Is the kitchen dead?

Introduction

Ghost kitchens have been sneaking up in the market like nobody’s business in the past few years. Gigantic companies have been built around the concept that is known as‘Cloud Kitchen’. So, what exactly are they? Simply put, it is a commercial kitchen space that provides restaurant brands the facilities and resources required to sustain a delivery and take out centric service.

Its intrinsic purpose is to provide restaurant like services without the physical infrastructure, dine in spaces and take away counters and is an operational kitchen serving as a production unit for the product that is food. One could say Cloud Kitchens are the Ola and Uber or the food industry, given as they own little to no tangible assets. No furniture, no waiters, no ambience expenses, no maintenance costs are perks they enjoy. Customers can place orders through online delivery aggregators or the specific restaurant’s app and their food will be prepared in a shared kitchen space.

Cloud Kitchens also do away with the infamous failure rates of the restaurant industries. While many factors contribute to the foundering of restaurants, the most common one is that of the location. And since cloud kitchens are not bothered about the location, that is one less factor contributing to possible failure. Their operating model is somewhat like this: The brand operating in the cloud kitchen receives an order, usually through an online delivery aggregator such as Zomato or Swiggy, the food is prepared and thus dispatched for delivery.

All a standard process of the food delivery system. But the difference here is that there is no “restaurant” space. All the food being prepared by a particular restaurant or more aptly, the concerned brand, is being prepared along side the food from different brands. Cloud Kitchens are thus just a communal, joint food preparation space in the restaurant industry.

The rudimentary concept of Cloud Kitchens however, has been around for quite a few decades now. Pizza delivery restaurants in the 1950s would prepare fresh pizzas ready for takeout without creating a physical space for dining. The modern concept of Cloud Kitchens however emerged in India in 2003 when Rebel Foods started its first business with ‘Faasos’. Since then, they have not looked back. Cloud Kitchens started popping up in India and then in the entire world as restaurants adapted to what can be called a breakthrough in the industry. 

Rebel Foods

Launched in 2004, Rebel Foods has been the pioneer of the cloud trend and it started with its founder’s dream to sell the previously unknown Calcutta Rolls, a popular street food that originated in Kolkata, India. Today, in 2021, Rebel Foods has transformed itself into the world’s largest Internet restaurant platform with 4,000 virtual restaurants and 350+ cloud kitchens in 40 cities in India and across countries like The United States of America the United Kingdom, Indonesia, Singapore, UAE, Malaysia, Bangladesh and many more. In fact, it is one of the handful companies working on all three levels of the present model of the F&B business sector of India i.e. ordering, logistics, and order fulfilment.

The brand has become India’s newest unicorn on 7 October 2021 by raising $175 million in a Series F round led by sovereign fund Qatar Investment Authority, with participation from existing investors Coatue and Evolvence. The company has also set its eyes on an IPO in the next 18-24 months

The story of such big numbers goes back to January 2011, when Jaydeep Barman and his partner Kallol Banerjee quit their jobs and started working extremely hard towards an idea, a project,which would realise their love of Indian Food and bring a systemised fast-food option, catered to the Indian taste, in a competitive environment of burgers and pizza’s. Their solution to it was a simple Calcutta Roll store chain in Pune named ‘Faasos’. The first big break just hit by October 2011, when this nascentchain raised $5 million from the American Venture Capital firm,‘Sequoia Capital’.

While their business was booming in its initial years, it faced a challenge that majority of restaurants go through, the problem of location. Their operating structure added to the problem, as a typical Faasos joint just had a small standing area with a table or two, and a basic kitchen area. If a good location failed, the high rent to be paid to acquire it made the situation even worse. And if it was successful, balancing the dining-in and delivery consumers from a joint tangled with time. A turning point came with a new infrastructure system, when online food ordering was introduced, and the persevering entrepreneurs immersed their business into it. But the rapid growth of this model led to a discovery, that 70% of its customers had never set foot in a Faasos store. As Barman and Kaloll’s internet and phone delivery business was growing independent of the stores, this discovery led to the genesis of Rebel Foods. The quick service outlets were shut down, low-rent kitchen spaces were leased and India’s and quite frankly, the world’s first ever cloud kitchen was born, a kitchen with only online delivery. As they had solved the problem of location and rent, the rent to sales ratio dropped from 15% to 4% and Faasos grew exponentially in the ensuing years. And thus, Rebel Foods became a unicorn and a revolutionary in the kitchen industry. 

Rebel Launcher

Just like Pizza Hut or KFC have their niche, Faasos was built around a niche of Calcutta Rolls. Food fatigue however is an imminent hurdle to a consumers psychology and preferences when they consume the same fare week in and week out. Faasoshowever, had already overcome this block. If it had been anoffline restaurant chain, the cost of setting up new outlets would have been higher than that of cloud kitchens, as the latter can provide the brand multiple outlets, even in a city. With set up costs minimised, fear of failure mitigated and physical constraints removed, Rebel Foods’ very own start up incubator, Rebel Launcher, has launched eleven independent brands, each with their own niche and speciality. 

Launched in 2018, the Rebel Launcher Program offers a complete operating system, with kitchens, technology, distribution channels and a supply chain and is now being used to scale up partnerships with established brands, who are working towards building a Cloud-Kitchen network to increase their market share and consumer base. Currently working with 15 restaurant chains such as Mad Over Donuts and Belgian Waffle and tying up with foreign brands such as Wendys has provided Rebel Launcher and in turn, Rebel Foods, an opportunity to establish over 250 cloud kitchens in India in the foreseeable future.

Cloud Kitchens as a separate industry

UBS in its report “Is the Kitchen Dead?” estimates that the online food delivery market will grow ten times in the next ten years, from its current value of $35 billion to $365 billion by 2030. They cite “In a world of increasingly time-starved and asset-light consumers, online food delivery is part of a mega-trend, combining the on-demand and sharing economies.” The Covid19 pandemic has also done Cloud Kitchens a great favour. Majority of the dine-in restaurants were shut down and physical dining took a back seat as home deliveries became a sort of necessity around the world. Sharing a kitchen space comes with its own benefits. The relative ease and low cost of setting up a cloud kitchen attracted many investors and also moved many restaurants to become delivery only, seeing the enormous financial and operational benefits it offered. The concept has evolved to become very diverse and dynamic in a very short period of time. There are now various types of cloud kitchen too, such as ‘Hub & Spoke Model’, ‘Pod Kitchen’, ‘Commissary (Aggregator) Kitchen’ and many more, which have been developed to cater to the ever changing demand. 

With an undeniable shift in the demand patterns of consumes, hazy regulations, an evolving and healing industry and uncertainty looming in the future, cloud kitchens have gained a significant and possibly disruptive foothold in the hospitality industry. More and more restaurants are adapting to or shifting to this model of operations, given its obvious benefits in the long run, it is safe to assume that Cloud Kitchens have the potential to be the next big thing of the restaurant industry.

-Rashika Namdev, Aastha Kumar