Why Cloud Kitchens?
Cloud kitchens have been around since before the coronavirus pandemic. They are, however, better adapted to customers’ needs for social distancing than traditional restaurants. While the pandemic forced many restaurants to shut down or go into survival mode, cloud kitchens weren’t affected as much. This is not to say that there was no negative impact on them. During government-imposed lockdowns, food consumption outside the home completely stopped, and even now, many customers remain hesitant to try food not prepared at home due to potential risks.
Cloud Kitchens as High-Profit, Low-Risk Ventures
Most cloud kitchens were able to stay afloat because they did not have storefronts to maintain or pay rent for, and they employed a minimal number of staff. The ratio of rent to revenue is low, which is one of the primary reasons this format was founded and continues to grow. A commercial kitchen is typically rented in the cheapest possible location. Although profit margins may not always be high, the speed of production and savings on various fronts make it a low-risk, lucrative investment. These factors contribute significantly to the scalability of this type of business.
Traditional Restaurants Versus Cloud Kitchens
In a nutshell, a cloud kitchen operates out of a cost-effective location and aims to deliver delicious, high-quality food right to your doorstep. Statistics before COVID-19 showed a 12% growth rate in cloud kitchen businesses compared to a mere 7.2% growth rate in traditional restaurants. By 2024, it is projected that cloud kitchens will overtake the dine-in restaurant business. The pandemic has further slowed the growth rate of traditional restaurants, potentially accelerating this shift. A decline in dine-in trends means that many restaurants may have to pivot their business models to include cloud kitchens to remain viable. While the pandemic accelerated the cloud kitchen business, these changes are likely to persist and cause a paradigm shift.
How Did Cloud Kitchens Develop?
Market researchers attribute technological advancements and the emergence of a new demographic as the primary drivers behind the development of the cloud kitchen business in India. After economic liberalization, the increase in job opportunities opened up new avenues for women. The rise of nuclear families with working women led to a higher demand for food delivery services. Furthermore, the internet and smartphone revolution transformed the way food was consumed. Apps like Zomato and Swiggy now host numerous restaurants and cuisines, provide delivery services, and integrate digital payment gateways into a single platform. These aggregators have significantly boosted the growth of commercial kitchen businesses.
Conclusion
The change in consumer behavior has encouraged many entrepreneurs to venture into the cloud kitchen space. However, takeout is unlikely to replace traditional restaurants entirely, as people will always seek the unique experience of dining out. Instead, cloud kitchens and traditional restaurants will likely coexist, each fulfilling different needs and preferences in the evolving food industry landscape.