Council Post: Cloud Kitchens: A Technology-Driven Phenomenon
CTO and Founder at pulsd — a company in the business of democratizing fun in New York City.
Like seemingly everything else, technology has been taking over the food industry. Around 60% of new restaurants fail within the first year, and almost 80% shut down before their fifth anniversary. So if technology can give the industry an uplift, I’ll call it a win.
What are the cloud kitchens (a.k.a. ghost kitchens, shared kitchens, dark kitchens or virtual kitchens)?
They have been in the news a lot lately. So chances are that you have at least heard of them. On the surface, cloud kitchens are delivery-only restaurants. However, if you dig deep, you’ll find out that they are a little more than that.
Historically, we have used the word “cloud” to mean either that the processing happens at some data center or the files are saved at a data center. However, the meaning of the word has evolved lately to include anything that happens in the background so you can get the final product wherever you are. Cloud kitchens are restaurants that only have kitchens. They are essentially food production facilities where dozens of restaurants rent space to prepare delivery-optimized food items.
Cloud kitchens are more of a technology play than a restaurant
The major innovation is not happening in the kitchens but in the cloud. A data-driven approach has all the venture capitalists running to grab a piece of it, as opposed to traditional restaurants, which VCs generally stay away from. There is a good reason for that. Traditional restaurants are capital intensive, not easily scalable and have thin margins, making the ROI for VCs slim.
How do cloud kitchens command higher margins?
The biggest cost for a traditional restaurant is the rent, more often than not. A prime