With food delivery apps giving the much needed boost to cloud kitchens, business is gaining momentum. Debarati Palit Singh talks to both the players to know where it is headed
Harish Mathani, like several other young IT professionals, lives in Pune away from his family. Living all by yourself can be tough, especially when it comes to your meals. If you know how to cook, some part of your problem can be solved. But even if you know how to wield the ladle, who has the time? Thanks to food delivery apps like Zomato, Swiggy, Uber Eats, Food Panda etc, your next meal is not such a big headache anymore. There are many like Mathani, who rely on these apps for their daily meals.
As the business grows, newer models and methods are also coming into place. Food aggregators and investors, including owners of restaurants and start-up founders, are supporting cloud kitchens in a big way. However, cloud kitchens, which are delivery-only places and do not have a seating area and ambience that restaurants offer, aren’t a recent phenomenon. Operating their kitchen at a small space, flat or bungalow, they run their business through online orders or delivery apps. Their clientele has been growing at a considerable rate across the country, including Pune.
The market in Pune
With a large number of student and working population, Pune is an ideal city for a cloud kitchen set up. In the last few years, several big players, including Faaso’s, Box 8 and so on, and smaller kitchens, opened across the city. Ganesh Shetty, president, Pune Restaurant and Hoteliers Association, says that right now, it’s hard to give a current figure on the total number of cloud kitchens running in the city. “That’s because the business is still in its initial phase. But cloud kitchens constitute 5 to 10 per cent of the total food industry in Pune.”
Mohit Sardana, COO, Food Delivery, Zomato, says that there has been a massive increase in the number of cloud kitchens in the past two to three years as food delivery has powered the overall growth of business for restaurateurs. “Magarpatta, Hinjewadi, Kharadi are the key zones which hosted the first few cloud kitchens in Pune and still host the maximum number of them. These are also the top-performing areas for us and present a massive opportunity for restaurants to expand due to the presence of IT companies and the high density of young working professionals (who prefer the comfort of ordering-in than the hassle of cooking),” he adds.
Like any other metro or tier II city, Pune has huge market potential. Which is why food aggregators like Swiggy, Zomato, Uber Eats and others have focused on building their own cloud kitchen networks. Swiggy has launched Swiggy Access Programme. Zomato follows a franchise model called Zomato Kitchens wherein they connect people with kitchen infrastructure in different cities, with restaurants looking to expand their presence in more cities. “This helps restaurants expand and scale rapidly while incurring a minimal fixed cost, add more supply in our delivery ecosystem and offer greater and better food options to our users,” adds Sardana.
A spokesperson from Swiggy says that they strongly believe that it is their job to expand the market by addressing existing and future need gaps for consumers. “With that aim, we launched Swiggy Access, our cloud kitchen initiative for restaurant partners. We have over 40 access kitchens across Pune. The city draws crowds for its good weather, colleges, and IT parks. With such an interesting mix of demographics, Punekars show great love of traditional, as well as newer cuisines. With Swiggy Access, we’re bringing quality restaurants in the city closer to more consumers and bringing great brands from other cities, hence allowing consumers to experience the best of what the restaurant industry has to offer.”
Why opt for the delivery-only model
There are various factors prompting investors to opt for delivery-only restaurants. Akshay Shinde, who has been running High Street Café at Balewadi, along with his partner Rushikesh Gadge, for the past one-and-a-half months, says that it was the most practical step they could have taken. “One of us owns a space close to High Street Balewadi but it’s a few metres away from the main road. Also, Balewadi is full of office crowd and students, so we decided to start a cloud kitchen and concentrate on burgers, pizzas, Maggi,” says Shinde.
Manish Verma, owner, Hidden Kitchen at Hinjewadi, says, “It was less of an investment and a startup for me as I wanted to do something of my own.”
Sharing similar thoughts, Shashank Chaurasia, who co-owns The Urban Kadhai at Wadgaon Sheri, along with partner Vinita Bajaj, says, “I had no experience of the hotel industry and being a fresher, I wanted to understand the running of a kitchen because it’s the most important aspect. Once we get the hang of it, we will open our own restaurant.”
Zain Kazi, owner, OMG Burgers!, says that he initially wanted to start a food truck but because there are no specific laws that allow people to run food trucks in India, he decided to run a kitchen. “To run a café meant high rent and a lot of logistics. Because it’s a startup, it was a risky proposition. I run my kitchen in my uncle’s bungalow and have converted one of the rooms into a kitchen,” says Kazi who runs the business along with his cousin Aakif Anwar Khan and uncle Dr Sadiq Khan.
“Despite the mushrooming of eateries, there exists a huge deficit in restaurant supply. To keep up with the demand for richer culinary choices, restaurants are turning to delivery-only kitchens as a relatively easier inexpensive way for them to expand,” adds Swiggy spokesperson. Many are treating a cloud kitchen as a stepping stone to setting up a restaurant as it gives a first hand experience.
A different ball game
But running a profitable cloud kitchen isn’t easy. Without visibility and the experience to dine-out, drawing customers is a humongous task. Verma says that competition is fierce. “There are 700 restaurants in and around Hinjewadi but I am learning how the online business works; it’s a different ball game. The biggest challenge is to get listed on the right app because visibility matters the most,” adds Verma.
Chaurasia says the biggest challenge is maintaining the staff and quality of food. “Add to that, marketing and getting recognised as a delivery-only restaurant. So, we did free sampling at a nearby housing society and word-of-mouth publicity helped,” he says, adding, “You have to also take care of your budget and keep within the limit.” One has to choose the location of their kitchen smartly. “I can deliver within 5 km radius including Kalyani Nagar, Kharadi, Viman Nagar and some parts of Magarpatta as well,” adds Chaurasia.
Not only the location of the kitchen, but also the catchment area that it delivers to matters. “It’s an optimisation decision — cloud kitchens can be opened in areas with low rentals and good road connectivity so that they can deliver to high demand zones for a particular cuisine and price. In the absence of a high visibility physical outlet (such as a dine-in restaurant or at a prominent location like malls or high streets), marketing and advertising efforts (features on relevant platforms such as food aggregators, social media enhancement and local media reach out, among others) are important to build a long-term sustainable business,” says Sardana.
Shinde’s experience with Swiggy in the initial phase was exciting. “It kind of helped us get noticed along with the quality of food that we offer. We also made business because of the offers in Swiggy. However, post the offers, business was down. But we have yet again planned to run the offers. We have priced the items accordingly so that even after giving 50 per cent discount, we will be able to make 10-15 per cent profit,” says Shinde.
Koeli Chatterjee, along with Shikha Chakraborty, runs Copper Handi at Hadapsar. This cloud kitchen specialises in Kolkata-style Biryani, Rolls and Mughlai Parathas. Chatterjee, says that in addition to everything else, packaging of the food is very important. “The boxes and trays that we use are microwave safe and tight so that the gravy doesn’t leak. We have to also keep in mind that it takes a minimum of 40 to 45 minutes for the food to reach the customer, so it has to stay fresh,” says Chatterjee, adding, “Social media plays a key role for players like us. If you have a community-based Facebook page and your existing customers rave about your food, it can be of great help.”
Are food aggregators giving the push?
Though cloud kitchens depend on food delivery apps for their business, no single app helps. Each one is still figuring out the best.
“Swiggy Access is building hundreds of pods to help thousands of small, medium and large restaurants expand to newer locations with a small fraction of their regular investments, giving them access to more consumers in ways that have never been possible before and building more loyalty. The kitchens work on a plug-and-play model where restaurants bring in their own equipment and manpower to simply rolling out operations. Restaurants can leverage Swiggy’s data insights and consumer feedback which helps them optimise the kitchen space at Swiggy Access with details like stock planning, demand forecasting, preparation time, and order edits,” Swiggy spokesperson explains.
“Zomato has its promotional offers and area-wise clicks that you can purchase, so that the name of your brand pops up at the top,” says Chaurasia, adding, “Once a customer orders from The Urban Kadhai and continues to do so, the name of the restaurant automatically appears on top of the list. We have a great number of repeat customers.”
Chatterjee says that these apps have genuine rating system which helps promote the business. “Nowadays, one can search restaurants by rating and fortunately for us, we have got good ratings,” she says, adding that there is no denying that they give away a huge chunk of their profits to these apps but as the business grows, they will reduce the burden. “Having said that, small cloud kitchens are running because of these apps because they are taking care of the logistics,” she points out.
Competition with restaurants
Some of the key areas, including Baner, Viman Nagar, Warje, Wakad, Pimple Sadagar, Kharadi, Hadapsar and others, that have the IT crowd, already have more than hundreds of restaurants. For example, Baner is home to around 340 restaurants, Pimple Saudagar has around 300 and Hinjewadi (as Verma pointed out earlier) has 700.
Competing with restaurants and cafes is a huge task for cloud kitchens. Verma says that considering the crowd in Hinjewadi, they had to plan their combo meals. “Mostly, we serve combo meals because that’s the demand there but at a competitive rate. You need to know what the crowd in that locality is looking for,” he says.
“The menu that I have created isn’t too highly priced. This is what the younger generation wants,” says Kazi, adding, “We are preparing everything in-house, from the patty to the sauces. The quality and taste of our burgers and affordable pricing attract customers.”
Cloud kitchens have just begun their journey. Over time, these small players will gather experience and most likely, turn into big ventures because of their affordability and convenience to customers.