The pandemic hit the food industry hard, with businesses forced to shut down for long periods due to government restrictions. Even after lockdowns were lifted, restaurants had to keep their dining areas closed to stop the spread of the virus.
Because of this, online food delivery became the main way for many eateries, restaurants, and hotels to make money. This situation gave rise to the cloud kitchen business model.
A cloud kitchen is a virtual restaurant. As one of the most profitable trends, it's now a must-have for both small businesses and large food chains.
Today's food business faces tough competition, high rents, and rising costs. Food entrepreneurs are searching for smarter solutions with things getting out of hand.
Luckily, cloud kitchens offer a new, more efficient way to start and run a restaurant. This article will explain a cloud kitchen and highlight the top 7 cloud kitchen business models for food entrepreneurs.
Cloud kitchens, also known as virtual or ghost kitchens, are commercial spaces set up specifically to prepare food for online delivery (like a takeaway-only restaurant).
In simple terms, these are delivery-only businesses with no dine-in option. They mostly depend on orders made through food delivery apps.
One of the biggest advantages of cloud kitchens is the use of advanced technology. These businesses often have their own online ordering apps and websites or work with multiple food delivery platforms.
Cloud kitchens streamline the process by eliminating the need to manually enter and track orders from different services, saving time and effort.
Right now, cloud kitchens are one of the most popular models in the food and beverage industry. With digital platforms changing the way people live, this business model has been a game-changer for many restaurant owners.
Starting a cloud kitchen makes sense, especially with the trust that major delivery services like Zomato and Swiggy have built. Here are some reasons why cloud kitchens are both efficient and successful.
Cloud kitchens are a great alternative to traditional brick-and-mortar restaurants. They let business owners focus on food production and building their brand while cutting out the usual administrative and logistical challenges that come with running a restaurant.
Here are some key benefits and advantages of cloud kitchen business models to consider:
Cloud kitchens help restaurant owners cut down on expenses. Renting space from a cloud kitchen provider is cheaper since there’s no need to invest in costly construction, zoning, or permits. Plus, you can open a cloud kitchen in just days or weeks, compared to the months or even years it takes with traditional restaurants.
Traditional restaurants often struggle with high property taxes, large payrolls, and ongoing maintenance costs. Cloud kitchens handle these time-consuming and expensive tasks. Most cloud kitchens only need one or two chefs, and businesses can share costs with others using the same space.
Cloud kitchens allow your business to focus on food delivery and reach a larger audience. Instead of relying on limited marketing tools, delivery-based businesses use food delivery apps and social media to grow their brand. This helps boost your visibility and build a strong presence.
Cloud kitchens make it easier to meet customer demands. People want quick, affordable menu options, which is driving the growth of online food delivery. Cloud kitchens streamline logistics, reduce costs, and use the latest technology to keep customers happy.
Cloud kitchens are a recent trend that’s gaining traction. They offer several benefits compared to traditional dine-in restaurants. In this section, we'll cover seven different cloud kitchen or ghost kitchen business models.
This is one of the most common cloud kitchen models. Your kitchen takes orders from various third-party apps like UberEats, DoorDash, and Grubhub. These are standalone kitchens without a physical restaurant location.
You can choose to deliver food yourself, use food delivery services, or both. Once an order comes in through an app, you prepare the food, package it for delivery, and set it out for the delivery person to pick up and deliver to the customer.
For example, if you run a pancake business and receive an order through UberEats, you would cook the pancakes in your cloud kitchen and send them out for delivery.
In this model, you operate a single location with one brand and one kitchen. A brand-owned cloud kitchen is a delivery-only setup, meaning there’s no option for takeout or dining in. It’s the simplest form of a food business without any branches, large spaces, or seating areas.
By skipping the front-of-house operations, you can avoid expensive rent and real estate costs. As online ordering and the demand for delivery grow, this model is becoming more popular. The kitchen is usually in an affordable area but still close to densely populated neighborhoods.
It’s a small and efficient setup with minimal staff. Orders, bookings, and deliveries are managed by a few organizers to boost visibility. Sometimes, the kitchen may handle its own deliveries, especially if the brand is well-known.
For example, if your waffle business partners with UberEats and uses this model, you’ll benefit from the app driving sales and promoting your brand. Your success is closely tied to the success of the delivery platform.
This model is one of the more complex cloud kitchen setups. It uses data on local demographics, popular cuisines, and consumer demand to serve a variety of brands from a single kitchen. The goal is to offer popular dishes (like North Indian, Chinese, and Continental) to people within a 5-6 km radius, where there are few other restaurants.
This approach works well because each brand operates as its own separate entity.
Additionally, sharing a single kitchen helps cut down on operating costs. In this model, a traditional dine-in restaurant might start a delivery-focused side business, offering its best-selling menu items for delivery only.
This model is considered smart because it’s been trusted by many different brands. Using a single shared kitchen keeps operational costs down.
Think of it as a group of specialized cloud restaurants that focus on different cuisines but share the same kitchen space. All the brands are owned by the same company and operate from one kitchen.
Unlike the independent model, this setup manages several brands from the same kitchen. For example, you might offer waffles, sushi, and doughnuts all from the same virtual kitchen.
This approach gives you a better chance to tap into a larger market. Whether someone is in the mood for waffles, sushi, or doughnuts, this model lets you cater to various cravings and meet diverse customer needs.
This model works similarly to the independent cloud kitchen but with a twist. Instead of having orders delivered to customers, they come to the cloud kitchen to place and pick up their orders.
Not many cloud kitchens offer this pick-up option, so if you're interested in this model, check if any in your area provide pick-up services. Many cloud kitchens are located in less populated areas with low foot traffic to keep rent costs down.
Combining pick-ups with this model can be a smart strategy. It’s a good choice if you have a great location and want to boost your revenue.
The hub and spoke model comes in various forms, including single brand, multi-brand, and shared kitchen setups. All these variations focus on a central kitchen where most of the food is prepared. The finished products are then sent to smaller pop-up locations for final touches and distribution.
The central kitchen is typically located in an affordable area. It serves as the main production center where most items are prepared before being sent to smaller pop-up sites.
Starting a hub and spoke system can be costly due to the high volume of food production involved. Usually, the main kitchen is either owned or leased by the business.
Labor costs can rise with each additional pop-up location, and you’ll need time to hire and train staff. Be prepared for extra expenses for a few months before you start delivering orders.
Due to the high investment costs, this model isn’t very common. It’s better suited for established businesses looking to expand into different areas of a city.
For example, if you make all the batter and toppings for waffles in one central kitchen, you can send them to various virtual restaurants or kitchens. This model helps you reach more people across different parts of the city.
The key difference in the outsourcing model is that your raw materials come pre-packaged. You just need to unpack the ingredients, do any final touches, and hand them over for delivery. This model requires minimal infrastructure.
For example, if you receive pre-packaged waffles, you’d just remove the packaging, reheat them, add some sprinkles and cream, and then send them out for delivery. It’s popular because the complex preparation tasks are handled by someone else.
In this setup, you can outsource everything from call center operations to food preparation and supply. For instance, a restaurant might outsource most of its food prep, leaving only the final touches to your team before delivery.
These cloud kitchen business models are not owned by the companies using them. Instead, multiple restaurants share the same cooking and storage spaces. It's a shared environment where different businesses lease space from a service provider.
Some of these cloud kitchens are fully equipped, while others are just basic setups. This model is also known as Kitchen as a Service (KaaS). In the restaurant industry, it’s often called a “shell” model. This means it’s an empty kitchen with essential equipment like drainage, gas lines, and ventilation already installed.
In the future, nearly half of restaurant orders will be for delivery. Because of this, cloud kitchens will become more practical due to advances in technology, cost savings, and improved consistency.
It’s clear that cloud kitchens are a strong choice in today’s food and tech industries. While traditional restaurants will still be important for dining out, cloud kitchens can offer great customer experiences with timely deliveries and excellent service.
To ensure your food arrives on time, it’s crucial to plan and optimize delivery routes using software like eLogii. This software helps you efficiently plan and improve routes, making sure your deliveries are fast and reliable.