By 2030, the global internet food ordering business is predicted to increase from $35 billion to $365 billion, with restaurant food delivery income growing at a rate three times faster than on-premises revenue. Restaurant owners are preferring to liquidate their storefronts totally to focus on the more economically advantageous Cloud Kitchen firm due to exorbitant rents and shrinking margins.
52 percent of foodservice operators have decided to create a Cloud Kitchen or a delivery-only site, according to detailed research on the Restaurant Industry and Market Evolution.
A food entrepreneur who wants to create a delivery-only food company will concentrate on the features that will gratify a growing proportion of the public with significantly less capital and overhead costs due to the wider business potential.
Due to delivery-only concepts, food entrepreneurs that want to explore new markets don’t require an established client base or to be physically located in a high-traffic area to gain visibility.
We do know, however, that this concept has the potential to create a completely new category of food service providers, anywhere between food trucks and restaurants. We also expect that the next several years will serve as a proving ground for venture-backed firms fighting for a piece of this growing market.
In this article, we’ve attempted to cover everything from what a cloud kitchen is to several cloud kitchen business models, how to establish a cloud kitchen business, how to make it successful, the tech required to operate a cloud kitchen, and so much more!
What is a cloud kitchen?
A cloud kitchen is a restaurant kitchen that only accepts orders via online ordering systems and does not have any dining facilities. They have a central kitchen where food is delivered to consumers’ doorsteps.
Cloud kitchens may have their website and app for online ordering, or they may accept orders via a variety of meal delivery companies. Because numerous food ordering systems are the primary source of revenue for these internet restaurants.
It’s essential to have a check-in system set up that keeps a record of dispatches and the volume generated by the organization across various platforms. This will save you time at the end of each day when it comes to adding and measuring orders from various ordering systems.
In essence, the virtual restaurant is the new food truck (without the truck).
Although the barriers to entry for launching cloud-based food services have never been smaller, the steps to get up and running, as well as the methods for success, are vastly different from those of a traditional restaurant or food truck.
If you’re thinking of opening a virtual restaurant, there’s plenty of room on the market. Here’s a rundown of the seven most important measures to get you started.
Plan the idea to be as delivery-friendly as possible
The highest costs of outfitting and maintaining the truck, legal constraints about running and parking the vehicle, trouble shuffling food and supplies on and off the truck, and back-office difficulties and fees associated with payments are the most significant limitations for food trucks.
Brick and mortar restaurant kitchens, on the other hand, are designed for in-person dining and service, which comes with its own set of challenges, including low margins. As a result, restaurants are realizing that delivery has become an unavoidable cost in a physical space, and their menus are no longer built with deli items in mind.
In general, designing the design necessitates delivery optimization. Food quality is hampered by time and temperature, which are the most important factors to consider when designing a delivery-only concept.
If your food is cold, soggy, or dirty when it arrives, you risk losing repeat customers, which is crucial for a small business.
You’ll need to perfect your offerings, just like a brick-and-mortar restaurant, by paying attention to time, temperature, consistency, and taste. Unlike a physical location, you’ll need to concentrate on convenience, ingredient flexibility, and quality.
Give a few regular menu items with common ingredients and preparation methods to keep the ingredient costs down.
Determine your area of expertise
When starting a company, you must conduct research and identify a specific gap in the market. Is there a particular demographic that you should target for delivery-only services?
Are you a student? Professionals, who are still on the go? Dietary restrictions? Seniors with reduced mobility? Complexes of offices?
Take a poll of your target groups. Talk to people in your neighborhood and on the sidewalks. If there are already several 5-star-rated curry restaurants in your area that deliver, it may not be a good idea, and try to compete.
However, if you know there is a shortage of ethnic food or there is no definite winner for Late Night Burrito King, you might be the next to take the throne.
Build your brand
Since your whole company will be mostly online, you’ll want to invest time and money in creating a logo, menu, and other brand properties.
Create a website with Wix or WooCommerce and use it to tell your story: explain who you are and what makes your food unique. Include your company’s contact information as well as a link to your social media pages.
The most popular outlets for food companies to communicate directly with consumers are Facebook, Snapchat, and Instagram.
Do market analysis
Conducting an extensive market analysis of your industry and the demographics of potential clients is an integral part of developing a business strategy.
Conducting surveys, organizing focus groups, and analyzing SEO and public data are all part of this process.
Market research allows you to learn more about your target customer, including their desires, tastes, and attitudes, as well as your industry and competitors.
To better understand opportunities and limitations in your industry, many small business professionals suggest collecting demographic data and performing a competitive analysis.
When putting together your business plan, it’s also a smart idea to think of an exit strategy. Making a plan for how you’ll finally leave the company helps you to think ahead. Don’t put all of your assets or resources into a single project because if it fails, you might be in big trouble, so think twice before you invest.
Look for a commercial kitchen to use
You must manufacture your food in a licensed commercial kitchen to legally sell it to customers. The number of shared-use kitchens or commercial kitchens that rent by the hour, day or month to multiple tenants has increased dramatically in the last five years. (Think of it as a coworking area for cooks, caterers, food trucks, and other food-related businesses.)
Visit The Kitchen Door to find a commercial kitchen for rent in your neighborhood. You can search for available kitchens by city or zip code.
Prepare to answer the following questions, which will be asked by all commercial kitchens:
1. Do you have a business license?
To apply for a business license, contact your city or county office. You’ll need to fill out an application and pay licensing fees to get started. The average cost of forming an LLC is between $50 and $500. Using LegalZoom for these filings to save time.
2. Are you ServSafe certified as a food handler?
The National Restaurant Association offers this nationally recognized food safety course, which can be taken online or in-person with a teacher or proctor.
You may be required to have a ServSafe Manager Certification as the primary operator of your company. The cost of the one-day course is $195.00, and it is usually accepted as valid for three years.
3. Decide on a strategy
To use your kitchen’s utilities, you’ll probably have to pay a deposit (similar to a gym). While several companies offer hourly booking and “pay as you go” options, you can also sign up for monthly plans that might include a reduced hourly rate.
Choose your schedule based on the days and times you expect to be open, and remember to factor in planning time, set up time, cleaning time, and receiving time. Inquire with your kitchen manager about off-peak and on-peak prices.
Although working the night shift has its advantages, make sure your menu appeals to night owls.
4. Liability insurance is essential
Most shared kitchens would enable you to have a $1 million general liability insurance policy with the kitchen you work out of listed as a co-insured party.
Many service providers, vendors, and companies you deal with would require you to have such insurance, which typically costs $300-$500 a year. Because of their low premiums and robust coverage, we suggest the Food Liability Insurance Program. In reality, we’re offering a discount right now.
5. Submit an inspection request
Many health departments would want to come to see you in your new location before you go live. They want to see the food preparation processes, food storage areas, and general flow diagrams that include standard operating procedures and vital control points.
For your final inspection and licensing, you’ll need to get these written down. Keep in mind that your local health department’s regulators might have no idea how to regulate your business.
They just know you’re a cross between a food truck and a restaurant. But keep in mind that your local regulator is one of your most valuable friends when it comes to getting reliable information and staying legal. They need to know that you are processing food healthily and legally.
Walk them through your menu, your manufacturing schedule, how you plan to keep time and temperature, and who you plan to hire a third-party service provider. You’d like them to be by your side.
Select a service provider
You’ll need to find a food distributor and supplier that can bring it to your kitchen. While national brands are available, there may be some excellent local options to consider, especially if you want to include specialty or locally raised, or grown food as a value add.
In return for having one of the most important aspects of your business’s success, these companies charge a fee. To communicate with customers, accept online orders, and provide timely delivery fulfillment, you’re using a technology platform that was designed by someone else.
How it operates is as follows:
- A customer comes across your menu and decides to buy something.
- You consent to the order.
- You complete the order and pass it on to a third-party distribution service.
- Your order is delivered to the customer by the distribution partner.
Remember that the money you save on attracting buyers and selling the idea is included in the service. Instead, hungry people flock to a digital marketplace where you can be found.
Many content providers will let you pay for increased coverage in the form of banner advertising and placement at the top of search results.
Figure out who serves your region and compare average delivery times, efficiency, and customer support when selecting a provider.
Many people still object to the commission rates, which can be as high as 30% but think about it in the sense of your business: time and money saved for a wider consumer base. In the end, you’ll most likely come out ahead.
Several providers have already been compared, so read these articles from FoodDeliveryGuru, Modern Restaurant Management, Mel Magazine, and Fast Casual to make your own decision. Since these distribution services compete with one another, prices may have changed.
Iterate and launch
The best advice for newcomers is to keep it straightforward. To cut food costs and waste, choose ingredients that can be used in multiple dishes.
Before shipping something to a paying customer, you can conduct extensive testing. Concentrate on high-quality food that flies well, keeps its temperature, and arrives on time.
To do so, test your food “in situ,” that is, in the delivery take-out containers you will be using. Webstraunt offers a variety of take-out container options. Request samples from your suppliers so you can try them out with your food.
Soggy Food Sucks is my favorite company to keep an eye on in this area, but I’m sure there are others.
Practice packing and shipping your food. Assign a quality assurance representative to serve as a liaison between the cook and the delivery service.
Ensure that the orders are double-checked and triple-checked to ensure that the correct materials are included (napkins, utensils, sauces, sides, drinks, desserts, etc.) Nothing beats receiving the delivery and discovering that your son’s pad thai is missing.
Another tip for saving money and reducing waste is to make sauces, plasticware, napkins, and condiments available only upon request at check out.
Everyone has a cluttered cabinet full of unused plastic spoons, salt and pepper packets, and ketchup packets. Allowing people to opt-in would save you and your customers time and money.
Also, do something special. Mints and fortune cookies have become overly common. What should you do to give your customers a unique experience that they’ll remember the next time they order food?
Is it possible to submit a handwritten note? Isn’t it a fun collectible? Create your brand by delighting your customers.
Make marketing a top priority
Building a clientele would most likely be the most difficult aspect of starting a delivery-only restaurant. You’ll need to communicate with consumers in innovative ways, such as through posters, advertisements, word of mouth, festivals, and so on because there are no signs or places to pass by and see by chance.
Create a website to showcase your menu options. Maintain consistent and timely hours so that customers know what to expect you and can place orders for the products they’ve come to enjoy.
Use social media to create a following consistently and innovatively. Also, make sure you request feedback on your food. Be attentive to your customers and culture.
Develop a relationship with the audience. Word of mouth is also the best marketing you can find. Pay attention to what your group has to say and uniquely respond to their needs.
Fill in the blanks. This is how you’ll figure out if your product is right for the market.
The most significant differences between a conventional dine-in/takeaway restaurant and a cloud kitchen are the location and land. A cloud kitchen does not necessitate a high-traffic area or prime real estate.
Because there is no Front of the House, it can easily be set up in a 250-300 square foot space. Because you don’t have to spend money on the interiors or furniture, the cost of starting a cloud kitchen is significantly reduced.
The cloud kitchen could be in an inaccessible location with high customer demand, particularly for a specific cuisine. Residential areas, market backsides, and unused parking lots are all good places to set up a cloud kitchen.
You may also consider a shared kitchen space to save money on the initial investment.
The type of kitchen equipment you use is entirely dependent on the cuisine you’re serving. Stoves and ovens, refrigerators, cutting counters, knives, and other basic kitchen equipment are needed to start a cloud kitchen.
Packaging is an essential aspect of operating a food distribution company.
No matter how good your food is, if it isn’t treated properly, it will ruin the whole customer experience and give your company a bad reputation. The type of food you’re serving affects the packaging.
To properly package your food, you’ll need plastic containers, boxes, spoons, and other products.
Since a cloud kitchen usually generates orders from online food aggregators, blogs, and mobile apps, technology is critical to its success. For taking online orders and assisting operations, a cloud kitchen includes an integrated online restaurant ordering system.
Although collaborating with online food aggregators is necessary, you must also have your independent restaurant website or mobile app to accept orders. Third-party food delivery platforms charge a high margin per order, ranging from 12-18% for accepting online orders to 18-25% when delivery is included.
This figure will eat into your income significantly, which is why getting an organic source of online orders is critical. So that your customers can order food online with ease, you should have an online ordering-powered restaurant website and mobile app that is user-friendly and SEO optimized.
To increase the number of online orders, your food ordering landing page should be well-designed.
If your cloud kitchen business receives a high volume of telephonic food orders, an integrated Call Center panel is needed.
Since orders are directly pushed into the POS, a POS integrated Call Center panel will help you streamline all your telephonic orders if you have several brands and outlets.
You’ll also be able to see the customer’s information and order history, eliminating the need to ask for the customer’s address and other information repeatedly.
The food delivery company entails more than just taking orders and preparing food. The real obstacle is ensuring that your food is delivered on time and in excellent condition to your clients.
To fulfill orders, you can either partner with third-party aggregators or a logistics firm, or you can provide your in-house food delivery fleet.
When it comes to providing excellent delivery service, the packaging is critical. When the food is shipped to the customer, you must ensure that it has been properly prepared and treated.
The cloud kitchen format offers a variety of resources for both restaurateurs and aggregators, as well as a host of spin-off companies that are thriving in the food and beverage industry.
Cloud kitchens are quickly becoming the most popular restaurant model for both new and established restaurant brands looking to start a new business or scale an existing one.
We hope that this article has given you some tools and new ideas for starting your own delivery-only food company.
Are you prepared to begin? We’ll be highlighting several companies that can help you refine your delivery-only food model in the coming months.
Meanwhile, please keep us updated on your development. We’d love to hear about your achievements, struggles, and lessons learned.
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