A STUDY ON THE GROWTH OPPORTUNITIES FOR CLOUD KITCHEN IN AMRAVATI CITY
Anjor Gawande
MBA 2 nd Year, Department of Business Administration (MBA), Sipna College of Engineering & Technology, Amravati
Dr. M. D. Jadhav
Head & Professor, Sipna College of Engineering & Technology, Amravati Dr. N. J. Gupta
Associate Professor, Sipna College of Engineering & Technology, Amravati
Abstract - With the onset of the Covid 19 pandemic and normal life thus coming to a halt, the concept of cloud kitchen gained momentum. The purpose of this study is to ascertain the preference of cloud kitchens over restaurants during the pandemic. Food delivery globally has been experiencing massive growth, alongside rapid advancement in technology has given a further push to cloud kitchens. Additionally, the factor of hygiene and safety as a priority and changing sales strategy can further establish the vitality of cloud kitchens overall.
Keywords: Cloud kitchen, food delivery, technology.
1 INTRODUCTION
A cloud kitchen is primarily a restaurant kitchen that accepts incoming orders only through online ordering systems and offers no dine-in facility.
A cloud kitchen is a concept of delivery-only restaurant with no physical space, no dine-in space, or takeaway counter. It is a restaurant kitchen that accepts delivery-only orders without a traditional restaurant or dining-in facility.
Just an operational kitchen for the preparation of food that functions as a production unit. No fancy infrastructure, no waiters, no tables, no furniture, nothing at all. Customers can place their orders online through the online food aggregator apps or the restaurant app, hence, the name cloud kitchen. These kitchens are sometimes also known as ghost kitchens, dark kitchens, or virtual kitchens.
Standalone Cloud Kitchen- These are the independent kitchens where one brand owns or rents a single kitchen location without offering a dining space.
These restaurants generally focus on a single type of cuisine and rely on different food aggregators or delivery channels.
1.1 Objectives of the study
1) To study the concept of Cloud kitchen functioning in India
2) To explore customer preferences of cloud kitchens over restaurants.
3) To evaluate advantages and challenges compared to traditional ways
Functioning of Cloud Kitchen This is not totally new concept as pizza industry has been using online order and food delivery system from many years. Cloud Kitchen is delivery only model, is use of advance technology and response to change in consumer behavior. (Colpaart, 2019).Cloud Kitchen can have their own online system like ordering app or online ordering website or can accept orders from various platforms of food delivery such as Zomato, Swiggy, Uber Eats, Dunzo etc.(Posist, 2019) Customers will place orders through food delivery app as above mentioned or restaurants own ordering system or website. Cloud kitchen receives the order and food /meal is cooked as per the order of the customer.
The cooked food is packed properly and then delivery boys deliver the food to the customers doorstep. There are no waiters or seating arrangement or dinning is not there. Chefs work on food order and a person is there packing the food. If your kitchen is cooking best food in town and if you can reach people using promotions tools, marketing ideas you can serve customers online through the cloud kitchen concept. (Loomba, 2019).
Challenges of Cloud kitchen: No personal contacts with customers: To build customer relations you can‟t talk to customers face to face to get real feedback, feedback you receive is through online mode which may not be genuine.
Limited Customers: Compared to traditional restaurants or outlets there is no foot fall as people who use internet, smart phones and apps only order online food so such customers are limited to some extent in every location. People who are nontechno savvy won‟t be able to taste food of the kitchen. Limited presence compared to restaurants: Restaurants because of advantage of prime location or popularity of the their brand attract walk in customers in that area while is not applicable for cloud kitchen and need to make their presence on social media sites and various other popular apps which can attract customers but this advertising adds expenses to the business. (Posist, 2019) Technology Expenses: The biggest challenge with Cloud kitchen is technology cost which is higher because kitchens have to keep contacts with many food delivery apps , order received need to be communicated to kitchen which is nearest to the customers location .Monthly subscription for third party delivery app is also burden on wallet of Cloud kitchen.(Juneja, 2019) Hygiene:
There are many cases seen on social media where food delivered to customers was unhygienic. Problem with many kitchens is to save the cost of real estate, kitchen are set in unhygienic conditions.
To serve the food which is edible kitchen need to be in hygienic conditions. Regular pest control of the premises, personal hygiene of the staff working for all the operations is the need. Food quality standards: Customers are attracted towards food because of high food quality standards and taste they want. No customers will order if food quality is detoriated. (Nanda, 2020) Research Methodology: Current study discusses about the concept of Cloud Kitchen in India. Essentials for Cloud Kitchen initial setup. Various models in practice and challenges faced by the new sector are explained. Secondary data is used for the study, referred from various websites, articles, research papers and journals etc Localcirclesconducted survey of about 27000+ customers in 218 cities in India referring to complaints received about the food delivery app. Following is analysis of various factors studied in survey.
2 ADVANTAGES OF CLOUD KITCHEN
Cloud kitchens offer the following advantages over traditional restaurants Low Operational Costs- For a cloud kitchen, a lot of the operating costs incurred by traditional restaurants are done away with. Be it infrastructure costs, overheads cost, logistics cost, etc., cloud kitchens theoretically incur lower costs and have an edge over the brick and mortar restaurant.
No Investment Business-A cloud kitchen can be designed to be a very lean operation - with less staff and infrastructure, enabling a low-risk venture. The initial investment required for starting a cloud kitchen is quite less as compared to a brick-and-mortar restaurant.
Lesser Human Resources Required- Since you don‟t need a restaurant at a prime location or hire staff to serve customers, it takes only one-third of the time and resources to open a cloud kitchen as compared to a traditional dine- in restaurant.
High-Profit Venture-It is possible to start a cloud kitchen with less staff, minimal kitchen equipment, no furniture cost, no décor cost. Thus, it gives restaurant operators the flexibility to experiment, cut down on the overheads, and quickly reach operating breakeven making it a profitable venture.
Easy Expansion-As the operation is just limited to a kitchen, the total Capex cost is much lower than a full-fledged restaurant. Restaurants can leverage the scale of cloud kitchens to test new geographies and consumer adoption without investing in infrastructure.
2.1 Disadvantages of Cloud Kitchen Cloud kitchens have their share of a disadvantage as well.
Building Brand - Since it‟s an online-only venture with limited customer interaction, cloud kitchens might find it difficult to build their brand at first. With no physical location, cloud kitchens are competing exclusively in a crowded online marketplace. Customers are less likely to become regular and won‟t be able to connect with a particular restaurant brand because they are ordering from a third-party app with various restaurants listed.
Dependence On Food Aggregators- Unless a restaurant has its own delivery
app, the access to the customers is through third-party food aggregators like Zomato and Swiggy. These aggregators charge between 15% and 35% to restaurants as commission. Ideally, the restaurant doesn‟t mind the commission due to the order volumes generated by these services. But is worried about the impact high commissions can have on their business in the long term.
Masked Customer Data-Dealing with third-party food aggregators would leave the restaurant with no customer data of their own. The restaurant would be provided masked customer data, which means they would not know who their customers are. This impacts sales in the longer run, as there would be minimal customer retention.
3 BUSINESS GROWTH OF A CLOUD KITCHEN
With increased internet penetration and the age of millennials with disposable income demanding digital, mobile-friendly solutions, the trend of virtual restaurants (delivery-only brands) has lately garnered attention. Cloud Kitchens have evolved the traditional restaurant industry, just like meatless burgers have. And, this is more likely to grow with the next generation, who has grown up with the internet and smartphones, entering the marketplace, advances in kitchen automation, drone delivery. So, many restaurants are now moving towards cloud kitchen operations.
Since the cloud kitchen business still has a huge untapped potential, this might be the best time for you to invest in a cloud kitchen business model. With minimum risks involved, it is one of the safest bids, if you are planning to invest in the food industry. And, even if you a running a profitable restaurant, investing in a cloud kitchen would require less investment compared to the classic dine- in restaurant and would add more profits at a lower cost.
3.1 Data Analysis
Do you know about cloud kitchen
Interpretation: Out of 45 respondents 38 are aware of the cloud kitchen concept.
Interpretation: Out of 45 respondents 35 prefer ordering food through cloud kitchen while others order through restaurants.
Interpretation: Out of 45 respondents35 pay their bills/ payments through mobile app, 9 through websites & 1 through take away or cash on delivery.
Interpretation: Out of 45 respondents maximum of 36 respondents order food
85%
15%
Do you know about cloud kitchen
Yes No
78%
22%
Where do you prefer ordering food from
Restaurant Cloud Kitchen
78%
20%
2%
Preferable mode of Payment
Mobile App Website Take Away
14%
81%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Discount Convinience Better Selection R E A S O N T O O R D E R T H E F O O D
T H R O U G H O N L I N E A P P Reason to order the food through online App
through online app because of its convenience for time, energy and ease rest others order due discount offers and better selection choices.
The maximum customers are particular about their liking for cuisine and taste preferences while others are brand loyal and trust factor for the particular restaurants.
The most favourable reason for the cloud kitchen to grow is the quality and value for money.
The cloud kitchen does not have fine dine experience for the customers which is major challenge along withlimited menu options, infrastructure and personal feedback by the customers.
Maximum respondents believe in promoting small business, while many prefer hygiene, budget and simplified menu options.
Maximum respondents are satisfied with packaging of food delivery.
4 CONCLUSION
Major transformation is seen in restaurant industry, cloud kitchen is new invention for the industry and consumers.
A segment which was neglected by traditional restaurants created market niche and is expanding the market to benefit the restaurant industry.
Compared to a start a new restaurant, essentials to start a cloud kitchen are very low and cost efficient reason is cloud kitchen need not be at prime location with good ambience and dining facility because location of cloud kitchen is not important for customers as they get food delivered at the door step. Operational cost to run cloud kitchen is comparatively very less as to a restaurant. When it comes to pricing of the food dishes, cloud kitchen dishes are economical in some cases, which is affordable for working class people who order food on daily basis as an meal. Automation has been advantage for the cloud kitchen as orders are placed online and new technology has made it easier to locate customer through various
10%
35%
20%
35%
0% 5% 10% 15% 20% 25% 30% 35% 40%
TRUST FACTOR TASTE IS ACCORDING TO YOUR PREFERENCE BRAND LOYAL CUSTOMER YOUR LIKING FOR A PARTICULAR CUISINE
Why do you prefer ordering food from restaurant?
Why do you prefer ordering food from restaurant?
44%
20%
26%
10%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
QUALITY HYGIENE VALUE FOR MONEY FEASIBILITY
What are the possible reasons for the demand of cloud kitchens?
What are the possible reasons for the demand of cloud kitchens?
25%
10%
50%
15%
0% 10% 20% 30% 40% 50% 60%
LIMITED MENU CHOICES NO FACE TO FACE FEEDBACK FROM CUSTOMERS NO DINING EXPERIENCE TO CUSTOMERS INFRASTRUCTURE
What according to you are the challenges faced by cloud kitchen
What according to you are the challenges faced by cloud kitchen
10%
10%
25%
55%
0% 10% 20% 30% 40% 50% 60%
SIMPLIFIED MENU BUDGET FRIENDLY HYGIENE PROMOTE SMALL BUSINESS
What according to you are the growth prospects for cloud kitchens?
What according to you are the growth prospects for cloud kitchens?
24%
59%
17%
Packaging of Food Delivery ordered Online
Excellent Satisfactory Disappointed
maps and routes available on internet.Quality of food is the USP for the cloud kitchen and can attract customers on basis of quality and taste of food served.
To conclude, cloud kitchens are a new concept which do not have a physical dining area but prepare food and deliver it through online delivery applications to their customers. Cloud kitchens have become popular during the pandemic as people had no dining options available.
Cloud kitchens serve food with good quality, taste and that too at a reasonable price. Cloud kitchens have lower operational costs, lesser number of staff required, no restriction of space, no dining area to maintain and hence can offer products of the same quality but at a lower price than that of restaurants.
Setting aside all the odds cloud kitchens have emerged to be a tough competition for the restaurant business in the world and in India. They have made a space for themselves in the market and are serving customers. All this to the extent that restaurants started following their business model during the pandemic to vail away their daily operating expenses and earn minimum profits. This shows that every difficult time gives us an opportunity to upgrade and innovate ourselves and the one who changes with the time is sure to sustain in any given situation.
If an entrepreneur goes the cloud kitchen way over a regular dine-in with the same level of efforts, with its fair share of advantages such as low cost of entry, low overhead cost and low operating cost, The cloud kitchen without any doubt can turn out to be a more profitable venture.
Even though there are certain limitations like late delivery, dependence on internet etc. Cloud kitchen is the ultimate need of time over traditional restaurants.
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