Food & Drink Features

No dine-in restaurant required: How virtual kitchens are future-proofing the F&B industry

Since 2019, Philippine-based startup CloudEats has been leading the way, establishing its delivery-only food operations even before the pandemic hit. By FELICIANO RODRIGUEZ III
ANCX | May 12 2020

With the COVID-19 crisis still ravaging the globe, the world as we know it has turned upside down. Businesses have closed, hotels have stopped operations, and many global industries have come to a screeching halt.

The food industry has been particularly hard hit. Restaurants and fast food chains are trying to cope with the enhanced community quarantine (ECQ) lockdown in Luzon by offering take-away and food delivery options. But with uncertain times still on the horizon, even if the ECQ is lifted, what can F&B businesses do to adapt and thrive in a new post-COVID-19 world?

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It’s true what they say, “Necessity is the mother of invention.” And in modern day adversity, technology is more often than not the solution to a community or society’s problem. Look at how app-based transportation solutions like Uber and Grab have revolutionized how we travel locally and abroad. This same strategy of adapting and infusing technology into a particular need can now be applied to food, in the form of the cloud kitchen.

 

What exactly is a cloud kitchen?

For one, cloud technology is not particularly new. The “cloud” is basically the Internet, a series of interconnected servers and hard drives where we store our photos, watch our movies, and yes, order our food. We already have app-based food ordering technologies here in the Philippines, like GrabFood, Foodpanda, among others. The cloud kitchen simply takes the concept to a different, elevated level.

Basically, cloud kitchens are purpose-built to create food specifically for delivery. Not the traditional concept of what, say GrabFood, does—a customer orders through the app; the app relays the order to a delivery person; the kuya buys or picks up the food from the selected restaurant; and then delivers the food to the customer.

In a cloud kitchen, the customer orders the food from the app which relays the order directly to the kitchen, without any stand-alone restaurant in the middle—they cook the order and then deliver it to you. Sometimes, they run the delivery mechanism; or sometimes it’s outsourced to a different delivery service. These commissary-like kitchens are also called “shared kitchens” or “virtual kitchens.” The delivery-only brands under these kitchens are, in turn, called virtual restaurants. 

In the United States, such virtual restaurants have already been gaining traction. Imagine huge open-spaced warehouses filled with rows of kitchen stations, all preparing various cuisines and fulfilling the orders of their customers. These virtual restaurants can host dozens of delivery-only brands, with each station fulfilling the food orders. It’s like shared office space, but for food. Such a concept can, in theory, keep costs down, since you don’t need a physical space to present and sell your food; and also, no need to maintain a full restaurant staff.

 

The CloudEats case

The applications and variations are numerous, and indeed, gives entrepreneurs added flexibility and options in selling their creations. One of the first to bring such a concept to the Philippines is a local startup called CloudEats. The company recently raised US$1.4 million in seed funding, according to an April 27 Rappler article, a testament to the cloud kitchen concept being the next wave of the future. CloudEats is now on its ninth month of operation, and takes in about 3,000 orders a day as of this March.

CloudEats co-founder and chief executive officer Kimberly Yao recently shared how the company deploys its particular iteration of the cloud kitchen. “CloudEats runs restaurants that list on online food delivery platforms,” says Yao, during an online interview with ANCX. The startup currently runs 5 cloud kitchens with about 70 restaurant brands. All of the in-house food brands are available on local food delivery services like GrabFood and LalaFood.

“I’ve been in the traditional food, beverage, and entertainment business for over 10 years,” Yao continues. “The F&B industry has notoriously thin margins, meaning it’s very hard to make decent profits. Every restaurateur knows this. So, I decided to incorporate technology with what I know from F&B and try to ‘future-proof’ the business.”

When asked about the food brands currently in their lineup, Yao answers, “Our restaurant brands that cover a variety of cuisines are constantly being developed. Some brands are being upcycled at the moment so, unfortunately, we won’t be able to provide a list.”

The food options offered by CloudEats are up to 20% cheaper, compared to others that are not made through a cloud kitchen, proving the cost efficiency of the business model, according to CloudEats. With the current pandemic crisis, such services are now thrust in the forefront, and have accelerated the growth of and need for cloud kitchen set-ups.

“Food is and always will be a huge industry. That fact is only furthered by current events. Food delivery services are very convenient, especially in the times we face today. The Philippines has always been at the forefront of mobile Internet usage. Filipinos spend over 10 hours a day online, the #1 population in the world on this factor. This was before COVID and I’m sure this only increases along with the current challenges we face.”

Yao then described how, here in the Philippines, small to medium enterprises (SMEs) still don’t have a firm grasp of e-commerce, despite the prevalence of shops like Lazada and Shopee. But now, businesses are forced to cope and adapt to new technologies, because of the troubles brought about by the COVID-19 pandemic. “They (the SMEs) are forced to fast track digitalization plans that were probably 1 to 2 years in the making. The opportunity for e-commerce is now, and in order to survive, everyone will go online.”

CloudEats is certainly riding the e-commerce wave with plans to further expand in the country as well as across Southeast Asia in the near future. Yao concludes, “Food is and always will be essential to every individual and because buying food online has now become a default action, more than just a convenience, the business will only grow from here.”

 

Photos courtesy of CloudEats