Cloud Kitchen is definitely a buzzword in the food business and a lot of good things are talked about this particular mode of business. Both of these models of business has its own pros and cons and nothing can be termed as just perfect. We will draft a 5 pointer comparison between cloud kitchen and restaurant and then based on that you can decide which one suits your goals and aspirations the best.
- Real Estate: In any brick and mortar store, real state cost is a major chunk of investment and recurring cost which adds a hole to any business. A restaurant definitely needs a larger space to accommodate dining and service area, also in some cases parking area. On the other hand, a cloud kitchen needs only enough space to cook and pack the food. On any day, the difference is more than 50% of the space between the two models.
- Human Resource: In any blue collar job, the attrition rate is the highest and food sector will top this list every time. Hiring, retention and effective utilization of staff will always remain a challenge in the food business, no matter whichever model we follow. Less the staff, less is the burden. Considering this, cloud kitchen will always be a winner as it needs only staff for cooking and packing purpose. For e.g, there is a cloud kitchen which only serves 4-5 items in the menu and is having 22-25 staffs working on any given day. Imagine the kind of burden this particular brand will have to go through if they decide to expand to dine-in and also increase their offerings. A small change can lead to a lot of chaos.
- Initial Investment: Real estate + staff + furnishing is the minimum need to start any restaurant. 50% less real estate + less staff + no furnishing is the minimum need to start any cloud kitchen. The equation very clearly justifies, why every restaurant either wants to move to the cloud kitchen or start a cloud kitchen under their existing real estate. The entry barrier has reduced by a huge margin compared to 3 years when dine-in was the only option available. A cloud kitchen can be started at a possible every budget by doing some permutation and combination of the requirement.
- Menu: This is the biggest challenge for any cloud kitchen as not every menu works in a cloud kitchen. You can read more here “The Best Selling items in a Cloud Kitchen“. A dine-in restaurant can serve exquisite offerings to its customers by virtue of their space and staff availability. This is return helps them to charge a premium as their offerings are not easily available. Along with that, a dine-in restaurant can also add and retain customers based on the ambience, service and add-ons like live music etc for their patrons. While doing so, they can also offer part of their menu as a delivery option. This results in better optimization of resources and space.
- Retention and Loyalty: The world has moved to a digital marketing domain where brands are spending more money on Digital marketing than the traditional way of marketing. Every new restaurant or cloud kitchen need to at least get on the digital marketing bandwagon to put out the word about them. Once a customer orders from a cloud kitchen, there is nothing much a kitchen can do to get them back other than by providing good food. And since the entry barrier is small and the menu is limited, there is a huge overlap between different kitchens. Customer loyalty goes for a toss unless there is something really exceptional. On the other hand, for fine-dine, likewise explained in point 4, there are lot many factors to create customer loyalty and increase the customer lifetime value (amount of money a customer spends on a brand over a period of time).
Now, we can decide which options suits us the best considering our current financial availability and future goals. There can always be a discussion for which is a better option. If you decide to open a cloud kitchen, don’t forget to read “5 factors to consider before opening a cloud kitchen“ Feel free to share your thoughts and ideas on the comparison between cloud kitchen and restaurant.