DeliveryKitchen.net: Changing Canadian Restaurant Business Landscape.



Cloud Kitchens, Dark Kitchens, Online Kitchens, Virtual Kitchens, Ghost Kitchens, Cloud Kitchens, Delivery Kitchens…


The restaurant business is rapidly evolving. People are looking for ways to eat well with minimal effort. With this new concept, a whole world of opportunities lie ahead. Below, I have outlined some statistics as an appetizer.


Based on marketing research published by Statista.com, online food delivery industry in Canada has doubled in revenue over the past 2 years: from $1,539M to $2,959M. Platform-to-consumer deliveries, which take up the smaller part of the revenue share has tripled from $434,7M to $1,136.9M in only two years.

The number of online food ordering & delivery users has shown significant growth from 8.6M in 2017 to 10.78M and expected to reach the mark of 15.19M by 2023.

“Millennials” with low to medium income are the major users of online food delivery services.

Also, according to a Statista survey, 70% of consumers order food delivery from quick-service restaurants and 44% of consumers order food delivery at least once a month.


Top 5 countries that adopted online food delivery services are:

  1. China (Revenue: US$40,239M)
  2. USA (Revenue: US$22,073M)
  3. India (Revenue: US$7,730M)
  4. United Kingdom (Revenue: US$4,869M)
  5. Japan (Revenue: US$2,518M)

Despite similar mentality and close location to United States, Canada makes only US$2,004M in revenue, more than 10 times less than its neighbor.

The fastest growing markets are:

  1. Hong Kong
  2. Singapore
  3. Netherlands
  4. United Kingdom
  5. USA

No need to dig deeper. You’ve got the idea and you are hungry for more.

Waiter! Bring the main dish!


Where did it all start?


No seats, no reservations, no waiters to sweet talk over a glass of cabernet sauvignon. Dark kitchens — are kitchens with the sole purpose to fulfill online delivery orders.


Maple was a food delivery startup that launched in 2015 in New York. The restaurant prepared and delivered meals, had its own online delivery apps, delivery staff, and kitchens. Top chefs would prepare the main menu and have satellite kitchens provide the complementary dishes. This cut the costs of opening an actual restaurant, which allowed them to provide premium dishes at an affordable price. Well… they Failed. Maple did not thrive for several reasons, which you can read more about on Startup Cemetery.


Next was Travis Kalanick – former CEO Uber & UberEats. He began exploring the concept of delivery only kitchens and launched the company called CloudKitchens.com. Based on FORTUNE his startup already valued at $5 billion.

“… billionaire quietly raised $400 million from Saudi Arabia’s sovereign-wealth fund in January in a deal that could value CloudKitchens, his delivery-only restaurant company, at $5 billion…”

Business Insider Magazine, Nov 7 2019

“Since 2017, Uber has helped start 4,000 virtual restaurants exclusive to its Uber Eats app. The other — the one Kalanick is focusing on — is “ghost kitchens,” a name for those that have no retail presence and serve as a meal preparation hub for delivery orders.”

FORTUNE Magazine, November 8 2019

According to South China Morning Post, CloudKitchens planning to enter the China market – the biggest food delivery market.


This is the big one, literally. Rebel Foods today is the largest internet restaurant company in the world, by a wide margin. Their revenues and number of restaurants both grew 4X over the past 2 years.

REBEL Foods launched in 2016 and quietly raised $125 million in fresh capital from the Indonesian delivery service Go-Jek, Coatue Management and Goldman Sachs — now operates 235 kitchens across 20 Indian cities. The company processes two million orders a month. They offer cloud kitchens to every kind of cuisine imaginable under one roof. Their main competitors on the market are UberEats and the food delivery company Zomato, which itself has plans to open more than 100 cloud kitchens by the end of this year (2019). Zomato is not about the food preparation — but rather renting facilities, kitchen equipment and software to restaurants.

“Rebel Foods have zero location risk as each kitchen serves multiple brands (think a fully equipped, state of the art, 5-star hotel kitchen). This is fundamentally the power of building what we popularly call a “cloud-kitchens” serving some of the most daring food brands on the internet.

Medium, March 7 2019

Rebel Foods found specific patterns of food delivery business on Indian market. The discoveries they made shined the light on several opportunities:

Rebel Foods found specific patterns of food delivery business through the Indian market. The discoveries they made shined a light on several opportunities:

  1. Late-night ordering
  2. Takeaways
  3. Multi-national cuisines
  4. Pizza was amongst the top searched food item
  5. Indian cuisines outnumbered any other cuisine by a huge margin in terms of being ordered
  6. Biryani as a dish came out on top for consecutive multiple years amongst the most ordered

More on Rebel Foods here.


What’s the current situation?


Nowadays, dark kitchens are present almost in every market in the world. Several Dark kitchens launched their own delivery services:

  • Deliveroo (London, United Kingdom)
  • Takeaway.com (Netherlands)
  • Glowo (Spain)
  • Wolt (Finland) etc.

Deliveroo is quite unique and deserves a special attention.

Deliveroo’s Editions kitchens launched in April 2017. These delivery-only kitchens, sometimes known as ghost restaurants, allow restaurants to access customers in locations without needing High Street premises, thereby reducing set-up costs compared to a full-service restaurant. Deliveroo uses its data to identify areas where customer demand for certain cuisines is high and predicts which restaurants are likely to succeed there.

Wikipedia

In addition, Deliveroo provides the delivery service as well as marketing and order taking, allowing it to provide food from restaurants that do not normally offer a delivery service.


Sensing the Opportunities


Online food ordering and delivery services catalyse the change restaurant businesses are going through. The days of waiters, reservations, and long wait times will soon be in the past. A new generation of young people set a trend for efficiency. Efficiency can be achieved by following the path of least resistance. Amount of “work” it takes to eat out at a restaurant, is often unjustified. Not to mention the Canadian winters. No one wants to go outside when it’s negative 25 celsius. If you are simply looking to satisfy the hunger and don’t care about the restaurant experience it is absolutely unnecessary to spend the time commuting and waiting in lines. We are not going to Subway, Freshii or other healthy food restaurants for the “experience”. We are simply getting food to eat. High-end restaurants still have their place, as they serve an entirely different purpose.  They provide an experience for special occasions and nights out- not every day living.

Dark Kitchens deliver benefits to all the parties involved.


Restaurant Owners


Lower costs
The operator doesn’t have to worry about rent, shop-fitting or design, or other property-related costs with dark kitchens. Highly sought-after locations with high footfall and top-class staff are expensive to find and keep. If you don’t have to accommodate diners, employ waiters, or invest in decorative furnishings, then you obviously face considerably fewer costs.

Online Restaurants Incubator
Delivery Kitchen saves foodpreneurs from high rent. A low rent translates to both lower Capex and Opex cost. Our cloud kitchens are very lean in operational sense. With less staff and kitchen equipment, we enable new foodpreneurs for a low-risk venture. It is possible to start a cloud kitchen staff with as little as 2 to 3 people. As the operation is limited to a kitchen, the total Capex cost is much lower than a restaurant in a common sense. Our platform is essentially a launchpad for anyone with a slim budget, allowing them to start earning money and quickly breaking even. 

Real estate owners on major streets not only charge high rent but also charge up to 9 months of deposit. A cloud kitchen gives a first-time food entrepreneur a fighting chance to be successful. A low rent also allows the restaurant brand owner to serve customers at lower prices and creating value.

Test the Menu
Restaurants can safely test the new menu offering while minimizing potential loss which otherwise would be higher if done to the detriment of restaurant operations. Utilizing Delivery Kitchen, restaurants can launch a new menu in parallel to its main production process. This way the “main kitchen” remains working at 100% of its capacity without dedicating human resources and kitchen space to fulfill the new meal orders. This could be a great way to promote the restaurant by offering seasonal specials or special menus on the occasion of the holiday whether its Thanksgiving, Christmas or Easter specials.

Test the Market
Canada is as multicultural as it can get. In particular Toronto’s population is made up of 51 per cent of residents born outside of Canada, but is also home to 230 different nationalities, which makes it far more diverse than Dubai. Indian cuisine might work well in Markham, Brampton, Mississauga, Etobicoke, and Scarborough – where majority of Indian-Canadians reside. However it might be difficult selling “biryani” in North York, among an asian and eastern european population. Delivery Kitchens have developed the network of kitchens across markets with different demographic landscapes. We offer an opportunity to expand via delivery to areas without incurring the costs of a fully-functioning restaurant. This allows eateries to “test the waters” in different markets with minimal financial risks. Fail Fast!

Offer Better Prices
Delivery Kitchens allow restaurant owners to invest the majority of their financial resources into creating delicious dishes, testing new menu items, and expanding their digital footprint. They can lower the price on their menus as they don’t need to generate additional revenue to cover investment in other areas of the business.

Go Commercial

Offering free meals and caffeine is actually a highly effective — and cost-effective — means of motivating and controlling young employees.

Strategy+business.com, May 2016

More and more companies are offering free lunch. Restaurants and catering services within close proximity greatly benefit from such a trend. However, high rents and startup costs in a prime corporate sector make it tough for smaller restaurants to enter the market.

Most restaurants that are working with food delivery services focus to deliver one meal to one person/family at different places and times. Corporate lunch startups have figured out that group dining can deliver profitable margins. As a result, 35% of these VC-funded concepts were founded only in the past 5 years. Delivery Kitchens allow smaller restaurants and cuisines to expand the corporate market.

Delivery Kitchens offer space for your cloud kitchen in prime locations where you get access to the corporate customers. You can develop and test corporate catering offerings and create lunch/dinner options to serve businesses within the surrounding radius. This is a great opportunity to safely test the market, develop new menus, and increase your customer reach.

Focus on Food Quality
Minimizing daily operational disruptions that are associated with operating a full-size restaurant frees a lot of time, energy and resources. Now restaurant owners can focus more on the things they love – cooking great food.

Become more Efficient
Delivery Kitchens allow restaurants to become more efficient by lowering per- customer costs in the technology, marketing, infrastructure, and customer support realms.

Faster Packaging
Packaging food is another important aspect of food delivery and it takes up about 25% of your time. Delivery Kitchens work on creating effective solutions to help optimize packaging.

Extend the Opening Hours
A lot of people order food after hours. According to McKinsey’s, the highest-volume days for the online platforms were Friday, Saturday, and Sunday, when 74 percent of orders were placed. Lower operational costs and less staff required to operate the kitchen allow restaurant owners to extend operational hours. Being opened while the rest are closed simply means more orders and gives an enormous competitive advantage over the restaurants that can’t afford late evening operations.

Faster Order Processing and Meal Preparation
Delivery Kitchens offer the service of receiving and processing incoming orders by our professional centralized order receiving center. This allows restaurant owners to unload the kitchen staff from dealing with orders and increase efficiency of meal preparation. We take the job of receiving and processing the orders through online delivery platforms. We make sure that no orders were missed, all the missing information was confirmed with the customer and instructions were passed onto your cloud kitchen for immediate execution. Once received, your kitchen staff immediately begins meal preparation.


Restaurant Customers


Better Food
No more shiny banners, storefronts, or other marketing tricks to attract customers into the eatery. When ordering online – food quality is the only thing that matters. Restaurants place all their focus on creating the best foods they can.

Cheaper Food
Restaurants are able to minimize operational costs, which translates into more affordable menu prices. With lesser expenses, smart restaurant owners will strive to make their prices more competitive, which will attract more customers.

Richer Selection of Food Options
With a lower entry barrier, more foodprenuers will be able to enter the market and expand the variety of meals being offered. People ordering foods will have a greater selection.

Faster Food
Delivery Kitchens offer restaurants a more efficient way of order processing, which lowers your wait times. Shorter wait – tastier food – happier you.


Online Food Delivery Platforms


Large players like UberEats, DoorDash, Foodora are working closely with established brands to help them identify the items / cuisine that are in high demand in their area. And then these existing restaurants are creating virtual kitchens within their existing kitchen, with a curated list of items that are working well on the overall UberEats platform. While this is great for established restaurants, it makes it harder for “smaller fish” to break into the market.

Delivery Kitchens serve as a “Big Brother”, helping smaller restaurants to enter the online food delivery market. This brings more customers to online food delivery platforms and increase their revenue respectively.


Fast food drive-thrus, cuisines, and local restaurant chains need to re-think the way they operate. We don’t need to follow the food, food now comes to you, on demand.

Delivery Kitchen invites food chains as well as independent restaurants and food truck owners to lease space in one of our facilities for a monthly fee. DeliveryKitchen offers a lot of benefits mentioned above and can increase your sales while reducing the overhead.


oleksandr.tereshchuk1@gmail.com


References:

  1. Online Food Delivery – Canada: Statista Market Forecast. (2019, June 1). Retrieved November 29, 2019, from https://www.statista.com/outlook/374/108/online-food-delivery/canada.
  2. Howell, J. P., & Wanasika, I. (2018). Travis Kalanick. Snapshots of Great Leadership, 276–282. doi: 10.4324/9781315110066-39
  3. Marinova, P. (2019, November 8). Ex-Uber CEO Travis Kalanick Is Betting on the Rise of ‘Ghost Kitchens’. Retrieved November 30, 2019, from https://fortune.com/2019/11/08/uber-travis-kalanick-cloud-kitchens/.
  4. Бурых, Е. (2019, September 19). С черного входа: что такое “темная кухня” и как она меняет ресторанный бизнес: ForbesLife. Retrieved November 30, 2019, from https://www.forbes.ru/forbeslife/383769-s-chernogo-vhoda-chto-takoe-temnaya-kuhnya-i-kak-ona-menyaet-restorannyy-biznes.
  5. Roy, S. (2019, March 18). Building a multi-million dollar internet food brand. Retrieved November 30, 2019, from https://medium.com/swlh/building-a-multi-million-dollar-internet-food-brand-d6669db33d76.
  6. Deliveroo. (2019, November 19). Retrieved December 1, 2019, from https://en.wikipedia.org/wiki/Deliveroo.
  7. Gross, D. (2016, May 11). What Companies Gain from Providing Free Lunch to Employees. Retrieved December 1, 2019, from https://www.strategy-business.com/blog/What-Companies-Gain-from-Providing-Free-Lunch-to-Employees?gko=398a4.
  8. Hirschberg, C., Rajko, A., Schumacher, T., & Wrulich, M. (n.d.). The changing market for food delivery. Retrieved December 1, 2019, from https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-changing-market-for-food-delivery.
  9. Place of birth for the immigrant population by period of immigration, 2006 counts and percentage distribution, for census metropolitan areas and census agglomerations – 20% sample data. (2009, March 27). Retrieved from https://www12.statcan.gc.ca/census-recensement/2006/dp-pd/hlt/97-557/T404-eng.cfm?Lang=E&T=404&GH=8&GF=535&G5=0&SC=1&RPP=100&SR=1&S=10&O=D&D1=1.

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