Here you would explore why the dark kitchen franchise is viable for someone who wishes to venture into the restaurant industry.
Dark Kitchen has now become a kind business model that is shaking up the entire restaurant industry. It is a restaurant-model with no storefront, not tables and chairs, no diners at all. Cutting so many errands aids the concept in becoming a high profit-low risk model.
In India, a major chunk of the population, especially the working class and students, are heavily dependent on online sites such as Zomato and Swiggy to order their loved food and satiate their hunger. Moreover, existing restaurants and QSR chains are now venturing into cloud kitchens because of its operational efficiency and low startup costs.
Booming Food Delivery Market
In India, the online food delivery market was valued at Rs 45.58 billion in 2017 and is expected to grow at a CAGR of 38% for the forecasted period of FY2018 to 2023. While taking a closer look at the online food delivery market, it is revealed that the dark kitchen category constitutes a major share in the growth of the online food delivery market in the country with a 30% market share.
The online food delivery market is constituted by another market of aggregators that are now heavily influenced by the Dark kitchens. With the rise of food-tech start-ups and the increasing internet penetration across India, the online food delivery market is showing no signs of slowing down anymore. This is one of the biggest reasons why big brands are going forward with the concept of a dark kitchen. The booming online food delivery market is yet another growth deterrent of the dark kitchen industry.
Why dark kitchen model is viable?
Here are the reasons that show why investing in the cloud kitchen model is viable for someone who wishes to venture into the restaurant industry:
Lower Operational Costs
As per the general notion, the operational cost of a restaurant is very high. This is because of various factors like startup costs, real-estate or rent costs, interiors, IT, inventory, manpower, salaries, material cost, and other miscellaneous expenses like safety and security, and so on. On the other hand, in a cloud kitchen, so many of the expenses get cut down. It doesn’t require investment in real-estate and interior costs.
Higher Margins and Competitive Pricing
In spite of the added cost of delivery, a cloud kitchen is still a much affordable model than running a brick-and-mortar restaurant where infrastructure and operational costs don’t let you earn higher margins. While operating a cloud kitchen, as the operational costs are reduced, there are greater possibilities of earning high margins. Ultimately, with higher margins, one has the ability to offer competitive prices and see the market’s response towards your venture, both in terms of food and service quality.
One of the best things about the cloud kitchen is that it does not need to be at prime locations since customers are never to visit the place. This develops a room for cutting down the costs of food, hence attracting more consumers.
A cloud kitchen provides limited and simplified menus so that more automation can be introduced. These companies have successfully automated all the packaging activities, which contribute to about 25% of the total workload.
Everything is automated to carry out time-consuming activities, ranging from pre-preparation activities to packaging. Cloud kitchens are also aggressively exploring more technologies that allow them to automate the entire operation.
Food Quality and Price
The regular restaurants face a lot of overhead expenses. This is one of the major reasons why they have to compromise on either the quality of products they use in preparing the food or the price. Ultimately, the quality of the food which should be the USP of the restaurant becomes its negative point.
However, in a cloud kitchen, the objective of the kitchen is to add value to the customers through their food only. It’s not the ambiance of the kitchen or any other factor that is going to bring the consumers to the cloud kitchen but the food. Therefore, the entire focus is on the food.
Low-cost model woos Franchisors & Franchisees
According to the general notion, the operational cost of a restaurant is very high. This is because of various factors such as startup costs, real-estate or rent costs, interiors, IT, inventory, manpower, salaries, material cost, and other miscellaneous expenses like safety and security, and so on. Whether it is about starting a restaurant afresh or it’s about owning a restaurant franchise, the total investment in a restaurant could easily go up to Rs 80 lakhs to 2 crore.
On the other hand, in a dark kitchen, so many of the expenses get cut down. It doesn’t require investment in real-estate and interior costs. The investment in a dark kitchen franchise could be from Rs 22-25 lakhs for an area of 150-200 sq ft with an expected breakeven period of 12-24 months.