Treendly

by Treendly Team

April 19, 2020

Food-for-Delivery only restaurants are beginning to thrive because of food delivery apps. These restaurants are also referred to as cloud kitchens or sometimes, dark kitchens.

Why the trend?

Changes in technology and in consumer habits brought the ancient concept of food being sold in a “to go” fashion (i.e., food stalls) into the limelight today. There are several advantages for the cloud kitchen over the traditional brick-and-mortar type of restaurant.

Advantages include paying lower rent prices for space needed for business operations. Other expenses, like having servicing personnel, paying employment taxes, insurance, utilities and what it costs to furnish a full-size restaurant are also greatly reduced with a cloud kitchen.

Yelp notes in their Coronavirus Economic Impact Report that food delivery has doubled since the onset of the pandemic outbreak. Pizzerias and chicken wing restaurants gained 83% and 93% respectively in sales since the pandemic outbreak from delivery business. Convenience and time savings from cooking made the market available for cloud kitchens feasible. Shifts to its popularity began when people were asked to begin social distancing and became considerably more popular when restaurants were asked to close their doors to dine in customers and only serve delivery orders. The three largest delivery firms are GrubHub, Door Dash and UberEats.

An advantage of food delivered to your home over eating in a restaurant is that you are able to maintain social distancing with the restaurant staff, other customers and the food carrier and because you can pay over the phone with a credit card; no money has to be exchanged. Of course, there is the benefit of not having to cook, which is always a treat.

As people become accustomed to being able to order foods from cloud kitchens, the demand for them will grow.

Problem

Traditional restaurants will likely lose business in the delivery business as cloud kitchens grow, unless they optimize, i.e., decide to deliver and advertise more for delivery. For some restaurants that can mean up to 30% or more in their sales.

In Los Angeles, it can cost $1 million to rent and furnish a restaurant in a nice location; for $20,000 and 2 months deposit, one can begin a cloud kitchen. Additionally, because there is no customer traffic at a cloud kitchen, they can be housed in facilities in off streets with no traffic.

Players

Cloud Kitchen Restaurant Groups include Alt Grub Faction, Keatz and Rebel Foods. Providers include: CloudKitchens, DoorDash Kitchens, Fulton Kitchens, Kitchen United and Kitopi. There's also a dropshipping model provided by 2ndKitchen.

Future thinking

As setup costs drop, cloud kitchens will evolve faster. People will cook less and order more from cloud kitchens. Instead of cooking for cost savings, we will cook for the joy and experience of it. Full kitchens in some apartments will become a thing of the past. It will become more difficult to find casual dining locations. The focus for most restaurant businesses will be on efficiency or experience. Cloud kitchen franchises will be easier to start up.