How Exactly Does Cloud Kitchen Work?

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It’s an undying fact that cloud kitchen business models are still evolving. Restaurants operators are increasingly transitioning to these kitchens that have more opportunities to serve.

Post-pandemic, the global online food delivery market is about to hit $137,596 million in revenue by 2023, and big-Bs in the food sector are up on their feet to upgrade their operational efficiency.

In short, technology adoption across restaurants is picking up stellar growth – and cloud kitchen has become a priority for most to get started with.

Considering ongoing changes in the food sector, restaurants are now finding vast potential in cloud kitchens. A new survey by the U.S. reveals over 67% of restaurant owners are about to move to Cloud Kitchen.

But how does a cloud kitchen work? Why are restaurants shifting to the revolutionary kitchen concept? As a restaurant operator, should you also visualize a brighter future in it? This article carries a breakdown of information to learn everything about it.

On this walkthrough on Cloud Kitchen, you will learn –

  • What is a cloud kitchen, in simple words?
  • How does cloud kitchen work?
  • What are the types of cloud kitchens for restaurants?
  • What are the benefits of cloud kitchens for restaurants?
  • How to choose an ideal cloud kitchen?

Let’s head right into our discussion and answer some questions.

Cloud Kitchen: A Simple Explanation

A cloud kitchen is unlike a physical kitchen. The new kitchen concept has no cooking counter or a dine-in space that can be touched. Indeed, these digitalized commercial kitchens work on the delivery-only business model.

This business model enables real-world restaurants to prepare and list menu items online for instant delivery and takeouts.

Maybe you’re thinking, “What’s new in that?” well, you can be right because it looks similar to a – Privately Owned Restaurant Website – but it isn’t like that.

The purpose of these kitchens is primarily to help restaurants expand, discover new markets, and launch trials with minimal effort, even without losing business productivity and reputation.

At a lower cost, cloud kitchens help restaurants optimize their operations as well, enabling them to offer a better experience to customers.

But, if you’re still struggling to get a clear picture of a cloud kitchen and can’t understand it well, knowing how does cloud kitchen work may make things easier for you.

How Does Cloud Kitchen Work?

Cloud kitchen is a digital solution designed to adapt to the changing habits of modern customers. But compared to a physical kitchen, these kitchens have no physical facility to welcome customers on the premises.

However, these can reside within the Smartphone or any smart gadget you are holding in your hands right now.
Simply put, orders at cloud kitchen come from an online food aggregator or ordering system, e.g., the App2Food website or application which might have been pre-installed in the user’s device to facilitate speedy food delivery for off-premise dining.

In short, cloud kitchens are entirely digitalized. You can view them, but you can’t sense the tasty, aromatic flavors or feel food items as you often do in a restaurant. That’s how do cloud kitchen work.

But don’t take it as a standard restaurant delivery application. Cloud kitchen enables a restaurant to launch multiple brands from the same delivery-only kitchen, using a similar infrastructure that typical restaurants can’t.

Simultaneously that cuts back the two most threatening operational costs – rent and labor. This leads to maximum focus on creating more tasty cuisines and not on the unnecessary burden. Restaurants can also diversify their businesses and expand their customer base through the business model.

Understand the ‘Cloud Kitchen’ Concept through an imaginary situation.

Suppose a restaurant that sells Mexican food uses Cloud Kitchen to facilitate smoothness in the food delivery operations. But soon, it launches a Chinese variety and intends to introduce them in the Mexican menu, which is a bit experimental. Instead of mixing them up with an existing menu, a restaurant owner can launch a separate brand to tap into a new business venture without ruining the existing reputation.

This might have answered most queries on how does cloud kitchen work. But apart from these, more moving pieces are involved in this discussion on cloud kitchens.

Being fully digitally operated kitchens, they may invite large investments in technologies. But it also depends on the cloud kitchen business model type you are partnering in.

6 Most Popular Cloud Kitchen Business Models Types

Cloud Kitchen is often mistaken as just a single delivery-only solution for restaurants. But the reality is it is divided into six different categories that are as follows:

Model #1 – Brand-Owned Cloud Kitchen

Also referred to as “Independent Cloud Kitchen,” it operates under a single brand and has only one location. However, the restaurant may not have any place to dine in or a physical store. Hence, they are quite popular among restaurant owners that want to avoid property cost related to renting or don’t have a budget to invest in real estate. These brands may have a self-delivery option, but they prefer outsourcing food delivery service providers in most events.

How does it work?

  • Orders come from online sources.
  • Kitchen work is done.
  • Cuisines are packed
  • Orders are set for delivery.

Model #2 – Dine-in Brand with a Separate Delivery & Production Unit

It is an upgraded version of “Independent Cloud Kitchen,” wherein a single brand has a separate production unit. Such restaurants may have an existing dine-in restaurant but are starting out a cloud kitchen as a side hustle. The idea is often selected by a brand when they are experimenting with new cuisines or testing out new menu concepts without affecting the existing business line. Simply put, the dine-in business model and delivery production line may operate separately. For successful order executions, restaurants may even partner with aggregators to deliver their products flexibly in the city. Alternatively, they may use their own staff.

How does it work?

  • Orders come online
  • Kitchen work is done.
  • Order is packed
  • A mix of aggregators’ dependency or self-reliance delivering an order

Model #3 – A Dine-In Brand With One or Two Shared Kitchen Locations

In the cloud kitchen concept, a business already has a well-established dine-in space, but the kitchen task is divided between two parties. Such as, a restaurant owner may rent out its kitchen space to divide operations and serve more customers, or they may outsource a kitchen outlet on lease. The cloud kitchen business model is normally adopted on special occasions, events, and weekends as well. The staff rotates from restaurant to cloud kitchen, whereas aggregators may take up the duty of the deliveries.

How does it work?

  • Orders come online
  • Preparing orders in the shared kitchen
  • Order is packed
  • Delivered through aggregators or private employees

Model #4 – Hub & Spoke

The cloud kitchen concept may have a centralized production unit because most items are pre-made before they reach out to different units in the market. Simply put, business operating under this model has multiple pop-up locations. To meet customers’ requirements at each location, some cuisines or food items, e.g., pizza toppings and peppers, are prepared in advance at a single production unit in bulk. This eliminates the hassles (if you have any) with producing food on the dining site. Restaurant brands operating under this cloud kitchen concept usually have large-scale operations.

How does it work?

  • Orders come from multiple online sources.
  • Multiple kitchens, but may have only a single brand.
  • Changing the menu with brand-source flavors, toppings, or a variety
  • In-house delivery

Model #5 – Hybrid Cloud Kitchen

Most people struggle to differentiate the hybrid cloud kitchen and how it works. Let’s answer; a hybrid cloud kitchen is wherein a single business supports different brands (each from different backgrounds, serving different cuisines) no matter if they are working in a privately owned space or in the shared kitchen. Multiple brands feature on a single dashboard and access shared benefits for being into existence. Also, a single restaurant is even allowed to run multiple brands and market multiple cuisines. However, delivery services are either managed by the business providing these services, or they may be arranged by the brands themselves.

How does it work?

  • Orders come from a single source.
  • Multiple brands attracting customers
  • Multiple menus from different brands
  • Shared delivery

Model #6 – Aggregator Owned Cloud Kitchen

These kitchens are a bit different from hybrid cloud kitchens. It may have multiple brands, a variety of cuisines, features, and options. But compared to a hybrid cloud kitchen, branding and growth benefits are only accessed by a single business entity. Other businesses operating within either benefit from the brand power of the business or the delivery service offered by them. The business model of these cloud kitchens is exclusively built on a delivery-operation theme sometime.

How does it work?

  • Orders come from a single source.
  • Single businesses attract customers
  • Multiple menus from different brands
  • Delivery is done by an aggregator
How Can a Cloud Kitchen Benefit a Restaurant?

If you still need some motivation to get convinced of this revolutionary business model for the food industry, all these advantages have been illustrated below. Cloud kitchen offers some of the most promising advantages over standard restaurant operations, which are as follows –

Lower Investment
If you seek a one-word answer for how does cloud kitchen work? So it basically works with the lowest investment. You heard right! It literally takes fewer amounts than acquiring, buying a dining space, or taking a property on lease to launch a restaurant. You can start your own brand right from within the home. Simply connect with a firm that can assist you with entering into the cloud kitchen and start marketing your brand. Receive and execute orders as soon as customers begin to come in. Nonetheless, you can even save cost on repairs, more hiring, electricity, furniture, and other expenses.

Competitive Pricing
One of the biggest benefits accessed by restaurants moving to cloud kitchens is the competitive pricing. Compared to a dining-in restaurant, since a cloud kitchen smartly sidesteps from a business operation cost, quality food can be accessed at a relatively low price. Simultaneously this helps a restaurant gain a competitive edge in the food industry. Exposure to an enhanced profit margin is also possible in case a brand wants to keep its cost parallel to the market cost. Alternatively, cloud kitchen can run combo offers at competitive pricing as well.

Manage Multiple Brands Easily
One of the remarkable benefits offered by a cloud kitchen to restaurants is business expansion. Simply put, if you are a single-brand business entity willing to include a wholly different taste in your menu but fear being too experimental. Don’t worry. Cloud kitchen lets you create multiple brands and build menus separately for the new cuisines. Putting extensive capital is also not required. That’s great; if the menu works out, you can move on. Unfortunately, you will be in no profit and no loss zone if it doesn’t. But avoid doing that, as your maximum focus must be on real growth.

Quick to Start
It is quick to get started on a cloud kitchen compared to a restaurant operating digitally or physically from any location in the city. Simply connect with an aggregator or firm providing a cloud kitchen facility and go ahead. However, the eligibility criteria and application steps can vary at different companies providing such services. But that’s a different scenario if you own a cloud kitchen that is both costly and time-consuming. Therefore, it’s worthwhile to join a pre-built cloud kitchen where a third party handles the majority of operations. Such as, giving contact details and restaurant menu details is the only requirement.

Menu Flexibility
People who know how cloud kitchen works are well-versed in menu flexibility. These business models solve real-world problems related to menus. Simply put, in most events, you want to test a few latest cuisines, or you may wish to change the restaurant menu entirely. But it can be an inherently risky deal; most restaurant operators think twice before making such a big change in their business. On the other hand, there’s no room for anxiety if you are operating your business entirely on the cloud kitchen. These kitchens allow you to create a custom menu either with your existing brand identity or through a brand-new one for experimental reasons.

Improved Efficiency
Compared to an offline restaurant, a cloud kitchen provides improved efficiency to businesses. How? Well, the magic resides within the data available in the abundant amount on the CLOUD. Restaurants can use this data for workflow optimization so that only needed and the best service can be served to a customer. The data is more helpful to those business entities running multiple brands on the cloud platform. From the most browsed cuisines and order placement to order fulfillment – every important data is garnered in real-time by the cloud kitchen. This later helps restaurants move to cloud kitchens.

Increased Brand Reach
Cloud kitchen market is expected to become over $139.37 billion empire by 2028. The market is already picking up a stellar rise which is happening because more and more people want to be in this new trend of cloud kitchen. Also, cloud kitchen facilitates brand expansion with the power of marketing tools and software. The operator of these kitchens advertises themselves organically on search engines, third-party applications, and social media. Simultaneously that provides a restaurant brand exposure to a larger audience in no time.

One of the significant benefits of bringing momentum to the cloud kitchen demand in the food industry is scalability. The future of the food industry is already flourishing in the digital world, especially cloud platforms, and will keep progressing in the upcoming years. The demand for cloud kitchens has largely been driven by the global pandemic and universal social distancing norms. Some research reveals that the cloud kitchen market has been growing at a compound annual growth rate of 12.4% since 2021 and will keep growing till 2028. Hence, it is absolutely scalable, and there’s no room for doubts at all.

How to Make a Cloud Kitchen Work For You?

Preparations are also advised for restaurants planning to move to cloud kitchens. However compared to any other alternative, these kitchens are easy to run, and if you are prepared for how cloud kitchen works, it’s time to learn how to make it work for your business now.

Cloud kitchen expands a restaurant’s reach beyond the local visitors. So make sure you don’t end up with a silly mistake while visualizing instant growth. The location must be selected cautiously in cloud kitchen operations. Customers hate waiting.

But if the delivery agent approaches their home after an hour long, it will not just ruin relation with the customer but will also impact the freshness of the food. Simultaneously this can later put your business into severe trouble as well. Hence, picking an ideal delivery circle within which you can commit faster delivery is worthwhile.

Licensing is required to avoid infringement of the mandated laws and regulations built for fair restaurant operations. Even when establishing yourself on the cloud kitchen, if you have been found infringing on any rules and policies mandated for the fair usage of the cloud kitchen, you can run into severe trouble.

Especially in the U.S., not every restaurant or brand is eligible to operate on the cloud. Luckily, the criteria aren’t that intricate as, well. Simply pass the regulation, and you are good to go.

Online Ordering System
Online ordering systems are a powerful vehicle to drive your restaurant faster in the digital world. These systems are the perfect substitute for websites, applications, or any online portfolio where you may wish to launch your business online.

These systems are actually software occupying ready-to-use themes, features, and functions that aspiring restaurant operators can use to create their own digital portfolio in minutes against a small monthly fee. App2Food is one of the best examples of an online food ordering system that also provides you perks of cloud kitchen upon joining.

Point-Of-Sale Software
Point-of-Sale is a need for restaurants for effective business management. The software is basically used for order management at physical restaurants. But make sure you don’t miss it when transitioning to a cloud kitchen in the assumption that things will go digitalized now.

In the end, some manual check points will also be involved, and their POS integration will come for your support. The system keeps track of the orders, prevents inventory, facilitates quick billing, and tracks the smallest business metrics, etc.

So make sure you don’t forget to link it with your cloud kitchen or online ordering system. However, how cloud kitchen work with POS is a wholly different chapter. But make sure you study it well.

Equipment and Tools
A considerable investment in advanced equipment, tools, and machinery will be required when transitioning to a cloud kitchen. The reason lies in the speed. Cloud kitchens are growing in demand; your desk will be loaded with orders within a minute if things go well.

But if you aren’t prepared with the needed equipment and tools, e.g., the fastest internet, computer, machinery for mass production, etc., some unexpected disasters may arrive. Most notably, work on energy and keep power back up to ensure you keep fulfilling orders without a pause.

When upgrading your restaurant, ensure you don’t forget to upgrade your staff. They must be trained and provided knowledge on cloud kitchens to ensure they also go modernize and adapt to the modern requirements of customers. A business has a higher chance of succeeding with smarter and more talented people on its team. So train them in a way that they keep your cloud kitchen up and running in your absence.

Great Packaging
Most brands use cloud kitchens as a side hustle or a place to experiment with their latest cuisines and tastes without exposing themselves. But in the wave of trying something latest for the achievement, ensure you don’t let all your efforts drown in vain by skipping great packaging. Most foods, especially pastries, cakes, pizzas, and food with curries, require special packaging. And if your restaurant is ignoring it, be prepared to face massive negative customer feedback. In cloud kitchen, mark negative feedback as the biggest business crusher.

Marketing! Marketing and Marketing!
Cloud kitchens are meant to boost progression for restaurants struggling to achieve growth. It allows one to climb up the ladder of challenges with the support of other businesses, if not possible by oneself. Still, marketing will be required to keep flourishing in the newest business territory. So keep persistent on the routine of SMS marketing, Email Marketing, and Social Media Marketing that deliver promising results. It will help your business gain recognition in the market. And, your brand will be picking up faster growth.

App2Food’s Cloud Kitchen
If you are fully sorted on how cloud kitchen works, without further ado, jump straight to App2Food – the online ordering system even serves cloud kitchen facilities wherein your business access the opportunity to flourish along with different restaurants at the same time.

Using App2Food’s Cloud Kitchen software, you can gain exposure to some powerful features and functions that refine your image online while deriving more customers for your kitchen on digital interface.

The range of features covered in the software is marketing tools, ready-to-use customizable websites, and applications which will help you a lot at scaling in the cloud world. The software serves the flexibility of menu creations, menu additions, and creating a separate brand on the cloud whenever desired.

All these are against a small monthly fee that isn’t going to impact your business profitability in any way, so don’t worry!