Cloud Kitchen Business Model & Unit Economics

Cloud Kitchens or Dark Kitchens are a concept that has been around for quite sometime now (when we say quite, we mean decades).  The only difference is that, these kitchens were captives of their mother brand and used to supply pre-cooked or part-cooked stuff to the store fronts.

Cloud kitchens, or virtual/ghost/dark kitchens, are setups that operate in remote locations with none street presence whatsoever, rely only on the delivery model and do not have a dine-in area. With the exponential expansion of digital payments and the preference to have everything, including food delivered to your doorsteps, there hardly seems the need to be present where the customer was (on the streets) and this concept in catching up with VCs.  

Cloud Kitchen Economics

The economics of this concept depends on the model these cloud kitchens are setup.  There are various types of these kitchens depending on the end use case of cloud kitchen setup as a closed loop or a platform use case.

Landlords / Restaurant Owners (Closed Loop)

This is a typical landlord and tenant relationship, where the restaurant owner owns the entire value chain i.e. right from choosing the location to setting up the kitchen themselves and then using the kitchen to provide delivery/takeaway/dine-in services.  

Restaurant owners are those who either setup their own dark kitchens and use it only as a supply source for their storefronts or own brands (delivery or otherwise).

These type of setups will be excluded from the discussion since these are closed loop systems (i.e. catering to only a single use case relevant to self).

Open Loop / Fitted Cloud Kitchens