Five important differences between Restaurants and Cloud Kitchens

April 17, 2024

The Food and Beverage (F&B) industry has existed from time immemorial. Starting from roadside inns catering to hungry travelers to Michelin-rated restaurants where dining is an experience, the F&B industry has evolved significantly. With rapid urbanization, this industry will further change to cater to the evolving needs of the customers. Delivery of food at home is one such evolution that is here to stay.

In India, before the all-pervasiveness of Swiggy and Zomato, we had restaurants handing out printed menus to their customer base. Ordering in was a laborious job, done over the phone, with no guarantee of getting the right items and most importantly within the 30 to 45 minutes time window. Fast forward to the Swiggy Zomato world, ordering in is a very convenient process. Talking about scale, in 2023, every day we see about 4 to 6 million food deliveries happening in India. The suppliers to this need are traditional restaurants and the new-age cloud kitchen business.

Differences between restaurants and cloud kitchens

Here is a list of the 5 critical differences between Restaurants and Cloud Kitchens!

1. Service vs Factory Model in Operations

Service is a critical element in a Restaurant. The guest who visits the restaurant should walk out with a great experience in which the actual food is only one of the components. The décor of the place, the behavior of the service staff, etc are equally important factors. In a Cloud Kitchen, there is no guest walking in. The kitchen runs like a factory. Delivering what is promised consistently is the mantra. There is only one chance to get the food right, once it is out of the door, there is no way to make any changes.

2. Menu Selection and Packaging Considerations

Restaurants generally have a fixed menu. The items, pricing, portion size, plating, etc need to be decided beforehand, and once set, it has to execute this plan for a few months. Changing things frequently will create dissonance with the customer Cloud Kitchens have the advantage of changing menu, portion sizes, and prices very frequently. They can add and remove items depending on the season and customer response. Ensuring the product reaches the customer correctly is the most important factor. For example, a sizzler in a restaurant that may be a customer dine-in favorite will be a disaster when shipped to the customer.

3. Ratings and Metrics

Getting customers to provide honest reviews in restaurants is difficult. While it is possible to get some forms filled up, we never know if the customer loved the place enough, to make another visit. We, humans, do not like to give unfavorable feedback unless the experience is horrible. We just won’t visit the next time. Ratings are mostly brutally honest in delivery. Getting the ratings right, and working on the feedback provided are critical elements of a cloud kitchen's operations. There is a direct correlation between sales and the ratings displayed for the brand on the aggregator. In some sense, getting this metric right ensures success in the delivery business.

4. Offers and menu fine-tuning

Special menus and discounts cannot be changed and communicated easily in the restaurants. Customers expect a certain consistency of experience when they visit a restaurant. While there is flexibility in the long term on menu changes and positioning

Changing discounts, and menu items based on the time of the day, day of the week, etc are very easily done in the online world. Additionally, the data related to such changes can be analyzed and offers can be improved to drive more sales and bottom-line.

5. Location Relevance

Traditionally location, location, location is the core mantra in retail including F&B. Once a restaurant is set up, driving additional walk-in’s is a herculean task and involves expensive marketing. At the same time, getting the location right can be a very important factor in the success of a restaurant business and can act as a significant moat against any competition.

Getting the demand area right is what matters in a cloud kitchen. The exact building or the street matters less. In fact, the specific kitchen can be moved around in the same demand zone without much impact on the overall demand. Advertisements and discounts can be creative ways to drive more menu opens in the digital world with lower costs. That said, it is also easier for another competitor to win over your customer if their ratings and pricing is better than yours. However, compared to the risk of getting the location right in the offline business, running a great online operation is a much better and less risky option.

While there are many more nuances in the restaurant and cloud kitchen business, meeting and exceeding customer expectations is the key to both. Everything else is secondary!

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