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GROWTH / JUNE 12, 2019 / 9 MIN READ

Preparing Profits in the Clouds

Lesser risk is involved in the cloud kitchen franchise model; it requires low
expenditure and is the high-profit-margin business.

SARA KHAN
Feature Editor
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While major food aggregators like Swiggy, Zomato and Ola

Foodpanda have reshaped the dynamics of the restaurant
delivery system, newer concepts like cloud kitchens are
further revolutionizing the space. According to Redseer
Consulting, online orders worth $1.7 were placed in the
country in 2018; the market is set to reach $3 billion by
2020.

Anurag Katriar, Executive Director and CEO, DeGustibus

Hospitality, says, “There is a visible shift of consumption
from dine-in to delivery at work or home. I would like to
believe that even the frequency of consumption of non-
home food is growing but the average spend is far lesser.”
The average spending of the consumers who order food
from the cloud kitchen brands hovers between Rs 200-
TRENDING
320.
ARTICLE
The founders of PopWonMo, another cloud kitchen
franchise, Krunal Shah, Imad Patel, Rajat Ryan and Kenneth
Dsouza, feel the consumption pattern is “rapidly changing
due to the sudden influx of substantial discounts from food
aggregators who are constantly competing for acquiring
new users.” (/article/giving-dubai-an-
authentic-taste-of-
Anurag Katriar of Indigo Burger Project, which is the QSR india.13472)
and cloud kitchen arm of DeGustibus Hospitality, says, “I
BARS AND RESTAURANT /
call it the ‘3C effect.’ Consumers have multiple choices, By
Kritika Agrawal (/author/Kritika-
there is the convenience of ordering over Apps and the Agrawal)

cost is also good due to deep discounting being offered by

Giving Dubai an Authentic
aggregators.” Taste of India
(/article/giving-dubai-an-
Als o Re ad: The C ost of B ui l di ng a Restaurant i n
authentic-taste-of-
Met ro C i t i es i n I ndi a
india.13472)
( ht t ps://w w w.restaurant i ndi a.i n/ar t i cl e/t he-cost -of- Share
2 MIN READ
b ui l di ng-a-restaurant-i n-metro-ci ti es-i n-
i ndi a.1331 1 ) SUPPLY CHAIN /
By
New Entrants Tarun Gulati (/author/Tarun-Gulati)

How Hotels Can Optimise

Though Zomato entered the industry in 2008, it was with
their Online Presence
FreshMenu that it first tested and validated the concept in
(/article/How-Hotels-Can-
2014. Later, players like Faasos and Ola Foodpanda joined
Optimise-their-Online-
the bandwagon. Recently, Oyo Rooms has announced its
Presence.9244)
entry into the cloud kitchen domain. The budget hospitality 3 MIN READ Share
brand is, currently, doing a pilot of its first cloud kitchen
under the Adrak brand. The Future Group is also mulling to FRANCHISE /
enter the cloud kitchen business. By Nusra (/author/Nusra)

How Bikanervala is
Multiple Benefits Disrupting the Snack
Cloud kitchens work on a hub and spoke model and deliver Market Globally
food at the customers’ doorsteps. The cloud kitchens need (/article/how-bikanervala-
low capital expenditure as dine-ins are strict no; that's how is-disrupting-the-snack-
restaurants can save money on furniture, rent and market-globally.11746)
Share
miscellaneous services. Many small businesses, initially, 1 MIN READ

take up the route of cloud kitchen formats to enter the

STARTUP /
restaurant industry. By
Pallavi Singhal (/author/Pallavi-
Singhal)
The cloud kitchen franchise model helps lower the rent-to- "I believe ‘innovation’ is the
sales ratio for a brand; the cost of manpower and rentals key to success" (/article/I-
decreases. In addition, it also reduces the product price for believe-innovation-is-the-
the consumers. Rebel Foods, which operates 160+ cloud key-to-success.9257)
3 MIN READ Share
kitchens with brands such as Faasos and Behrouz Biryani,
delivered kitchen sales growth of more than 75% in FY18 as
STARTUP /
compared to the industry average of 10-15% SSG. By
Reetika Bose (/author/Reetika-
Bose)
Business Model
“We are planning to Open
To open a QSR (quick-service restaurant), the average area
200 outlets by 2020”, says
required is 450 sq ft for 20-30 sitting, whereas, one can Robin Jha (/article/we-are-
operate from the cloud kitchen with just an area of 150- planning-to-open-200-
300 sq ft. A minimum of 25-30 lakhs is required to start a outlets-by-2020-says-
franchise unit of a cloud kitchen. The start-up investment robin-jha.11768)
cost includes lease rent, equipment, interiors, licenses and 2 MIN READ Share

registration, franchise security deposit, franchise fee and

operational expenses like the salary of the manpower and
rent.

The rent for 150-300 sq ft area is Rs 45,000-1 lakh. The

lease rent costs Rs 6.5 to 7 lakh per annum. The DAILY
equipment for cloud kitchen comes at between Rs 3.5-4.5
UPDATES
lakh. The cost of the interiors is around Rs 2.5-3 lakh. The
licenses and registration and franchise security deposit are Enter your Email ID
Rs 2 lakh each. The franchise fee is over Rs 3 lakh for a
cloud kitchen of 150-300 sq ft area and the franchisee Submit your email address to recieve the la
royalty is around 12.5 per cent on gross revenue per updates on news & host of opportunitie

month.

The manpower to run the store is around Rs 1.10 lakh per

month; seven to eight staff for each shift is required.

For Indigo Burger Project, Anurag tells the margin in cloud

kitchen business is around 50% and fixed expenses are
around 2.50-2.75 lakhs per month. “So if the store sale is
10 lakh per month, a franchisee can make around Rs 2.25-
2.50 lakhs per month - 22% to 25%. Very clearly, it is a top-
line driven business.”
The ROI for cloud kitchen businesses can be as low as 12
months, depending on the sale of the products.

Why Franchising?
PopWonMo founders find franchising in the cloud kitchen
area to be fruitful because “it helps to spread brand
awareness and scale up the business.”

Even if someone is new to the food service segment they

need not know the technical know-how with cloud kitchen
businesses. All they need to do is gather the products
together and get them delivered to the consumers. “Your
product will be consistent and all you need to do is to push
volumes”, says Anurag. This way the brand can have
control over the quality and supply of the product.

The franchisors provide their franchisees with supply-chain

support, training, backend support, financial management,
book-keeping, food costing, marketing, collaterals and
activations and even talent acquisitions. The cloud kitchen
franchisees get the support on the POS modules and get
the training on monitoring the key profit drivers.

Lesser risk is involved in the cloud kitchen franchise model;

it requires low expenditure and is the high-profit-margin
business.

Expansion Plans
FreshMenu has set up a network of 39 kitchens in its three
markets and is also exploring ‘kitchen-as-a-service’ model
with food tech giants Swiggy and Zomato. The start-up,
currently, operates in Bengaluru, Mumbai and Delhi.
Subscribe to
FreshMenu has delayed its expansion plans into Pune,
Hyderabad and Chennai which was initiated in 2018.
Our
Magazine
Indigo Burger Project which has a presence of 16 outlets at
present is looking for expansion in the west region of the
country as well as in Bengaluru; the aim is to reach to 100-
outlet mark. While PopWonMo operates two shadow
kitchens - one is located in Bandra west and one in Andheri
West in Mumbai. It aims to add five more outlets by Enter your Email ID
January 2020; the targeted areas for expansion are Lower
Parel, Worli, Malad, Powai, Navi Mumbai. Enter your Mobile

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