Multiple food brands, from Faasos to Biryani by Kilo, today are on Zomato and Swiggy, and these brands have a loyal customer base, which has come to expect food of a certain taste and quality from them. But these restaurants don’t have dine-in facilities. They only take online orders. These food joints have come to be known as “cloud kitchens” or “ghost kitchens.”
Dine-in restaurants were badly hit during the pandemic as people stopped eating out. According to a report by the National Restaurants Association of India, the restaurant industry in India will contract by 53% in fiscal years 2020–21.
At such a time, cloud kitchens found several takers. Such businesses are characterised by low entry costs because they don’t require waiters, front desk staff, parking space, etc.
But it is not that easy to establish a successful cloud kitchen business. Rebel Foods’ cofounder, Kallol Banerjee, pointed this out in a recent interview with Business Standard. He said companies have to spend on marketing and digital branding to ensure brand recall. Per-order commissions have to be paid to food aggregators such as Zomato and Swiggy. So the money saved on rent is spent on other things.
A cloud kitchen is similar to that modest eatery in your neighbourhood, whose kitchen looks out onto the street, which displays its kebabs on skewers to lure customers. Here, you see a queue of customers waiting for their takeaway orders.
As Rebel Foods’ Kallol Banerjee explained, India’s cloud kitchen and restaurant market is vastly underpenetrated when compared to the US and China. High rents, a lack of space in the big cities and a rising middle class will drive the growth of cloud kitchens in the days to come. In terms of gross merchandise value (GMV), the Indian cloud kitchen market is expected to become a $3 billion industry by 2024, up from about $400 million in 2019, according to RedSeer Consulting.