This article has been written by Shruti Singh from Hidayatullah National Law University, Raipur. In this article, the author discusses the legal compliances that are mandatory to set up a cloud kitchen and also discusses strategies to set up a Cloud kitchen business.
Cloud Kitchen – An emerging trend in Food and Business Industry
Gone are the days when dining at a physical place or restaurant was the only place to enjoy the company of friends, family or colleagues. The technology has led individuals to sit on their couches and enjoy delicious foods just a click away.
The concept of cloud computing is to deliver things to people at their doorstep using resources like data storage, services, databases, networking and software. It uses a network of remote servers to store, manage and process data rather than using a single computer or local server. It has access to a person’s data and softwares as long as the electronic data has access to the web. This term is usually used to refer to data centres accessible by many users over the internet.
With the increasing competition and growing technology, the food space has been volatile for quite some time now. There has been a sharp rise in the online industry which has also led to an increase in online food delivery systems and delivery only in kitchen or cloud kitchen.
Cloud Kitchens work exclusively for delivery only restaurants wherein the customers can order food online through an online ordering website or app. It has no physical place for dine-in. It is known by different names like dark kitchens, ghost kitchen, satellite restaurants and virtual restaurants which have gained popularity in the Food and Business Industry. If we look at the report published by the Goldstein research, the global cloud kitchen market was valued at USD 700 Million in 2018 and is estimated to grow at a CAGR of 17.5%(2017-2030). There are many restaurant owners working on its intricacies and trying to explore new opportunities.
Most of us would be thinking that this is not something which is very recent and I would like to tell you are right! Many countries have been effectively using the delivery platform to make a lucrative business. If we go a little back, you would understand that the pizza industry has built its business around optimising its delivery. The shift to delivery only restaurants has been only because of the ever-growing technology and changing customer’s habits. It offers certain advantages over traditional dine-in restaurants.
How to run a Cloud kitchen Restaurant
While the concept of cloud kitchen may sound very interesting it takes a lot of hard work, accessibility, and understanding customer’s habits to succeed in the market. Let us go through the things that make it successful:
The online delivery only restaurant
Since all the orders will be received through online platforms only, therefore its essential to have a Cloud Kitchen POS for cloud kitchens. There can be numerous sources through which we can order food online such as various online food aggregators, different websites and telephone.
Accepting orders and managing it is a complex task and can become a hassle also since each food aggregator provides an individual tablet of taking orders. POS helps in managing all the orders coming from different areas or sites without any issue.
The other method is picking up calls through a telephone. For that, there should be an effective calling system that can route the orders to the right brand and outlet. And when you have multiple brands operating at the same outlet, you require a robust POS system that can keep track of every order received for each brand.
Order processing in the Cloud Kitchen
The orders which are collected in a cloud kitchen are assembled and processed like standard orders. The brands and retailers have to maintain thor different tastes. POS helps in displaying the order as soon as it is made by the customer on the counter of a particular brand. Now as soon as the order is received the chefs can start preparing the food according to the details. Once the food is ready, the chef can mark it as done and send it for packaging.
The packaging staff can pack the food and then send it for the delivery. Each stage begins from ordering to delivering the customer, everything is recorded on POS. It helps in analysing the time taken for preparing the order and optimising the process.
Staffs in cloud kitchen
Since cloud kitchen is a delivery-only service, it doesn’t require much staff to take control of different areas. There is no need for waiters altogether as it has no din-’in facility. But it requires a highly skilled kitchen staff. The most impressive thing can only be food, so it has to be delicious. To build a reputation in a virtual kitchen, the food has to be flawless in every aspect. This requires highly skilled chefs who can decide on the menu and work efficiently. So it is important to invest in them properly. Then they require delivery boys to deliver the food and some helpers in the kitchen.
For a decent cloud kitchen to function, you require two to three chefs who can either be expert in one cuisine or can make different varieties of them.
Managing food suppliers
One of the most important decisions that you have to make is with regards to choosing your suppliers. A decision taken by a cloud kitchen restaurant for finalising their suppliers is mostly the same as by a normal commercial kitchen. If your restaurant has the same base ingredients and some different ingredients, you can choose to order the base ingredient from a particular supplier and different ingredients from different suppliers.
If the supplier offers a variety of ingredients then you can order all the things from the same supplier. You need to make sure that the supplier is punctual and particular with the orders just as in the case of a normal restaurateur.
It is also important that you are able to dictate the terms and conditions and within the required legal boundaries. You have to make a sort of relationship with the suppliers so that you can be benefited from it in future. If you order the ingredients in less quantity then you won’t be able to leverage your terms with the supplier. Also ordering things from different brands can increase your cost of production. So, it is always nice to win the trust of a few suppliers and work efficiently with them over a longer period of time.
Therefore the first thing to do is to make a list of ingredients required that you will news across brands and try to order maximum things from the same supplier. It will be easy for you to track the inventory and ensure the accountability of a single supplier. Even where there will be an immediate change in the goods required, it will be easy to communicate with a single supplier rather than contacting different suppliers for different goods. This will also be cost-effective.
Managing raw material for Cloud Kitchen
Managing the inventory in a cloud kitchen can be thought of as a complicated task but it is not entirely true. Yeah, having multiple brands under the same roof can make managing work a tedious task, but by developing a system of checks and numbers, things could be handled effectively. Here the POS system comes into the picture. A smart POS system helps in managing the inventory and stock requirements of multiple brands with a lot of ease. It makes it easier to keep the daily record of stock requirements from a single dashboard.
How to advertise your Cloud Kitchen Restaurant
The marketing strategy for a cloud kitchen is very different as compared to a normal dine-in restaurant. It is because a regular restaurant has a physical outlet where customers can walk in anytime they want, a cloud kitchen can lose out on visibility very quickly. To make up a Cloud Kitchen restaurant requires a smart and powerful marketing and branding strategy so that they are relevant in the market for a long period of time. Now, we would look at some of these strategies in brief:
1. Having an online presence
In a cloud kitchen business, most of the orders are received online via a website/mobile app. Hence, it is important to make the website creative so as to attract maximum customers. Investing in a good website/or mobile app is essential to entice the customers and improve the overall revenue.
Therefore it is crucial to have a solid online presence. This will provide the restaurant a virtual address and enable the consumers to find you with ease. Making accounts on different social media platforms will not be enough, you have to regularly update it and make it interactive to increase your visibility. Having an amicable relationship with customers is important and that could be achieved through regular interaction in comments, asking for feedback. The followers are the most loyal customers, always remember that.
Creative visuals, quick loading time, a brief and concise menu, a friendly mobile device are some of the indispensable aspects that you should keep in mind. Your ordering system gives your prospective customers an overall picture of your restaurant. Therefore it is important to put appealing pictures of your food online and make an easy to read the menu, which can be accessible in just one click. Interesting captions like ‘Click here and get amazing offers’ or ‘You will get your food in just a click away’ could be used to mark your importance. It really boosts the overall impression of the brand.
2. Introducing various incentive programs
Incentive in the form of offers and discounts really grab the attention of customers. You can email/message them on their email ids or a personal number and provide them with interesting offers so that they are compelled to buy. Different rewards could be given for loyal customers so as to repeat business and get better sales. Offers could also be provided on brands anniversaries. Coupons, discounts or additional things for free will excite the customers.
Then you can analyse the different sources of attracting the most number of orders, a popular mode of payment, most demanded dishes to curate customised offers. This will help in retaining customers and increasing your sales.
3. Rewarding loyal customers from time to time
There are some loyal customers that one has to keep by their side for a long period of time. So it is essential to winning their trust from time to time by giving them loyalty offers, various discounts etc. Keeping loyal ones while attracting new costumes will be beneficial for the success of the brand and will help in customer retention.
Make a stellar marketing strategy to impress and retain the regular customers and elevate their experience every time they order. This will significantly increase customer loyalty and interaction.
4. Optimising the website
In the Cloud Kitchen business, a prominent online presence is exceptionally important. A properly designed and curated website would promote proper engagement with customers and would be a determining factor in increasing sales. The website should contain all the necessary information like the detailed menu, delivery channels, customer reviews and ratings etc.
It is also important to keep the track of google searches made by people with tools such as Google Keywords Planner and Google Search Trends. It is important to keep on updating the website and optimising mobile devices.
5. Using third-party integrations
Nowadays, most people order food online through certain apps like Swiggy, Ubereats, Zomato and Foodpanda. Your integration with them is a must. Being on these successful websites will get you more orders for home deliveries and because they have their delivery mechanism, the cost will not be extra on your part. It will also help in discovering their potential customers for the virtual restaurant. Most people who order through this app do not know whether the food they are ordering is getting delivered through a Cloud kitchen, ghost kitchen or a regular restaurant. So if you want to attract a number of customers then you have to keep contact with the maximum number of delivery platforms out there to enjoy large-scale discoverability.
Social Media platforms have a massive reach to different audiences. Having your cloud kitchen business listed on social media is necessary for driving sales and increasing customer engagement. It is important to utilise the power of social media such as Facebook, Twitter, Instagram to increase the reach of your brand.
Social media could be used creatively to interact with potential customers by posting beautiful pictures of the food being prepared. You can share photos of food being prepared, share customer’s reviews, conduct giveaways and show the hygiene levels maintained by the Cloud kitchen. Promotion ideas like this would win customer’s trust and have a positive impact on them.
As the Cloud kitchen largely works remotely it is important to engage with your existing customers online and run various campaigns to grab the attention of people.
The legal compliances required to run a cloud kitchen
Before setting up a Cloud kitchen business, it is important to obtain proper license and certification in order to avoid any legal difficulties in the future. It also helps in validating your business since the customers cannot come and check the food safety and quality, hygiene standards and sanitation facilities. These certificates could be promoted so as to give potential customers the idea of what the kitchen looks like and build credibility.
FSSAI: The Food Safety and Standard Authority of India(FSSAI) is an organisation which works for security the laws relating to Food Business in India and also regulated the Food Business Operators(FBO) in the Industry. It issues licenses which are mandatory for food-related business and it is obtained on behalf of the company and its owner. The term of license depends upon the owner, it can vary from 1 to 5 year, but it can be renewed before it gets expired. You can also mention FSSAI on the packaging so as to make people know the standards that you have achieved.
For applying for FSSAI, you can collect all the documents and information by logging into FSSAI website.
GST Registration: After 2017, GST Registration for any type of business is mandatory and it is advisable to pay all taxes within time. GST must be submitted weekly, quarterly, or yearly. It also helps in procuring licenced vendors, as it reduces the per head cost if they have the GST number. GST can be filed on www.gst.gov.in.
Trade/ Health Licence: Every kind of business requires a specific form of license related to its kinds. This can be obtained from the local municipal office by submitting necessary documents.
Fire and Safety License: It is important to secure yourself from any future emergencies or troubles. It is not mandatory to get one but it is advisable to start with as fire and health agreements are mandatory at any workplace.
There are some additional licenses like trademark registration can also be taken to protect its brand.
Eligibility to obtain registration
Most of the owners register as sole proprietorship business which is a lucrative way to start the business. Registration under FSSAI is the basic license that is necessary for all Food Business Operators(FBO).
- A photo identity proof of Food Business operator.
- There should be proof to show possession of Place of business like Rent Agreement.
- Certificate for creation of business like Partnership deed etc.
- List of Products to be dealt with.
- A plan for a Food Safety Management System.
- Form-A should be signed and completed in every form.
Then there are different Central and State Licenses which are required to be taken.
All food operations having a license have to adhere to the rules of the FSSAI Act, 2006. And in cases of non-compliance, penalties are levied.
- If there is any kind of compromise in the quality of food making then a penalty of Rs. 2 Lakh will be imposed. (Rs.25000 in case of Registration holder).
- If there is found to be any unhygienic processing or extraneous matter in the food, then a penalty of 1 lakh is charged.
- Non complying with the directions of the Food Safety Officer will charge a penalty of 2 lakh.
- If the quality of the food is below sub-standard, then 5 lakh is imposed.
- If there exists a misbranded food then an amount of 3 lakhs is imposed.
- If at any point of time, the restaurant fails to provide true information or rather put false information or showcase misleading advertisements then a penalty of Rs. 10 lakh is charged.
The Cloud kitchen business has gained popularity, especially among youths. The pandemic has forced people to stay at their homes, as this has seen a sharp rise in online deliveries. Though the cost of setting up a cloud kitchen is less as compared to a regular kitchen, it takes a lot of creative hands to make it a successful venture. In a cloud kitchen, we can set up different brands under the same roof. All in all cloud kitchen business is quite an interesting affair to start with.
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