KUALA LUMPUR (Nov 24): With a ballpark figure of RM300,000 to RM1 million to start a physical restaurant in a prime location in Kuala Lumpur, this provides a good motive for the shift towards cloud kitchens, while changing consumer habits have placed food delivery services at a favourable position as compared to conventional restaurants.
Coupled with rising costs, shrinking margins and labour issues, the continued existence of the traditional restaurant model could well be seeing its demise, said foodpanda Malaysia director of operations Ilanges Rao.
In an interview with theedgemarkets.com, Rao said a secondary benefit of cloud kitchens is that they place entrepreneurs close to urban centres of demand by utilising distressed property assets, thereby lowering operational and real estate costs.
He said cloud kitchens eliminate both operational and labour costs, allowing operators to reduce their inventories with a better product flow by tracking data and removing unpopular ingredients from their shopping carts.
“This ‘platform-to-consumer’ format is overtaking the ‘restaurant-to-consumer’ format through two categories — the independent cloud kitchen or aggregator-managed cloud kitchen.
“The feature access to cloud kitchens removes F&B (food and beverage) business owners from the obligation of having to rent a space in high-visibility areas while simultaneously improving their profit margins.
“Depending on which model owners opt for, an Internet-enabled restaurant kitchen makes digital marketing easy through food,” Rao explained.
He said with continued uncertainty over the Covid-19 pandemic and the great consumer shift, it is highly likely that F&B outlets backed by a cloud kitchen network stand a greater chance of weathering the storm.
Rao said modern algorithms would determine the type of food to cater for a specific neighbourhood, and when demand is likely to be the greatest.
“Cloud kitchens are the future of the F&B industry, offering low overheads, high production efficiency, access to real-time user data, excellent digital brand awareness and at the same time providing low expenditure for marketing activities.
“By focusing on qualitative societal aspects of running the food business, cloud kitchens provide restaurateurs a solution by cutting the capital investment of starting up a business to a third.
“It is an economically viable option with low cost of entry and a high possibility of making a better margin,” he said.
Rao said in the fullness of time, running a business is all about finding a combination of data, means of production and capital that works best.
“Knowing where and when to establish an equilibrium between risk and benefits is important, especially in mitigating change.
“Cloud kitchens are the diametric opposite of traditional restaurants, a beacon of hope of gastronomical proportions,” he said.