With the advent of rapid internet, advancement in Food-technology and democratization of starting a Food Business by just listing on aggregator platforms, the food industry has transformed for good. With cut-throat competition among the foodservice businesses, the overal space has witnessed many unfavorable and volatile circumstances (Thanks to COVID-19), so opening the avenue for online ordering, Cloud Kitchens (aka Ghost Kitchens) suddenly seem like the only logical alternative to pivot to, keeping the risk and dwindling margins into consideration.
Cloud kitchen is the latest yet most viable niche that has quickly established itself in the Food Service space and seems like a smarter way to run and sustain in the overall food business landscape. As per a report by Inc 42, only 13% of the total market size has been tapped by cloud kitchens amongst the entire landscape. This shows the exponential potential and untapped gap in the market this format/niche holds across the entire landscape.
Our focus in this post is to share that key steps to open a thriving cloud kitchen business irrespective of whether you have domain expertise or not. So here it goes –
1. Deciding the Location for your Cloud Kitchen
The only aspect to keep in mind while selecting the location for your cloud kitchen is functionality and resourcefullness. You just need to be within 5 km radius of your target market you are good to go. Residential, Commercial, Mixed Land or Lal Dora land is your personal call. Idea is to have a controlled rental which is makes it viable to control a major cost head i.e. Rent.
2. Empanelment on Aggregator Platforms
Once the location is decided, you need to plan registering across relevant online aggregator platforms since they typically take 7-30 days to list your particular kitchen, hence, its imperative to apply for listing as soon as your location is set. These companies usually demand a commission of about 18-30% of your revenue per order. However, this might reduce depending on multiple other platforms like Google, Make My Trip (MMT), Amazon entering the space.
Since a cloud kitchen relies solely on its online presence, hence often referred as Internet First Restaurants. Further, as it does not have any physical outlet to draw in customers, a Self ordering website with an option to order food online is an outright must.
3. Attaining the relevant Licenses/Compliances
Compliances is an essential part of setting up a cloud kitchen. Few licenses are necessary to acquire in the first month to get yourself listed on the aggregator platform. These are GST Registration, FSSAI license, Municipal health trade licenses, NOC from fire department, etc. – depends purely on the scale of your enterprise but these formalities have to be met. I always recommend to focus on getting started with basic compliances and don’t get overwhelmed with compliances – it can be easily outsourced to a third party for a minimal fee.
4. Capital Expenditure for Equipment and Packaging
Major capital investment in cloud kitchen is equipping the kitchen with the right equipments. Although the cost of setting up the kitchen will completely depend upon the type of cuisine and the number of staff you are deploying.
Extra budget should be assigned for packaging as it is a vital part of running a food company. We always emphasize that Food is an experiential business and its all about how you can give a restaurant quality experience to your customers at the comfort of their homes. Make sure the packaging is innovative, promotes the brand and maintains the quality of the food during the delivery.
5. Prerequisite staff in A Cloud Kitchen
The secret sauce behind a successful Cloud Kitchen is the team that works for it, with the Chef being the most critical part of the team, as they not only prepare the food but also helps in designing the menu. Apart from the kitchen staff, you would need to allocate a Manager, Utility staff and delivery boys (if doing the delivery yourself).
However, with the democratization I spoke about earlier, the third-party delivery services (such as Wefast, Pidge, Grab, Shadowfax and Lalamove) which work on a per order basis – can be a great alternative.
Here it is absolutely essential to know 4 factors – Whom to HIRE, Whom to PARTNER with, Who to make VENDORS and What items to OUTSOURCE.
6. CRM & POS Planning
Cloud Kitchen is DATA and BRAND Busines – and managing our DATA well is the most critical aspect of your entire value chain. As orders stream in from different platforms, it is important to have a proper mechanism to facilitate the work evenly. Imperative to invest in quality Point of Sales system like Petpuja, Possist, Rista App etc. which can have an Additional feature of Customer Relationship Management feature to share offers and loyalty benefits with your customers. You can also try independent CRM software also
7. Marketing & Building Your Brand Story
Second part of DATA is the BRAND. Cloud kitchens have very less visibility as compared to restaurants with physical outlets. Hence, it is quintessential to have a powerful online presence. Online reputation management such as Social media platforms, Google my Business, Online aggregator listings can help you propagate your business.
Proper marketing and advertisement are indispensable to the success of your cloud kitchen. For a cloud kitchen, marketing becomes even more necessary as it becomes the only source of getting orders. Online marketing functions in favour of cloud kitchens quite well. However, I always recommend to leverage it marketing by building a brand story comprising of a
- Name
- Logo
- Story around it
- Packaging
These are the necesary ingredients to sky-rocket your marketing strategy. Further, with a strong look on reviews across platforms and influencer marketing activities. You can create a DENT in the cloud kitchen space.
I hope that this Step by Step guide on how to Start a cloud kitchen in India is of immense help to you. While cloud kitchens involve minimal risk and high upside potential, however, one should be aware of the competition ahead to earn profits. Hence make use of these critical points in order to harness the potential of Cloud Kitchen Niche.
This and more such details covered in my book – Cloud Kitchen Secrets.
Let me know your thoughts in the comments below.
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