Food delivery has been a common method of ordering and has been becoming increasingly popular for the past few years. Foodtech startup companies such as ordering aggregators, third-party delivery partners, and cashless payments have also ignited and contributed to the growth of food delivery.
When the pandemic hit, the food sales of restaurants were severely affected and customers have become hesitant to do in-store transactions such as takeaway, dining-in, or drive-thru because of health protocols and social distancing regulations. Customers have then shifted their method of transactions to delivery and this has pushed the growth and success of cloud kitchens.
Cloud kitchens are known as ghost kitchens, virtual kitchens, dark kitchens, or deliver-only kitchens. There are different names to it but all of these refer to the same business model.
These are a new hybrid of restaurant model that allows owners to set up a kitchen facility specifically for delivery transactions only. The locations where cloud kitchens are constructed are not in prime locations for walk-in customers. These are usually in class B sites that have lower rental costs, less foot traffic but are still within the vicinity of residential and commercial areas.
The main selling point of a cloud kitchen is that you can start your delivery business using just a fraction of the cost when opening a brick-and-mortar store. Operating costs in cloud kitchens are lower because there are facilities and equipment shared by all restaurant tenants. You also do not need to invest in any front-of-house elements such as dining area, brand signages, customer lounge, and others because there will be no walk-in customers in these types of establishments.
Processes are also simplified in a cloud kitchen setup. Receiving orders, cashiering, and dispatching of products are also centralized and outsourced to the staff of the cloud kitchen operator. The only focus that your staff needs to do when operating in a cloud kitchen is to cook your products to delight your customers.
Some cloud kitchen operators even provide restaurant owners with cooking equipment, storages, point-of-sale systems, common areas where orders can be assembled and dispatched to delivery partners, and even smart features that you can take advantage of. These smart features are developed to help restaurant owners to manage their restaurants more efficiently to improve the profitability and day-to-day operations of the business. Here is a list of smart features that you need to have when operating in a cloud kitchen facility.
Receiving orders from several food delivery aggregators can be an overwhelming task especially during your peak operating hours. Not only do you need to manually accept each order in a merchant console, but you also need to manually punch all of these transactions in your point-of-sale system for sales accounting and inventory tracking. After punching, you need to print the receipt which will now be the basis for the production and assembly of your kitchen staff. It seems like a manageable task if you are only receiving from one aggregator but it is difficult and confusing when you are receiving orders from more than three aggregators and can even be a cause of delay in your production. Cloud kitchen software is now offering a centralized ordering-taking technology that consolidates all orders from all aggregators and integrates with any POS system. This smart feature will allow your staff to focus on food preparation and assembly to ensure that dispatched orders will be complete and accurate. You are now enabling your staff to champion and adhere to food safety principles because you have lessened the focus on their tasks.
Live Data Reporting and Analytics
As an owner or even a manager, you would want to be involved in the operations and use data to make sound business decisions. Cloud kitchen operators provide back-office systems that allow you to access live-data reports and analytics.
There is no need to ask your staff to consolidate manual sales entry. You simply extract the sales data from your mobile phone or laptop. There will be a dashboard that shows you the hourly sales of your cloud kitchen, hourly transaction count, and a list of top-selling products, to name a few.
All these data are available real-time as it is fully integrated to the cloud kitchen POS system. Without going to the site, you can cascade business decisions to your staff because of the real-time data you can easily access. Similar to the first example, your staff will be more focused on the production of food products to ensure that you are serving high-quality products.
Inventory and Cost Management
As mentioned earlier, the main selling point of a cloud kitchen is lower initial investment cost compared to a traditional restaurant set-up. Cloud kitchen operators also allow you to use a back-office system that has a module on inventory and cost management that can help you manage your profitability.
With this module, you can track the delivery, usage, and wastage of your raw materials and ingredients. Combining it with the sales data from the restaurant analytics software of your cloud kitchen operator, you can easily forecast your next ordering quantity to ensure that it will be optimal. This means that you will have enough stocks to fulfill orders and also lessens the probability of your raw materials reaching their expiration dates.
You can also check if there is a variance in your theoretical usage and the physical count of your raw materials to know if correct recipes and portions are used by your staff.
To further optimize your cloud kitchen profits, you can take advantage of the menu engineering feature offered by your cloud kitchen operator. You can now study the profitability and popularity of your menu items to come up with effective product combinations and promotions. Based on the cloud kitchen analytics, you can eliminate poor-performing items to lessen your food cost. You can also highlight and upsell the more profitable items to ensure that all transactions generate profit. You can also combine high-cost products with high-gross profit products to maintain the variety of your menu architecture.
All around Asia, restaurant companies are taking advantage of this new business model and are gearing towards operating more cloud kitchens. Because of the success of KFC cloud kitchens in Thailand, Central Restaurants Group, Thailand’s leading quick-service company plans to open 100 cloud kitchens in five years. This is because cloud kitchens are easier to operate and cheaper to open to capitalize on the growing demand for food delivery. Gojek is already operating cloud kitchens in Indonesia and Jollibee, the largest quick-service company in the Philippines has budgeted $141 million to open cloud kitchens.
Potful, a restaurant offering freshly-made biryani in India, opened a cloud kitchen because it requires less initial investment, it is more scalable, and because of their high delivery sales contribution. They are now experiencing a double-digit margin, thanks to the cloud kitchen technology they are using. The analytics from the back office system allowed them to make data-driven decisions instead of gut feel and biased observations. To further improve their profitability, they are now driving customers to order in their own platform to reach their target margins.
Oota recently opened a cloud kitchen after 8 years of offering a pure dine-in setup. Aside from attracting more delivery transactions, it is important to look at the bottom line of your business to survive the competition. Spending on marketing initiatives is needed to attract more customers but you also need to consider the commission that the aggregators are charging. You have to ensure that each transaction will still be profitable after all these deductions. This is where the smart features of restaurant analytics will help you. With the data, you can easily identify which products are profitable, which raw materials are expensive, which ingredients are expiring, and which hours do you need to push more sales. Knowing this information will allow you to keep on improving your business.
Opening a cloud kitchen is easier and more manageable than a traditional setup because of lower investment cost, lower operating cost, and easier management of processes. To ensure efficient operations and profitable business, choose a software that will allow you to use a centralized ordering system that integrates orders from aggregators to your POS. The software should also allow you to generate reports from real-time data and analytics to make data-driven business decisions using your mobile phone or laptop. To strengthen profitability, it must also allow you to access modules that can track your raw materials usage, delivery, and wastages to lessen unnecessary costs from incurring. Lastly, your cloud kitchen software must provide meaningful insights into the profitability and popularity of your menu items to create effective product combinations and promotions. On a final note, choose a software provider that will not only help you simplify your operations but will also keep on innovating your system and will also give you technical support.