A cloud kitchen (also called dark kitchens, ghost kitchens, or virtual restaurants) is a delivery-only food service operation that does not offer a dine-in facility. They let users order via their own website, or their own mobile app, through the phone, or through their listing on online food aggregators. They could choose to deliver on their own, or via online food aggregators such as Swiggy or Zomato.
Within the overall cloud kitchen format, there are a few specific models.
- Single-brand Cloud Kitchens
This usually caters to a specific area in the city and is a small operation. Basically, instead of opening an outlet with dine-in facility, they open only online, with the kitchen being the only physical entity.
- Virtual Restaurants
This is a virtual restaurant by an existing offline restaurant. They look at utilizing the kitchen to spin an online-only brand and list them as a delivery-only outlet on food aggregator platforms.
- Multi-brand Cloud Kitchens
Here, a company leases large kitchen spaces in multiple cities and utilize it to offer multiple cuisines under different brand names. A good example is Rebel Foods that owns online-only brands like Faasos, Behrouz Biryani, Oven Story and Mandarin Oak, among others.
- Shared/Co-working Kitchen Spaces
This is the equivalent of the WeWork model. An entrepreneur creates a shared kitchen space and lets it out to any chef who wants to utilize a ‘desk’ (counter?) on a plug-and-cook model. The chefs need to create their own brands and the kitchen owner would have deals with food aggregators to list the freelance brands inside their kitchen. The chefs could also work directly with the food aggregators to get them priority listing or search priority. The Bengaluru-based Kitchens@ (owned by Loyalty Kitchens, which is owned by the Empire Group of hotels) is a good example of this model.
- Aggregator-managed Cloud Kitchens
Here food aggregators like Swiggy or Zomato set up large kitchen spaces and invite either the restaurants already listed in their own platforms, or new chefs/entrepreneurs who want to start a new virtual restaurant to set up virtual kitchens. The aggregators could also create their own in-house virtual brands much like how Amazon has in-house brands like Solimo.
The basic idea in the last two is that a large kitchen space is shared between multiple chefs who prepare food that would be sold primarily/only through online platforms.
These ghost kitchens, at a kitchen owner level, need to comply with Indian regulations (and global equivalents) like FSSAI license, fire license, health/trade license, pollution certificate, Certificate of Environmental Clearance (CEC), PFA Act Clearance Certificate, Night Operations License, and GST registration.
Considering it is one large kitchen, at least the basic licenses like FSSAI, fire, health certificates etc. would be a single one at the overall kitchen level. The individual ones could be things like GST registration that is more about the money part and not the restaurant’s operations part.
Our only interaction with one of the virtual ‘brands’ inside a ghost kitchen is through a food-tech platform. They need not advertise or popularize their brands outside of the platform, if they want to keep their operations limited.
Now, if you are not happy with the food quality or quantity at an offline restaurant and leave a poor review/rating online, it’d, at an aggregate, affect that restaurant’s business. Because it is very difficult to replace that restaurant brand with another brand name, in the offline world, poor reviews would force them to make an effort to change the way they function.
But, for a virtual brand in a ghost kitchen that keeps its operations small and limited to one food aggregator platform, wouldn’t it be easier to change the name and start afresh?
To be sure, even if virtual, a brand name is important and builds on the image over a period of time. But these ghost kitchens are not targeting people who want to see and feel their restaurants before ordering from them online – they are targeting people who are more deal-conscious and want to keep trying newer places without bothering about whether they exist offline at all.
The people leaving poor reviews and deciding that they would never order from this virtual kitchen again would not have any other link to the virtual restaurant apart from the listing on one (or more aggregator platforms). The people would not know which shared kitchen space this particular virtual kitchen operates out of, to boycott the entire kitchen space.
So the cost of switching ‘brand’ is dependent entirely on the food-tech aggregator taking an informed look at the reviews/stars/ratings at their data. If it seems good, the brand could be scaled up, but if it seems poor, the very same kitchen spot inside the larger shared space could be rebranded and continue as-is with more offers and discounts for another period of time (till a newer brand could be slapped on it).
Could this potentially be the ‘rebrand/rename by night’ variant of ‘fly-by-night’ operation?