With the digitalization of many industries and given the COVID situation, the restaurant industry has been shaken up and transformed in order to survive. Restaurants, regardless of the segment they appealed, had the same model for decades, if not centuries. You sit down, order, eat and pay (what differentiated from one to the other was this order). Then came the on-demand delivery companies. The Deliveroo, Glovo and Uber eats of live provided restaurants, which had a finite sit in capacity to extend their orders to an online audience. This new revenue stream developed in the idea of creating restaurants, or branded kitchens that only sold through on-demand delivery platforms.
Cloud restaurants are known by various names such as ghost kitchens, shadow kitchens, virtual, or dark kitchens. But the basic idea remains the same: restaurants have an online presence, and their food can be ordered through food aggregator apps or through the restaurant’s own app, but the restaurants themselves don’t have dine-in facilities. Like many retail food chains such as McDonalds, KFC, etc they have expanded this revenue stream, and have also streamlined their digital sales operations to a Dark Kitchen model. Now there are companies like Rebel Foods (formerly Fassos) that base their sole business model on digital sales. This has given way to an exponential propagation of companies that develop many brands representing different cuisines under the same company. They fall under different strategic models. Some operate under the same roof, others operate based on the demand and delivery facilities optimization.
Business model explained
Advantages over traditional restaurants:
- Low Operational Cost
- Low Set up and Introduction Cost
- Allow to better segment the target audience
- industry 4.0 – Automation, traceability and Data
Applied Metrics
- Food cost % of total costs
- Food cost % per item
= Item Cost / Selling Price
- Menu Item Profitability
= (Total Number of Items Sold x Menu Price) – (Total Number of Items Sold Per Item Portion Cost)
- Preparation
= (prep) Times per item
- Quality Rating
- Rejection Rates (of orders)
P&L Assumptions
This article was written by José Ramírez Terc, specialist in 21st century business models.
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