Pros & Cons Of Cloud Kitchens For Different F&B Businesses In Malaysia
Cloud kitchens looked like a futuristic concept just a few years ago. However, since the AGC, awareness and acceptance of food deliveries by formerly hesitant Malaysian consumers has grown.
This has led both established and new restaurant businesses to look for less expensive options, one of which includes cloud kitchens, and the ability to do away with dinners altogether.
But what are cloud kitchens?
Otherwise known as ghost, virtual, shared, or dark kitchens, a cloud kitchen is a restaurant without a physical storefront for customers. Virtual catering brands that use it depend solely on food deliveries through their own website or delivery apps like GrabFood, foodpanda, AirAsia food, beep, etc.
Cloud kitchens offer entrepreneurs the opportunity to expand an existing restaurant or start a business at a low cost. This is because most cloud kitchens offer unified services that support cooking space, refrigeration, marketing advice, and partnering with food delivery apps.
While it can be a faster and cheaper way to scale businesses, each business model still has its pros and cons.
The advantages of cloud kitchens
Reducing risk and start-up costs are great benefits of cloud kitchens. With built-in kitchen facilities and no dining space, ghost kitchens eliminate the expensive elements of a physical restaurant like renovations, decor, dishes, and wait staff.
For example, for a capital of RM10k in Cookhouse, entrepreneurs can start an online catering business, its founder, Huen Su San, said in an interview with The Star. This is in comparison to a typical start-up cost of at least RM500K for a brick and mortar cafe.
Cloud kitchens also give brands the space to experiment with concepts, fail and adapt quickly. Being online, it is possible to introduce new products, test their acceptance in the market and remove them from the menu as soon as they are introduced. In addition, flexible virtual kitchen leases allow entrepreneurs to reduce their commitments, compared to the long-term rental of a physical restaurant and the assembly required for it.
Most cloud kitchens in Malaysia are also equipped with back-end infrastructure such as cloud inventory systems, delivery partners, as well as social media and photo support. Thus, present fewer learning curves in the management of point of sale systems and marketing.
Another benefit is the increased reach of customers through delivery hubs, especially since most Ghost Kitchens are located in central hubs like PJ and KL. This makes it more accessible to a wide variety of customers ordering from home.
But, with the country once again encouraging the movement to stimulate the economy, cloud kitchens have some limitations.
The disadvantages Cloud kitchens
Operating from a cloud-only delivery kitchen sacrifices traffic from customers who otherwise would not have the opportunity to simply “stumble upon” a brand. Some restaurants even choose to pay a higher rental fee to be located in places with higher pedestrian traffic, especially in shopping malls.
Online delivery platforms are also a crowded space, with new apps appearing every two months. Being on multiple apps means more commission rate to pay, resulting in higher overhead costs after initially dodging front desk staff salaries.
As maintaining the quality of a food is essential to generating repeat orders, delivery-only brands face threats that are beyond the control of the kitchen. Such examples could range from bad traffic, weather conditions, or drivers making multiple stops along the way.
Packaging can also be a crucial part in maintaining the temperature of food, which means testing different shapes of containers to preserve the quality of the food as it is intended for customers.
So who are cloud kitchens good for?
Those who can benefit from cloud kitchens are probably home catering businesses overtaking their home kitchens, or even establishments looking to expand their customer base from different locations.
Indeed, these brands have already established a loyal customer base who can themselves be word-of-mouth marketing materials, overcoming the cloud kitchen con of sacrificing discoveries via foot traffic.
Flexible cloud kitchen pricing comes in many forms. Cookhouse offers rates that start at RM200 per person per day, or RM900 per person per month, including utilities.
Grab also launched GrabKitchen earlier this year at Desa Sri Hartamas. Despite their call, Vulcan Post has learned that they are not disclosing their rental rates at this time.
TCH Foodworks Co-Working Foodlab is another option for small F & Bs to start their business. Their space is mainly intended for R&D and culinary filming for restaurateurs. The weekly and monthly rates (5 days per week) for a single cooking station are RM1K and RM2K respectively.
So the average cost per month of renting a kitchen space in the cloud can range from RM 900 to RM 2,000 (based on what we talked about), compared to the aforementioned RM 500,000 capital expenditure. for the opening of a café in KL. The latter also comes with recurring monthly payments that can cost anywhere from RM25K to RM50K for loan repayments, rent, salaries, insurance, and utilities.
It’s no longer just delivery only
Although the concept of cloud kitchens started out as a delivery-only model without a dining area for customers, it has since grown in recent times. GF Ghost Kitchen, for example, is a hybrid food hall that combines multiple brands in a retail store with a shared dining space located in shopping malls. It’s basically a miniaturized food court if you will.
EPiC Food Hall is another brand offering the same, with storefronts in places with heavy foot traffic like Bandar Sunway, Mont Kiara, and Damansara Perdana.
However, the above brands currently only offer strategic partnerships with restaurants and are not yet open to restaurateurs using their shared kitchen space. Nonetheless, these hybrid shared kitchens provide opportunities for new and existing restaurants to enjoy the best of both worlds.
For consumers who eat in these food halls, much like in a food court, several people in a group can order different dishes while continuing to dine together. By reducing them only to deliveries, consumers may have the option of paying only one delivery charge when ordering from multiple brands in the same store (as with GrabKitchen).
Clearly, cloud kitchens are a very attractive business model for catering businesses, budding home businesses, or established brands, but some may still choose to keep their physical stores.
For now, consumers still enjoy going out to dinner somewhere, and having a physical storefront creates more trust in a brand, but maybe we’ll see a gradual change in that behavior as more brands move forward. Cloud kitchens are also becoming more common.
- You can read other articles we’ve written on food deliveries here.
Featured Image Credit: Cookhouse
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