In the last couple of years, customers have moved away from wanting to dine in at restaurants. They now prefer to enjoy the comfort of staying in and ordering food. After all, why spend money on stepping out, dealing with traffic and waiting in line when you can sit back, relax and have your favourite food delivered to your doorstep? This is where Virtual Kitchens come into play.
A Virtual Kitchen, also known as a Cloud Kitchen, is a restaurant that doesn’t have a particular physical space for dining. So, it is essentially a commercial kitchen that you would find in a full-fledged restaurant, minus the seating options and takeaway.
These kitchens run on orders that are received online, either on the restaurant website and application or through third-party food delivery apps. Nowadays, it is not just new and budding restaurants that venture into building Virtual Kitchens but also old and established names who want to give this trendy and convenient business model a shot.
Benefits of Running a Virtual Kitchen
Virtual Kitchens make operations much simpler and more seamless as compared to a traditional restaurant. Moreover, they require lower start-up costs and capital expenditure. You save money on exorbitantly high rental costs. You also don’t need to worry about hiring staff to handle with clients face to face.
Lower Capital Expenditure
Running a full-scale restaurant is a tough and tedious process. There are multiple factors that you have to take into account for every decision you make. The costs are enormous. One of the major costs incurred is rent. With real estate prices soaring higher and higher every day, being able to afford rent in a fancy neighbourhood is starting to seem like an unattainable dream for many. In this scenario, running a unit that comprises solely of a kitchen is a perfect solution. It is way more affordable than renting a huge space for kitchen, dine-in, and takeaway. You also don’t have to work your way into finding a place in a classy neighbourhood. All you need to focus on is being in an area that makes easy delivery to where your target audience is situated.
Higher Profit Margins
When you run a virtual kitchen, you avoid many overhead costs that come along with a full-scale, traditional restaurant set up. This means paying lesser for utilities including water and electricity and staff such as servers and cleaners. Operations with a smaller setup and lesser people are easier to manage and thus become a much less expensive affair. You will have to take the money spent on delivery costs into account but all in all, you’d end up saving a lot of money as well. With higher profits, you can focus on offering highly competitive prices to your customers and win their hearts!
Quick and Efficient Service
When running a virtual kitchen, you have the added advantage of distributed cooking. If you have kitchens situated in multiple locations across a town or city, you can practically ensure extremely quick service to your customers. Your dishes can reach them hot and fresh in rapid delivery time.
Given that your entire restaurant presence is online, you have a lot more freedom when it comes to making changes. Millennials love to experiment with food and try new things. So when there’s a new trendy fad in the food market, you can give it a trial run and introduce new options on your menu. Adapting to market preferences is easy with a virtual kitchen as compared to a full-scale restaurant. You can play around with the menu as much as you like, seeing what appeals to customers the most.
More Scope for Expansion
Virtual Kitchens have more scope of expansion than any other restaurant business model. Think about it- you have the option to run multiple restaurants from one single kitchen. You use the same space and equipment for more than one restaurant and get to make tons of profit. You could also have numerous virtual kitchens located in optimal areas in the city. With each added brand, you don’t have to worry about the capital expenditure you’d have to make all over again. Instead, you’re good to go with the commercial kitchen you already have! In this manner, you can experiment with different cuisines too. For instance, Faasos actually runs four brands, these are Behrouz Biryani, Faasos, Oven Story and FirangiBake. Each of these has its specific menu but they’re all run through the same virtual kitchens.
Easy Customer Info Collection
While running a virtual kitchen, technology is the most crucial aspect. You need to have your own online ordering system on a website or on a mobile application. You also need to ensure that it is customer friendly. With this website or app, you get to save and compile a lot of data related to your customers. What’s more is you can make good use of this data to find ways of engaging more and more customers, promoting your restaurant or making changes in your current menu.
Costs of Opening up a Virtual Kitchen
If you’re planning to set up an all-new Virtual Kitchen, you need to know all the costs that might come up in the process. You need to account for everything from rental costs to POS and Inventory from the very start.
Let’s take it one by one.
While picking the location for a Virtual Kitchen, you don’t need to worry too much about the ambiance, who your neighbors are or what kind of locality it is. What you do need to keep in mind is ensuring that your target audience is located not too far off from the kitchen. A radius of 5-6 km is ideal. You also don’t need too big a place, since it’s only a kitchen you have to run and not an entire restaurant. In general, you would need an area of about 800 sq. ft. which would mean Rs. 25,000 to Rs. 40,000 for rent per month.
You will need to acquire several licenses to open up a Virtual Kitchen. These include licenses such as Tax Registration license, FSSAI license and so on. Make sure you apply for all these in advance and have acquired them before the debut of your cloud kitchen. Be prepared to spend a sum of Rs. 15,000 to Rs. 18,000 on all the licenses you would need.
Now, your commercial kitchen needs to be equipped with everything that you will need for daily operations. Yes, we are talking about commercial kitchen equipment. Depending on the kind of cuisine you plan to offer, you’ll have to spend on equipment like an oven, mixers and blenders, refrigerators and so on. All in all, you should spend somewhere between Rs. 5 Lakhs- Rs. 10 Lakhs on kitchen necessities.
For a perfect kitchen, you need dedicated staff who meet your expectations. This would include a head chef, sous chef, and commies. On the whole, this would cost between Rs. 40,000-Rs. 70,000.
When it comes to marketing and sales for a Virtual Kitchen, you need to have a solid strategy in place to make your online presence strong and effective. Reaching out to your customers on the platforms they frequent will go a long way in making your endeavor popular and successful.
You’ll have to spend around Rs. 20,000 – Rs. 40,000 every month on social media platforms like Facebook and Instagram. This can include sponsored ads or paid collaborations with food bloggers.
Online Customer Acquisition through online ordering services or reaching out to customers via e-mail and newsletters can amount to Rs. 40,000-Rs. 1,50,000 per month. This is one of the most expensive factors when it comes to marketing your brand.
Since you don’t have a physical dine-in presence, you need to make sure that your food, along with good branding and packaging, makes a lasting impact on your customer. So if your packaging is effective, keeps food warm and toasty and is also eye-catching, your customer is sure to be pleased. Packaging costs should range between Rs. 50,000 to Rs. 60,000.
Lastly, running any restaurant smoothly requires an efficient and effective restaurant POS & Inventory System. You’d need to invest about Rs. 4,000 to Rs. 5,000 per month on such a system to make sure all operations function well and in sync.
Legalities of opening up a Virtual Kitchen
When you open up a restaurant, you need to acquire multiple licenses before you can begin operations. Although the work involved in getting licenses for a Virtual Kitchen is definitely lesser than getting licenses for a full-scale restaurant, you will still have to keep a few things in mind.
You will need to get a food license first. This is granted by the FSSAI – the Food Safety and Standard Authority of India. It ensures customers that the food provided by a restaurant is following the food safety standards of India.
Next, you will have to acquire an Eating House License too. This license is mandatory if you want to open an eating house. It is issued by the Licensing Police Commissioner of your city. Further, you need to acquire a Shop and Establishment License for your food business within 30 days of the commencement of your business.
Also, the restaurant business is bound by the law to make sure that its operations do not leave a negative impact on the environment. Hence, you will have to acquire a Certificate of Environmental Clearance.
Types of Virtual Kitchens
There are various kinds of business models you can consider if you wish to open up a Virtual Kitchen. Some of these are:
Independent Cloud Kitchen Model
This is where it all began! It is the original kitchen model and serves a single brand with one kitchen. There is no seating. It is the best way to avoid high rental costs by not opting for dining in space. With the advent of online food delivery, this business model has become extremely appealing to one and all.
Freshmenu Business Model
In this model, we have one brand with a single kitchen. However, there is an existent storefront along with multiple outlets. Think of it as a mix of a takeaway restaurant and a virtual kitchen. Customers are given the liberty to walk in and check out how their food is prepared, making the whole experience more interactive.
Rebel Foods/ Faasos Business Model
This business model is a little different. Multiple brands offer different cuisines in one single commercial kitchen. Again, there is no dine-in space but there are multiple kitchens located across the city. What’s more is that these virtual kitchens are created based on data intelligence which incorporates local demographics, customer preferences, and available demand and supply. The cuisines that are most sought after by customers are offered in a particular neighborhood that doesn’t already have too many food delivery options. Given that multiple brands operate from one sole kitchen, operational costs are brought down by a large extent.
Swiggy Access Business Model
This virtual kitchen model is also known as the “shell” in the industry. It is a cloud kitchen located in an ideal space with basic infrastructures such as drainage, ventilation and gas pipelines. It is owned by Swiggy. Established as well as budding restaurants can rent this kitchen space and benefit from Swiggy’s online ordering platform, their delivery fleet, and marketing strategies. All in all, the restaurant only has to focus on providing quality food and Swiggy helps out with all the other aspects.
Depending on your preferences and the kind of cuisine you would like to offer to your target audience, pick a business model that aligns most with your ideas.
Summing it up
Whether you’re new to the food industry or one of the most popular brands, running a virtual kitchen can offer a lot of benefits. All the way from easy-to-manage operations to highly reduced costs, it makes the whole process of catering to customer needs simpler as well as more flexible.