In recent years, off-premise dining has spiked in popularity as market revenue for the food delivery industry has increased by 204% in the past five years, according to research conducted by Zappia. Consequently, a new restaurant business model emerged in 2016 with the name, Cloud Kitchens. So what is a cloud kitchen? What are its advantages and disadvantages?
If you are looking into investing in a cloud kitchen, it is important that you weigh the pros and cons of this business model to make an informed decision.
In this article, we will cover the advantages and disadvantages of cloud kitchens.
What is a Cloud Kitchen?
A cloud kitchen — also known as a ghost or virtual kitchen — is a concept where food is prepared and delivered without a physical storefront or dine-in area; Its sole purpose is to provide deliveries and take-outs using a centralized kitchen space. Cloud kitchens typically operate from a single location and utilize a shared kitchen space.
Pros and Cons Of Cloud Kitchens
Pros of Cloud Kitchens
Cloud kitchens offer a cost-effective and flexible way for restaurants to expand their reach and test new concepts. Let’s delve into some of its pros:
1- Lower costs
Cloud kitchens offer significant financial advantages over regular restaurants.
How?
Cloud kitchens don’t require a physical storefront or dining area, so that owners can save on rent, utilities, and maintenance costs.
They operate solely with kitchen staff and delivery personnel. Therefore, costs related to hosts, and servers are entirely eliminated, which means lower labor costs.
And they do not require dinnerware, decorations, and branded signage, which can be costly.
2- Scalability
Cloud kitchens can quickly and easily scale their operations to meet demand. When your business flourishes and more orders come in, you don’t have to worry about physical expansion or hiring additional staff to cover a larger dining area. You simply need to hire a few more workers and, if needed, a few additional appliances, and you’ll be set. This allows for greater flexibility and the ability to respond quickly to changes in demand.
3- Efficient operations
With a cloud kitchen, you focus exclusively on preparing food and delivery, spared from the hustle and never-ending tasks of running a traditional restaurant. As a result, you have the opportunity to exert all your resources to ensure operations as efficiently as possible.
Speaking of efficiency, a cloud restaurant allows you to operate more than one brand from your kitchen, making it easier to batch-prep all ingredients for various types of menus and cuisines. In this context, we can’t stress enough the importance of investing in an advanced POS solution — namely Foodics Point of Sale Solution — that provides you with all the features you need to run your cloud kitchen efficiently and seamlessly.
4- Opportunity to experiment
A cloud kitchen allows you to experiment with your offerings and bring new ideas and concepts to the table. When you don’t have the added pressure of tremendous costs and customer service, you can focus on innovative ideas, dishes, and concepts for your business. Whether you are an already established restaurant or a new brand, you can do this. Make sure you make your meals appealing enough for people to choose over the dining-in experience.
For example, you can develop innovative menu items or fusion cuisines that cater to emerging trends or specific dietary preferences, such as plant-based comfort food or trendy brunch meals. You can also collaborate with local or celebrity chefs to create exclusive pop-up kitchen experiences and unique menu items.
5- Property and location
Flexibility in property and location is the main reason you may be considering cloud kitchens. You can operate in areas that cannot be suitable for a traditional restaurant, such as warehouses, parking lots, basements, etc… One thing you should be mindful of is choosing a place with a high customer demand, especially for the type of food you serve.
Cons of Cloud Kitchen
However, Cloud kitchens also come with their own set of challenges, including
1- Limited customer experience
One of the challenges of cloud kitchens is the limited customer experience and interaction. Since cloud kitchens only provide a delivery service, they lack the ambiance and experience of traditional restaurants. Therefore, it is harder to build brand recognition and customer loyalty.
Moreover, dealing with customer complaints and requirements in an in-house dining arrangement is easier and more efficient. With virtual kitchens, it is more difficult to get to the bottom of every issue and complaint which can lead to bad reviews.
2- Dependence on technology
Cloud kitchens rely heavily on technology, such as only ordering platforms and delivery apps. As a result, any technical glitches or downtime can significantly affect operations. Therefore, investing in reliable tech infrastructure and backup systems is crucial to prevent potential downtime.
Moreover, employing advanced technologies can be costly. So try to look for a single platform such as our Foodics Online that provides all required functions such as the delivery network, logistics support, order tracking, customer relationship, etc.
3- High competition
The rise of cloud kitchens has led to increased competition in the food delivery market. In order to succeed, you need to find ways to stand out from your competition. If you are still in the process of building your brand name, make sure to employ all available marketing strategies and use trends and innovative menu ideas to boost your brand recognition.
4- Improper structure of operations
Managers often overlook the importance of following standard operating procedures (SOP) in virtual restaurants, leading to challenges in staff management and monitoring. As a result, a significant number of virtual restaurants experience issues such as mismanaged orders and delays, inadequate hygiene and working conditions, and poor food quality control. Therefore, it is monumental to centralize operations and invest in customizable software such as our Foodics Point of Sale Solution for streamlined monitoring and improved efficiency.
6- Lack of pricing power
Without the dining experience, cloud kitchens can’t justify high prices. Customers will not pay the same price as they would in a traditional restaurant if the experience is not there. Customers who order from cloud kitchens are usually looking for special deals. That said, the lack of pricing power limits the offers you can provide as a cloud kitchen, hence limiting the potential of new customers ordering from you.
The Takeaway
To sum up, Cloud kitchens can be a great opportunity for individuals with a tight budget to open a food service business. While this model has advantages like lower costs, location flexibility, and the opportunity to experiment, it also comes with a handful of disadvantages. From limited customer experience to the dependence on technology and high competition, these challenges take a lot of planning, dedication, and the right technology to overcome.
Considering these factors, do you believe cloud kitchens have the potential to grow and thrive on par with traditional restaurants?
