The rise of the Cloud kitchens across India

Even as the pandemic forces restaurants to close down their dining areas, more and more kitchens are firing up for business. As you scroll through Swiggy and Zomato apps, you will notice new brands emerge every month, many of which are delivery-only. This is because the pandemic has triggered the rise of cloud kitchens, also known as dark kitchens or ghost restaurants. These are delivery-only outfits, which do not offer dine-in. They rely only on online orders, usually placed through online food aggregators.

As restaurants remain shut for dining, hotels and restaurants are pivoting to takeaway to stay open, and retain staff. However, for a restaurant that has been designed for dine-in, profits from takeaway will never be enough to break even. Those in the business of food will agree that starting a new restaurant has always been a glamorous ambition. However, as many have learnt, cloud kitchens are easier to launch and keep running, thanks to low entry costs, low capital expenditure and lower rents. Hence these are becoming a more democratic market space where a new start up can potentially compete with the biggest players in the business. And brands like SLAY coffee, Keventers, Penang, Burger king only go to prove it.

With restaurant footfall at an all-time low and sales down as much as 90%, according to CRISIL Research, takeaway has become a vital source of revenue for many restaurants. CRISIL estimates that the recovery of the 1.5 trillion rupee ($20 billion) sector will take at least a year after lockdown is lifted.

Despite the rush of openings, even through lockdown as food delivery was deemed an essential service, Riyaaz Amlani is confident that conventional dine-in restaurants will never go out of fashion. The CEO of Impresario, a group with 20 restaurants, including popular SOCIAL, under its umbrella, strongly believes that people will always cherish the luxury of dining out, probably even more so when the pandemic finally ends.

Riyaaz adds, “Cloud kitchens have proved beneficial because a lot of people look for quality cooked meals. They form a very important aspect of the food industry and are helping food entrepreneurs start their own ventures at a low investment and capital cost. For a cloud kitchen, its geographical location doesn’t matter as long as they are accessible by food delivery executives.”

Supriyo Banerji of Hyderabad-based Penang, an Asian cloud kitchen, says, “When the cost of rent, manpower and maintenance of a dine-in restaurant is saved, in a cloud kitchen, a lot more focus can be put on procuring quality raw material and expert staff in the kitchen, making it possible to offer gourmet food at competitive prices.”

Huge influx

However, with successive lockdowns in India since March 2020, many home ventures and cloud kitchens have been launching and listing themselves on food aggregators. Bengaluru-based Ravi Teja Jallepalli of Goli Soda, a cloud kitchen brand that makes South Indian drinks and desserts, says that over the “last couple of years, we have seen thousands of restaurants entering the cloud space,” adding that this includes new and old brands.

Established restaurants are also using their reputations to gain traction online and reach customers in different parts of the city, while running their brick and mortar outfit from a prime —and inevitably high rent — locations. According to Swiggy who introduced BrandWorks, a cloud kitchen initiative “cloud kitchens eliminate large costs associated with real estate and serving staff from a conventional restaurant thereby enabling a restaurant to focus on cooking great quality food alone. This model enables easier expansion for restaurant partners across geographies both within the city and to newer cities at a fraction of the cost, reducing the risk and commitment normally required for them to begin operating in a new location.”

Based on past events, economists predict a boom in consumer spending post-pandemic. Kolkata-based Debaditya Chaudhury, managing director, of Chowman says, “The cloud kitchen has always been around. It is just that, not everyone was aware of it. I had initiated a cloud kitchen 10 years ago when many were not accustomed to this term. The pandemic has carved a bigger path for it to thrive.”

Agreeing with Debaditya, Vishal Nagpal, owner of Royanna Military Canteen and Goila Butter Chicken says, “It enables an entrepreneur to work with more than one brand from a single location, thereby increasing the chances of managing costs better in the existing infrastructure. We have our brands Chicken Man, Royanna Military Canteen and Goila Butter Chicken working from the same location and this gives us a chance to try and sustain our business in these testing times with the hope we can pull back once things start opening up in the near future.”

Seeing the success of cloud kitchens, existing restaurants are now trying to launch multiple cloud kitchens from existing restaurants, taking advantage of central locations, and keeping staff engaged through the lull of lockdown.

Made at home

Apart from small, local players and home cooks, this space also has big players like Swiggy creating dark kitchens in multiple cities. The success of cloud kitchen ventures has spurred a rise in ‘plug and play kitchen’ spaces. For example, infrastructure providers such a Hyderabad-based Book Your Kitchen and Speciality Group of Kitchens can provide ready-to-move-in kitchens where all you have to do is supply equipment and manpower.

Vishal Bhatia, CEO – New Supply, Swiggy, explains, “Cloud kitchens enables restaurant partners with culinary capabilities and unutilised kitchen capacities to co-create delivery brands, which will be serviced by Swiggy. Having created over 1000 Access kitchens for our restaurant partners, we are now meeting unmet consumer needs by co-creating delivery brands through our initiative. This step bridges supply gaps and offers restaurants unmatched growth opportunities.” He adds that their goal is “to co-create hundreds of such brands with multiple restaurant partners across the country.”

Mumbai-based Rachael Goenka, founder of Chocolate Spoon Company (with brands such as The Sassy Spoon, Sassy Teaspoon, House of Mandarin, Saffron by The Sassy Spoon and Wicked China), weighs in: “To run a successful (profitable) cloud business, you either need to have raised quite a sizeable amount of venture capital or have a strong brand presence and delivery offering that can be leveraged in multiple locations. We have had to rely on the latter by operating multiple brands from our existing infrastructure. It’s never been a question of one option replacing another, Dining-out is celebratory and experiential. Dining-in is convenient.”