CLOUD KITCHEN FRANCHISE

INTRODUCTION

When a person thinks of entering into food service business he would have options like fast food center, restaurants, fast food stalls, franchise, etc. To open a business entity, one must consider what`s trending in their respective industry and adapt to the changes in the market. In fast food service industry, which was largely occupied by restaurants, business owners face many difficulties. Difficulties such as limited access, costs and inconvenience in home delivery and non-commercial location were mitigated largely since the advent of food delivery apps such as Swiggy and Zomato.

These applications provide online food delivery services specifically. They allow people to stay anywhere and order food from anywhere by following simple process. This online delivery technology brought revolution in India.  

Cloud Kitchen:

The restaurant business even with food delivery apps introduction, face high chances of losses. The high cost of renting a property, development of infrastructure with a unique concept in order to look different and attract customers, maintenance cost, staffing cost, etc. are risks associated with restaurants and even fast food stalls. These delivery apps and hardships in restaurant industry opened gate for a new and unique concept known as ‘Cloud Kitchen’.

A Cloud Kitchen, also known as ghost kitchen or dark kitchen is very different from physical food service businesses,  it is operated online and food is prepared from home or a place where facility for dine-in is not available. These businesses work with the help of online delivery apps. The first cloud kitchen was opened in 2015 in Los Angeles, USA by Diego Berdakin and EarthLink founder Sky Dayton. It was introduced in India in 2015 itself by Rebel Foods company owned by Jaideep Barman and Kallol Banerjee.

A franchise is a business where the owner licenses its business and products, processes, knowledge, IPRs to any person for some franchising fees. A cloud kitchen franchise is similar, in which a successful cloud kitchen franchise licenses its business to new businesses. Some of the most successful cloud kitchen franchises in India are- Box8, Rebel Foods, Gobblers, Rolls and Bowls, Biryani by Kilo, Mr. Shwarma, etc.

Key features of Cloud Kitchen Franchise

1. Location and Space: The location of such franchise owners and franchisees are the homes of respective owners. There is no requirement for them to provide a place for sitting or dine-in.

2. Equipment or Setup: The kitchen might not need too many equipments, it can carry the business with limited and specific tools and equipments. Basic equipments are must such as stove, oven, refrigerator, utensils,

3.  Technology and Integration: A robust order management system is crucial. Integration with multiple delivery platforms (like UberEats, DoorDash, Grubhub) ensures a steady stream of orders.

4. Staffing: The team will primarily consist of chefs, kitchen staff, and possibly a few administrative roles. Delivery is often handled by third-party services. Therefore no extravagant expenses for staffing.

5. Marketing and Branding: Building a strong online presence is essential. This includes having a user-friendly website, active social media profiles, and strong SEO practices. Creative advertisements are beneficial too.

6. Lucrative Offers: These businesses must conduct research on the value of their products. They must be reasonable. Offers and discounts often lure customers to buy. After discounting, the profit margin still should be satisfactory.

7. Franchisee: The cloud kitchen must conduct a research on which franchise model should be contracted to conduct cloud kitchen. Key factors to consider are reputation of the franchise, food products they deal in, profits, etc. Likewise the franchise must scrutinize the offers and look for suitable person to run their franchise.

Benefits of Cloud Kitchen Franchisee:

1. Lower Overhead Costs: One benefit of cloud kitchen franchise is that the business can be carried from home or low rented places, no need for establishing business at popular commercial areas where rent is high. Also there are no side expenses such as tables and chairs, interior designing, decorations, etc. This way cost is reduced to a great extent.

2. Wider access to customers: Since these franchises operate through online delivery apps, they cover whole city or large area where they can find potential customers.

3. Limited Staff: Cloud kitchens generally work with chef and one or two assistant to chef and most of the time owner and chef are same person. Thus, cost gets reduced significantly.

4. Flexibility & Stability: Cloud kitchen can modify their menu, keep limited stocks, purchase stocks on the basis of requirement. Thus they don’t waste too much of food and save costs.

Benefits of Franchisee from Franchiser:

1. Brand Reputation: The cloud kitchens gain immense boost by the use of intellectual property of franchiser. They don’t have to work to earn an identity in the market or to attract customers.

2. Supply Chain Management:  The franchisee have the convenience of established relationship of franchise with the suppliers.

3. Training and Development: Franchises provide training and development programs to help franchisees gain sufficient skills in cooking and attracting customers.

4. Networking: One franchisee can connect with other franchisee with the same franchisor and develop good relationship among them.

Benefits of Franchiser from franchisee:

1. Revenue: Revenue in the form of royalty based on the sales made, franchise fees and supply chain profits are helpful for franchiser.

2. Easy Access to local markets: Franchisees have good knowledge in their local area about the population`s demands. So the franchiser can gain from franchisee agreement.

3. Brand Access: By partnering with franchisees, franchiser can expand its brand to new  geographical areas.

Challenges to Cloud Kitchen Franchise

The Cloud Kitchen Franchise Business has the following difficulties:   

1. High Initial Investment   
A cloud kitchen entails a lot of capital expenditure in kitchenware, technology, and fixtures or improvements to the leasehold. The investment costs related to advanced ordering, delivery management systems, and kitchen automation tools may be high.           

2. Operational Challenges   
The major challenge of food consistency is the ability to offer the same quality in different outlets which may harm brand image.Balancing the two, the need to ensure that the ingredients are available while at the same time avoiding wastage can be a challenge. It is crucial that staff is trained often to be conversant with the new technologies and quality food hygiene.         
3. Market Competition

It is also noted that the cloud kitchen industry is crowded with many players thus creating a lot of challenges to maneuver. This creates price pressures that lead to the lowering of prices thus reducing the profit margins.           

4. Scalability Issues

It is often challenging to grow the business and at the same time achieve operational economies of scale and product/service quality. Some of the common issues that arise in franchise businesses are the need to ensure that the franchisees meet the laid down brand standards and operational guidelines so as to protect the brand image.

Conclusion

The rise of cloud kitchens represents a significant evolution in the food service industry, offering a viable solution to the high costs and operational challenges faced by traditional restaurants. By operating online and utilizing food delivery apps, cloud kitchens reduce overhead costs and expand customer reach. Franchising further amplifies these benefits, providing brand reputation, supply chain management, and training support to franchisees. As the food service industry continues to adapt to technological advancements and changing consumer behaviors, cloud kitchens and their franchise models are poised to play a crucial role in its future development.