So, hey everyone, in this video, we're gonna talk about Cloud Kitchen Business model. Now Cloud Kitchen is
also known as your Ghost Kitchen or Dark Kitchen or Black Box Kitchen. There are
so many kitchens out there.
But in this business model a restaurant will exclusively sell the food through delivery channels,
and it doesn't provide any sort of physical dine-in experience.
Now, if you wanted to open your own cloud kitchen, you have to use these food tech platform, so-called
food and technology, and these platforms will provide doorstep delivery to the end consumer.
And if you'll be running your own cloud kitchen, then you have to list down all of your product or
food products into all of these different platform.
Obviously, if you are from United State, you have to list on your menu or food items on platforms
like UberEats, DoorDash and GrabHub.
If you are from UK, then you have to list down all food items on platforms like Just Eat, Delivery
Hero or Takeaway Dot Com.
And if you're from Southeast Asia or India, you can do the same process with Zomato and Swiggy as well.
Let's understand the different types of cloud kitchen business model.
And then we will understand what is the basic difference between all these different types of cloud
kitchen.
So at first, we have traditional cloud kitchen.
We also have Takeaway Cloud Kitchen.
Aggregator-owned Cloud kitchen, Multi-branded cloud kitchen and Outsourced cloud kitchen.
Let's understand all of these different types of cloud kitchen business model, and let's start with
Brand-owned Cloud Kitchen.
Let's say you're new to the cloud kitchen game and you just have one location, one brand and one kitchen.
In that situation, you will only have delivery-only operation.
You cannot have takeaway or dine-in
And to set up this specific kind of cloud kitchen, you will usually take a small property in the lower-
end rent area, which is not very far from the densely populated spot because obviously in all of these
food tech platform, distance is also one of the most important factor.
If your cloud kitchen is located at a location where a lot of people are also staying, then chances
of you getting more number of orders is always high.
And let's say if your brand will become very popular after six to eight months, then you can also provide
dine-in or maybe takeaway as well.
But the main purpose of Cloud Kitchen is to have as less interaction with the customer as you can,
because obviously you have to choose a space which have low rent, and that is also very close to the
densely populated spot.
So chances of you getting a location where you can interact with the customer are very minimal.
If you look at the upfront investment, upfront investment in Brand-owned Cloud Kitchen, which is exclusively
selling all of their product on all of these food tech platforms, is very low because obviously you're
not providing any dine-in option. The time you provide dine-in option to different customer.
Now you have to bear the furniture cost, the maintenance cost, electricity, staff, operation.
Your overall upfront investment will go very high in that case.
In terms of scaling your operation, obviously all of your orders are coming through all of these food
tech platforms, so you can easily scale your brand by opening multiple Dark Kitchen at different location
in the same city.
So it's doable because it doesn't require the involvement of a lot of people. Now in this specific type of
cloud kitchen, obviously you are providing dine-in to different customer.
On the other side, you're also providing a pick up option. To set up this specific type of cloud kitchen
business model where you have dine-in and online delivery as well.
The setup cost will be a little high because now you need a very high investment in finding a location
where you can attract different customer or so-called walk in customer.
So you have to find a location where there is a high visibility of your restaurant so-called footfall.
So if you have more and more people coming to your restaurant, chances of you converting them is always
very high.
So you'll find a area where
You have higher footfall of customer, and that's why you end up looking for a place which have a higher
rent.
And because you are paying a very high rent, then you have to create a operation or a process where
you can also sell all of your products to all of these food tech platform.
That's how you will end up generating double the revenue.
Opening a new cloud kitchen separately with a separate delivery production line is very beneficial for
your brand, and obviously in the longer run, you can generate more and more revenue. In terms of upfront
investment.
It is comparatively low because you're opening your cloud kitchen in a separate area with separate delivery
production line but as soon as you start your own delivery in this specific type of cloud kitchen.
Your investment will go up because now you have to recruit your own delivery boys and you have to set
up your own process.
So the best advice is to open your dine-in and just start separate production line for your food
tech platform like your Uber Eats.
In terms of scaling this business because you have a dine-in option or a restaurant which is visible
to a lot of people.
It's super difficult to scale these kind of businesses because now you have a storefront and duplicating
storefront is super difficult, and I'm sure you may not have that much amount of capital as well, because
every single time you have to look for a new storefront and then you have to pay a very high rent and
to break even from that specific storefront, you have to give it some year.
So scaling this specific type of cloud kitchen business model is little difficult.
And the reason behind that is this specific cost structure.
Let's look at the cost structure of a restaurant and a cloud kitchen.
So if you look at the cost structure of a restaurant, let me take the laser pointer.
You can see that 24 percent of your total revenue goes into rent and salaries.
24 percent of your revenue goes into commission because obviously you might be selling all of your products
to these different food tech platforms like Uber Eats, DoorDash and three percent is your profit margin.
24 percent will go into your ads and discount, 17.18 percent goes into your food
cost, and five percent will go into your packaging.
So you can see that in a restaurant.
The majority of the cost goes to your rent and salaries and your ads and discount.
When we look at the cloud kitchen, 40 percent is your raw material cost, 10 percent is your profit
margin, 25 percent will go into commissions and 25 percent is your fixed cost.
Obviously, this profit margin is 10, but I think now because a lot of people started creating their
own cloud kitchen.
So this profit margin is.
Now, not exactly 10 percent, it got reduced down by, I think, four to five percent.
But it depends, if you have a very unique brand and if you're able to charge a higher price for that
specific brand, you can sell your product or food items at a higher price and you can generate the
same amount of profit margin.
Now you have third type of cloud kitchen business model, where you have dining facility, but you also
have a cloud kitchen, which is shared by other people as well.
In this specific type of business model, you already have dine-in option, but you have removed
the cloud kitchen from the existing facility.
And now we're operating out of a shared kitchen space.
Obviously, if you're separating out your dine-in with your cloud kitchen, which is shared by some other
people as well, you will always look out for a space which have low rent and totally separate operation,
so that you can streamline the process.
Because all of these cloud kitchen are shared and they are pulling all of their resources.
They have different kitchen, but the same area.
So let's say they have the flexibility to run all of their cloud kitchen on weekend, on holiday or
in the evenings.
And this have decent profit potential, and it doesn't require that much of upfront investment because
you are sharing your cloud kitchen space with other people as well.
But obviously, in the future, if your operation grows, then you have to hire some additional staff
or chef or people to manage all of this task.
In terms of scaling this specific operation because you have a separate cloud kitchen production line,
so this is doable, but obviously because you are sharing space with other people, it can often lead
to unscalable logistic nightmare.
Then we have Hub and Spoke cloud kitchen business model, and this specific type of cloud kitchen
business model is used by almost all the fast food chain that we know.
So your fast food chain like McDonalds, Burger King, Domino's, all of these fast food chains have
a centralized production unit, where most of these items are pre-made.
So if you look at a burger.
So your burger bun is already made by these people in this centralized production.
Or let's say, if you look at all of your chicken wings, those chicken wings are already made by these
people in this centralized production line.
And then these people who are running all of these separate retail front or restaurant or outlet, they
just have to heat it up and it's ready.
If you look at the setup procedure in this specific type of cloud kitchen, they have a centralized
kitchen, which is usually located into a low rent area, and all of these retail outlets have a very
standard operating procedure to prepare the food.
I want to prepare the food, they just have to warm it up. In terms of profit potential, obviously these
brand have a very good profit potential because they are operating from past so many years and they
have solved almost every single problem that we can imagine.
Not only that, they also have a very good branding, marketing and other strategy in place. In terms
of upfront investment.
Obviously, if you are opening these many retail store in such a small city and then you have such
a high volume and a dedicated centralized kitchen, you have to bear a higher cost in terms of scaling
the operation because you have a very high upfront cost to establish this centralized kitchen.
Then scaling will become very easy because now you have to open multiple restaurant in a small city
because we have a centralized location which can supply to all of these different restaurants.
And these restaurants will just have to prepare the food within a certain set of time or procedure.
In the end, you have shared kitchen space or shared cloud kitchen.
And in this specific type of cloud kitchen business model, you are running several different brands
or so-called cuisine, and you do not have any dine-in or takeout option and you just have delivery option
in this specific type of business model.
Now in this specific cloud kitchen, because you have different types of cuisine or different types
of brand, then obviously you will have several production line where different brands are being prepared.
Obviously, these brands will be closely connected.
So let's say if you look at cuisines like sushi or pork, the ingredients are somewhat the same.
I mean, you have to purchase all of these ingredients in the bulk quantity or so-called volume purchase.
And the ordering and delivering of all of these ingredients is usually handled by a aggregator partnership
In terms of upfront investment.
You need low to medium upfront investment because you are preparing different cuisine or different types
of brands, then obviously you need some expensive equipment.
These things really depends on the kind of volume and cuisines that you are preparing on day to day
basis.
As usual, scaling the business is very subjective.
You can do that if you are able to understand that specific market.
So scaling a multi-brand shared cloud kitchen is not gonna be a big deal for for you.
If you understand this domain.