The Future of Cloud Kitchens

While having your favourite lunch from a nearby restaurant delivered, have you wondered what the underlying processes that power the restaurant to deliver the food at your doorstep? For most people, the answer would be “no”, but if you are the type of person who likes to dig a bit deeper, then this article is for you. We are going to be talking about the most popular and profitable format in the organised food sector of India: cloud kitchens. Showing consistent growth in the past couple of years, and with the trend continuing, let’s understand the future of cloud kitchens. So let’s begin now, shall we?

Over the past couple of years, with the penetration of the internet, the concept of cloud kitchens and online food ordering has caught up in India. Today, people prefer to have non-home-cooked food even on weekdays, breaking the earlier trend of ordering food from restaurants only on weekends. This has helped in the growth of the food sector in India, so much so that it has helped the organised food sector on a consistent growth trajectory to reach 2.57 lakh crore, accounting for a growth rate of 15% by 2022 - 2023. That is a significant jump from the past couple of years of having an estimate of 1.48 lakh crore and a growth rate of 13% during 2018 - 2019.

In the organized sector, cloud kitchens are showing impressive EBITDA profitability and lower capital expenditures. This can be largely attributed to their reduced operating costs and better profit margins for each menu item sold. When you consider a full-service, dine-in restaurant, you have to factor in various costs like property, equipment, furniture, and separate licenses for food and alcohol. As a result, the capital expenditure for a dine-in restaurant is often two to three times higher than that of a cloud kitchen.

Digging deeper into profits, cloud kitchens, with their minimal manpower needs, lower rent, and fewer licenses, can generate nearly 1.5 times the net profits compared to traditional dine-in establishments. These efficiencies are amplified when cloud kitchens implement tools like Inventory Management Software and POS-integrated inventory systems, which streamline operations and optimize ingredient usage.

In addition, using a POS system for restaurants allows cloud kitchen operators to process high volumes of orders with ease, while integrating with Restaurant inventory systems for smoother coordination. Leveraging Real-Time Stock Tracking helps in reducing waste and ensuring that stock levels are always aligned with demand, an essential feature for the fast-paced cloud kitchen environment. The adoption of Food inventory software and the best inventory tracker ensures fewer stockouts and improved kitchen accuracy.

But it’s not just about capex and profitability; cloud kitchens are also winning over consumers. According to Redseer Consulting, many new brands operating under the cloud kitchen model are delivering customer experiences that rival those of long-established Quick Service Restaurants (QSR). This success can be linked to their focus on hygiene and food safety, top-notch packaging, and prompt food delivery, all of which contribute to an enhanced customer experience.

With growing demand in bustling metropolitan areas like Mumbai and Delhi NCR, cloud kitchens are becoming the go-to choice for consumers, even outpacing well-known QSR brands. Tools like the best stock management software, best inventory tracking system, and best inventory control software allow these kitchens to maintain quality while managing cost-efficiency. Furthermore, Supplier Relationship Management practices help in securing timely deliveries and negotiating better rates, all of which boost profitability.

Modern cloud kitchen setup with real-time stock tracking and inventory management software optimizing food preparation and delivery.

As a result, cloud kitchens are likely to see a 5 to 6 times growth in their gross merchandise value (GMV) and to become an estimated 3000 billion rupee industry by the end of FY 2025. Cloud kitchens expanding to Tier 2 and Tier 3 towns and cities would help maintain the growth momentum of the Indian food industry. With its rapid growth over the last couple of years and a promising future, it would not only support millions of households but also multiple allied agencies such as real estate, food processing, consulting etc., and it is due to these factors cloud kitchens have a distinct advantage in the organised sector.

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