Blog Description

The Cloud Kitchen Industry: Revolutionizing Traditional Restaurants for Evolving, New-Age Consumer Needs

ICT | Mar, 2023

In recent years, cloud kitchens, also popularly known as “virtual kitchens” or “cloud kitchens”, have completely disrupted the conventional restaurant industry. Thriving online food-delivery ecosystem, driven by changing lifestyle of consumers with increased disposable income and rising efforts towards convenience, comfort, and quality of service are adding to the emergence of cloud kitchens worldwide. Cloud kitchens are a low-risk alternative to opening brick-and-mortar restaurant as they require minimal upfront investment since they operate behind the curtains to serve the customers, relying completely on technology. Moreover, these kitchens allow owners to run multiple brands at one place using the similar ingredients, which can help them drive revenue by enhancing efficiency and eliminating wasted ingredients. As restauranteurs are increasingly opting for methods that save as much as capital as possible and are less risky, more cloud kitchens are expected to emerge in the coming years. 

Advances in kitchen automation, emergence of ready-to-use digital solutions, drone supply, and continuing growth of concert economy could provide cloud kitchens more advantage by further reducing their overhead costs. More than 51% of restaurants have already shifted to cloud kitchen in the United States as the traditional restaurant dine-in experience is rapidly changing. With rapid technological advancements and rising demand for food delivery services, the market share of cloud kitchens in the restaurant market is expected to touch 21% in the next four years. Currently, there are more than 1500 cloud kitchens in the United States. Growing trend of digitalization and personalization, along with changing taste preference of consumers are increasing demand for online food delivery, which in turn, are attributing to the rise of digital-only kitchens. Some of the major players in the cloud kitchen industry include CloudKitchens, DoorDash Inc., Kitchen United, Kitopi, Lightspeed Commerce Inc., POSist, among others. 

Online Food Ordering Boom Gives Rise to Cloud Kitchens 

Traditional owners are going digital as customers are just one step away from their desired services, owing to the growing access to digital platforms and services. The food delivery app has witnessed significant growth in recent years, more so due to lockdown restrictions spurred by pandemic. The US food delivery app revenue is predicted to cross USD42 billion by 2025, owing to the growing preference of younger population towards food delivery and ease of ordering food through mobile applications. The stratospheric rise in online ordering and food delivery has prompted restauranteurs to embrace the industry’s hottest trend, i.e., cloud kitchens. Many restaurants, including those in five-star hotels, are also pivoting to cloud kitchens to keep business afloat since consumers are shifting more towards ordering online rather than going for fine dining. Some restaurants are even totally switching to delivery-only models to reduce infrastructure costs since running a cloud kitchen is an online-only operation with limited customer touch. 

In 2022, REEF Technology partnered with Americana Group, one of the most established F&B brands, to form a new joint venture for launching cloud kitchens across the Middle East and North Africa. In 2021, REEF Technology acquired iKcon, a cloud kitchen operator, headquartered in Dubai, UAE. Recently, Rebel Foods expanded its third-party collaborations with restaurant chains to increase the sales of its own gourmet brands such as Faasos, Behrouz Biryani, Mandarin Oak and Oven Story. In 2021, Kitch, cloud kitchen operator has partnered with Lebanese restaurant chain, Barbar to expand its operations in GCC nations. More such collaborations between F&B brands and cloud kitchens could be predicted in the future. 

Emergence of Aggregator Managed Cloud Kitchens 

Aggregator managed cloud kitchens involve spaces rented by different brands in premises operated by food aggregators. These types of cloud kitchens have delivery staff utilized by brands belonging to aggregators. For instance, Chick-Fil-A, the Halal Guys and Dog Haus are some of the top brands that have opened cloud kitchen in collaboration with Kitchen United, a startup that builds kitchen commissaries. Backed by USD50 million funding from Google Ventures, Kitchen United has ambitious plans to open kitchens in cities through the United States. DoorDash has partnered with four restaurant chains, Nation’s Giant Hamburgers, Rooster & Rice, Humphry Slocombe, and The Halal Guys to open a cloud kitchen in Redwood City, California for offering delivery or pick-up in suburban Bay Area. Both Kitchen United and DoorDash are staking their shared-kitchen models for helping restaurants grow Uber Eats have also launched 4000 virtual restaurants across the United States and Canada. 

Advances in Technology Favours Cloud Kitchen Growth

In terms of technology, the restaurant industry has been experiencing exponential growth. Cloud kitchens, termed as ‘tech startups’ of the food & beverage industry is to deliver the best quality food with the help of data-driven insights. Leveraging technology, cloud kitchen owners can enable live feed of kitchen where people can know where and when your food is being cooked, details on the sourcing of ingredients, and allow them to provide special instructions, etc., which help to enhance customer service experiences. As young population is increasingly becoming tech-savvy, restauranteurs are strengthening new marketing channels and amplifying exposure through social media to keep up with evolving market landscape. 

Cloud kitchen owners are using the power of artificial intelligence in multiple ways due to its intuitive nature and recommending customers food choices based on their tastes and preferences while ordering. However, integrating with food delivery apps is the best way for cloud kitchens to reach potential customers since they provide an impeccable online presence, which expands their visibility. With the help of technology, owners can make multiple food aggregator integrations into the restaurant POS conveniently. US-based SaaS company, Deliverect offers omnichannel restaurant management tools for restaurants and cloud kitchens across the US. 

Moreover, many cloud kitchens are successfully automating all packing activities, which reduces approx. 25% of the entire burden. Utilizing data analytics-based supply chain management can help entrepreneurs discover demand-supply gaps, reduce food waste, and stock-out risk. Moreover, collecting customer feedback through technologies such as Voice of Customer (VoC) can help them understand customers’ perspectives and widen the scope of personalized experiences. 

Robotic Enabled Cloud Kitchen: The Next Big Thing

A cloud kitchen supported by robotic automation can bring value for the customers and entrepreneurs alike. Illionois-based Nala Robotics, an AI technology company has launched Nala Marketplace, which has a network of customizable, multi-cuisine robotic chefs. The robotic technology uses machine learning to replicate any dish with precision anytime. Orders placed through food delivery app goes straight to the automated chef where they are fulfilled by sourcing ingredients from a high-tech pantry. Hence, the technology is ideal for at-home chef who wants to start a food delivery business or a restaurant chain looking to enter the cloud kitchen market. Besides, the high-tech solution promises cloud kitchen up and running for 24 hours. In recent years, more such robotic solutions in the food industry have emerged which are built for improving efficiency and enhancing customer service experiences. 

Way Ahead

With rapid digitalization, the F&B sector will continue to evolve at a rapid pace. Cloud kitchen trend is here to stay as increased smartphone penetration and rising accessibility to internet will further drive its adoption. Growing investments by large food chains in cloud kitchen startups are further expected to fuel the cloud kitchen growth in the coming years. 

According to TechSci Research report on “Cloud Kitchen Market – Global Industry Size, Share, Trends, Opportunity, and Forecast, 2018-2028, Segmented By Type (Independent Cloud Kitchen, Commissary/Shared Kitchen, Kitchen Pods), By Product Type (Food Vs Beverage), By Source of Order (Web Vs Mobile App) By Payment Method (Cash on Delivery, UPI, Card Transaction, Others (Mobile Wallets, Internet Banking, etc.) By Region, Competition”, the global cloud kitchen is expected to register a significant growth in the coming years. The market growth can be attributed to the rising number of customers switching to online food ordering services and changing consumer tastes & preferences. Additionally, rising working women population and growing personal disposable income of the population are also contributing to the market growth.