Outlook may be cloudy for some restaurant innovators

A restaurant with no tables, no chairs…no customers.  Sound strange? It could be the future of dining.

We’re talking about “cloud kitchens,” a new concept in restaurants–mini-kitchens that only cater to online food delivery orders.  No dine-in and no customer take-out either, just online order delivery.

A recent trend beginning to take hold in certain regions, particularly India, cloud kitchens are emerging to economically meet the growth in online food ordering.

With more people ordering online delivery, and fewer going out to eat, many restaurants in India struggle to stay above water, especially given the high costs associated with the traditional restaurant model like premium real estate and wait staff.

Several chains in India have shut down their traditional restaurants and are transitioning to cloud kitchen, or kitchen-only operations.   Because cloud kitchens do not serve customers on-premise, there are huge savings in renting in non-premium locations, and a cloud kitchen can function in just around 300 sq ft of space, much less than a restaurant that needs to accommodate dining space.

Spring Leaf Retail and TMA Hospitality Services, both fast food retailers in India, have begun converting traditional restaurants to cloud kitchens in order to cut costs and meet transitioning customer preferences.

Food aggregators are also getting involved in cloud kitchens.  In January online food aggregator Swiggy launched its first cloud kitchen, “The Bowl Company,” and in March Zomato also entered the cloud kitchen market.

Zomato’s cloud kitchen project, dubbed Zomato Infrastructure Service (ZIS), aims to help restaurant owners to start a cloud kitchen without the infrastructure cost.  Zomato will create kitchen pods, each housing up to four different mini-kitchens, which restauranteurs can then rent space in.

With Zomato providing the real estate and the equipment, the restauranteur can just walk in and start cooking.  To further cut costs, Zomato is using its data to identify recently closed restaurants from which it acquires kitchen equipment at deeply discounted prices.

Walk in, walk out, no commitments

Zomato wants to eliminate start-up barriers for restaurants.  They’ve done this by absorbing infrastructure costs and also by not locking owners into long-term commitments.  Restaurants can leave at anytime if they aren’t making money.

Zomato will charge restauranteurs a percentage of their revenue, but there will be no fixed costs associated with the service.  Restaurants will also pay a fee for additional services rendered by Zomato including order lead generation and advertising.

Shared resources

These cloud kitchen pods not only eliminate infrastructure costs and high rent, but promote shared delivery personnel to offset delivery costs.

Zomato will also offer a front where customers can select dishes from different restaurants, and have them delivered in the same order. Kind of like a virtual food court where consumers can pick from multiple restaurants, all located in one (online) location.

It was not stated whether the restaurants needed to co-exist in the same pod to be packaged in the same delivery, but it is assumed that this will be the case.

ZIS was launched in early March, with the first pilot kitchen set up in Dwarka.  This is anticipated to be the sole location initially, with plans to begin building additional kitchens mid-year based on results of the pilot.  Zomato has stated it is their goal to have 100 of these locations by year-end 2018.

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