Camile Thai Kitchen Founder, Brody Sweeney looks at the trend of restaurants using cloud or ghost kitchens to expand internationally, and the part mobile tech plays in their operation
It is an understatement to say that the hospitality industry has gone through massive challenges since the beginning of 2020. The economic toll of COVID-19 on the industry has been harsh, though the toll was not evenly distributed. A higher level of digital maturity was a clear success indicator for most restaurants that survived the crisis, along with an ability to pivot to offer takeaway and delivery services, ranging from standard takeaway options, cook-at-home boxes and cocktail kits to subscription food boxes.
Over the past 18 months, technology solutions across the entire hospitality industry evolved at such a fast pace that keeping up with changes was challenging at times, even for those who work in this sector. This rapid rate of adoption in the industry caused even the technophobes in hospitality to rapidly embrace tech solutions. The investment bank UBS produced a 2018 report, “Is Kitchen Dead?” that estimated that by 2030, the majority of meals will be ordered online. It wasn’t just the ghost or cloud kitchens that were highlighted, but mobile ordering systems and the prospect of drone delivery too.
Mobile technology allows for improved customer service. Advances in technology each year, provide customers with a straightforward service, seamless customer experience and minimal disappointment. As the population of adults with a mobile is increasing worldwide, any restaurant without a usable and flexible online presence will lose out to competitors in the current and future environment.
The most notable growth has been in the areas of Digital Ordering & Home Delivery; and On-Premise Ordering & Payments Tech, including kiosks, mobile ordering and payments, as well as cashierless checkouts. In addition, we also saw tech companies reinventing themselves to stay in business during the pandemic. This trend is expected to continue post-pandemic, with the European online food delivery market forecast to grow at a CAGR of 5.8 per cent to be worth $20.27bn by 2026.
While many restaurant operators were familiar with the concept of cloud kitchens and virtual brands before the pandemic, these formats are now predominant in discussions on the “booming” post-pandemic hospitality industry.
Cloud kitchens are a single location to facilitate food preparation for multiple restaurant concepts to maximize efficiency and profitability. The concept took off during the pandemic, as indoor dining faced restrictions and demand for at-home dining soared. Indeed, the concept has been embraced eagerly by restaurant owners not afraid to change their business models and move away from the traditional bricks and mortar kitchen.
With the flexibility to place one order with multiple restaurants simultaneously, regardless of location, restaurants have the ability to capitalize on the demand for food delivery, while guests receive a customized dining experience.
Whether part of an existing kitchen or a separate commissary kitchen, the purpose of a cloud or ghost kitchen is to fulfil online orders for delivery or pick up. Ghost kitchens have the potential to solve real challenges for their restaurant customers, and there are tremendous variations on the economics, set-up, and ideal use cases.
This business model allows restaurants to scale-up and expand rapidly, in addition to benefiting new and smaller food businesses. They boast lower operational costs and risks compared to the bricks and mortar model. Costs such as renting a larger space for seated customers, and decor and renovations are removed, allowing these restaurants to engage in more competitive pricing strategies. Other expenses such as labour, salaries and inventory can be lowered in comparison to the conventional restaurant model. The lower costs reduces risk and provides cash flow for expansion.
Technology plays a crucial role in cloud kitchens. All orders come from online channels such as websites, apps, or third-party delivery providers. A cloud kitchen requires an integrated technology system for accepting online orders, processing payments and efficient kitchen management.
Expansion into new markets and territories has been made easier as ghost kitchens can operate virtually anywhere with lower costs. As there is no need for a physical storefront, this has allowed for many brands to venture into new territories through ghost kitchens. This can be done through partnerships with existing restaurants which may want to keep their physical locations, but also expand to meet new consumer demand.
A successful operation may also lead to the subsequent commitment to a bricks and mortar store in this location. An additional benefit of using the ghost kitchen model when expanding is the ability to learn about the market and trends, before the upfront investment for a brick-and-mortar store. Camile Thai Kitchen can learn more about the ever-changing customer base, as well as deciding through trial and error what products and dishes work.
While international expansion through the use of ghost kitchens boasts large benefits, it does not come without its issues and challenges. A brand using a ghost kitchen still needs to establish a presence online, rather than physical space. The lack of a physical storefront limits visibility of a new brand in an unknown market, and while online marketing may be more cost- and time-effective, it can be more difficult when entering unknown territory and make an early stage impact. Camille Thai has partnered with Kitchen United in the US market to test new cities.
But what a business loses in physical shop front presence can be replaced by the imaginative use of mobile technology. Social media marketing can be more effective, both in cost and time, and be more direct and targeted than more traditional methods of advertising. Data collection through mobile technology, especially those entering into new markets, allows brands to gain greater insight into their consumer base. In summary then, there is nothing for a technology forward business to fear in transitioning to or adding a cloud kitchen.