Are cloud kitchens the next evolution of food delivery?
Cloud kitchens, which offer shareable cooking facilities to support food delivery, are just getting started but are already seen by some as a threat to restaurants and the overall grocery channel.
Also called ghost, virtual and dark kitchens, cloud kitchens are basically delivery-only restaurants. Similar to co-working spaces, the centralized cooking spaces gain efficiencies by being lined up assembly-like side by side. The sole on-the-go focus allows the businesses to build in further workflow efficiencies.
Space inside cloud kitchens can be rented by an existing restaurant to better juggle walk-ins and delivery during peak times. The bigger opportunity, however, is seen to be for entrepreneurs launching online-only restaurants and avoiding the front-of house labor and other overhead of walk-in restaurants.
Cloud kitchens offer rent savings as well because they can be housed in industrial buildings versus pricey street-facing locales. The rental kitchens come fully equipped with cooking equipment and utilities, and provide on-demand delivery services as well as apps to take orders and manage the process. The healthier margins versus eat-in restaurants promise to offset delivery fees.
Los-Angeles based CloudKitchens wrote on its website that, rather than a $1 million upfront investment required to build out a restaurant, cloud kitchen rentals can start at $20,000 and a two-month deposit.
For a monthly fee, renters may further gain marketing assistance and data analytics. Some believe the data on local tenant preferences to be gained by cloud kitchen providers will be more valuable than rent.
The trend is gaining attention because of major tech investors in the space, including Uber founder and ex-CEO Travis Kalanick, a CloudKitchens backer. Google and Amazon.com have also made investments.
Fans believe cloud kitchens not only address already strong growth in food delivery but may take it to another level in the years ahead.
“There could be a scenario where by 2030 most meals currently cooked at home are instead ordered online and delivered from either restaurants or central kitchens,” UBS wrote in a report earlier this year. “The ramifications for the food retail, food producer and restaurant industries could be material, as well as the impact on property markets, home appliances and robotics.”
- E-Commerce Turns the Tables on Restaurant Space – The Wall Street Journal
- Uber Tests ‘Virtual Restaurants’ Program – Bloomberg
- ‘Ghost’ Kitchens Play Bigger Role In Food Delivery – PYMNTS
- UBS: Online food delivery could be a $365 billion industry by 2030 — here are the winners and losers from that ‘mega trend’ – Business Insider
- A rare glimpse into the sweeping — and potentially troubling — cloud kitchens trend – TechCrunch
- The rise of the “ghost kitchen” could change the restaurant delivery game – The New Food Economy
- Deliveroo Pushes Into U.K. Provinces With Help From Amazon – Bloomberg
- Is Amazon really out of the restaurant delivery business for good? – RetailWire
DISCUSSION QUESTIONS: Do cloud kitchens have the potential to disrupt both the restaurant and overall grocery space? How would you access the upside and downside of the business model?