food waste. To prevent food waste, you can implement the First In, First Out (FIFO)
method, conduct a food waste audit, or use portion control tools. There are also some creative ways
that you can use food scraps and overripe foods and prevent food waste. For example, you can use
vegetable scraps to create a delicious homemade vegetable broth. Additionally, many overripe
fruits have the perfect sweetness and texture for baked goods.

Conclusion

The global kitchen market size was valued at $43.1billion in 2019 and is estimated to reach
$71.4billion by 2027 with a CAGR of 12.0% from 2021 to 2027. Cloud kitchens are delivery-only
kitchens which can be owned by a brand or third party working with various brands. Brands which
are using cloud kitchens can also operate virtual restaurant or brick-and-mortar restaurant.
Moreover, on the flip side brick-and-mortar restaurants are using separate cloud kitchen to provide

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more efficient delivery. Furthermore, rise in utilization of independent cloud kitchens by grocery
stores, restaurant brands and multi-branded restaurants have augmented the growth of the cloud
kitchen market. In addition, Kroger has partnered with food delivery service Cluster Truck to
launch multiple independent cloud kitchen that serve up meal delivery from central kitchens.
Moreover, hectic work schedule of millennial and Gen Z along with increase in demand for
international cuisines such as Korean Tacos, Butter Chicken Dosa, Ramen Burgers and others, is
boosting the growth of cloud kitchen market.

There has been an increase in number of users on various social media sites with rise in internet
penetration. Considering this, most of the key players in the cloud kitchen market strategize on
promoting their products and services on these social media platforms. Social media marketing is
one of the major strategies adopted by various companies and industries to promote their product
offerings. Thus, rise in use of social media marketing is anticipated to provide lucrative
opportunity for the growth of the cloud kitchen market and eventually increase its customers.

Miami, August 09, 2020

References.

• Starting A Cloud Kitchen? Here’s All You Need to Know to Run A Successful
Food Delivery Business. https://www.posist.com/restaurant-times/cloud-
kitchen/demystifying-cloud-kitchens/starting-a-cloud-kitchen-food-delivery-
business.html
• The Cloud Kitchen Concept: An Addition to the Restaurant Delivery
Marketplace. https://pos.toasttab.com/blog/cloud-kitchens

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