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Cloud Kitchens in the New Normal

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Cloud Kitchens in the New Normal

You would have heard of Cloud Drive and probably Cloud Bread which has recently gone viral on the internet. What about “Cloud Kitchen”? 

A cloud kitchen is a shared kitchen which caters mainly for food delivery market and does not have a front-of-house activity. “Ghost Kitchen”, “Dark Kitchen” and “Cloud Kitchen” are terms which are often used interchangeably. In the Covid-19 pandemic, a sharp demand for cloud kitchens was observed in many countries. This was largely due to a shift in consumer demands for food delivery. 

Restrictions imposed on food operators and consumers due to social distancing measures, coupled with uncertainty on the spread of virus, makes it less appealing for customers to queue up and dine in the restaurants or food shops. As such, more consumers opt for alternatives to get their food through food delivery services. Technology advancement and attractive promotional deals from the food delivery operators made food delivery options even more attractive. 

How Does It Work?

Cloud kitchens are commonly run on a landlord-tenant relationship. The landlord owns the license of a premises to operate the food preparation area. Landlords rent the commercialised kitchen spaces and equipment to tenants to prepare their menu items. Consumers will then order the menu items through online food delivery platforms. Once the tenants receive the orders, they will prepare the food to be picked up by food delivery riders for delivery to the doorstep of the consumers.

With this dark kitchen concept, a cloud kitchen could house more than just one food brand. This provides a larger variety of food and convenience to consumers. For the food operators, all essential kitchen infrastructures and even pre-requisite programmes necessary for food safety, such as pest control services, maintenance services, and chemical supplies, are provided by the landlord. This helps the tenants to reduce their operating costs and allows them to focus on fulfilling the orders.

So Why Are Cloud Kitchens Attractive? 

1. Lower Operational Costs

Tenants could tap onto the shared infrastructures and services which have been packaged in the cloud kitchen rental. Another crucial cost-effectiveness is the lower manpower costs. Hiring kitchen staff is never easy for the F&B industry in a country like Singapore. However, the cloud kitchen model could overcome this challenge. For instance, service staff are not required as there are no front-of-house activities. Dishwashing staff are not required as dishwashing services are sometimes included in the rental of the kitchen space. As such, food operators could allocate a higher budget on the recruitment of skilled kitchen chefs to create better and more delectable menus.

2. Scalability

For businesses starting a cloud kitchen, the cloud kitchen model does not require high start-up costs as compared to traditional kitchen models. For new start-ups seeking business expansion and brand awareness, cloud kitchens would be a more cost-effective option for them to cater to consumers across the city within the shortest time frame, as there is no initial capital expenditure required for various major renovation works.

Consumers today are tech savvy. Online platform is one of the good marketing tools which can be used to reach out to the masses across the city in a short time. Having their branding featured on food delivery apps can help companies to gain exposure in the market in a short time. 

3. Flexibility in menu

Most of the time, the interior design of a restaurant will be greatly dependent on the menu items or cuisines which the restaurant offers. For instance, a Chinese restaurant would go with an oriental interior design, whereas a café tends to have a cosy interior design. In the cloud kitchen model, companies will feature their menus on the food delivery apps or on their websites for consumers to place their orders. If there is a change in the menu, companies will simply amend the menu in the apps or online platforms. Redesigning and reprinting of the menu board will not be necessary. Even if a menu item is sold out, staff do not need to manually put up a “Sold Out” decal to inform the consumers. Likewise, if a menu item does not perform as expected, food companies can easily change the menu to re-adjust to meet consumer preferences.  

4. Online Order Management System

Cloud kitchen will manage the orders through an online order management system. Customer orders will come from more than one channel, be it the food delivery apps or the company’s ordering website. Having an online order management system to manage customer orders from various platforms into a single system will help the companies to process the orders more efficiently. 

Furthermore, key details which are useful for traceability purposes would be captured in the online order management system. Information such as the customer orders, time of delivery, and the delivery rider who delivered the order would be recorded. This information will be useful when follow up on customer feedback is required.

5. Market Trend Analysis 

For all food companies, the ability to analyse consumer preferences and behaviours is the key to stand out from competition. With the online order management system that food operators could leverage on, it allows them to better study the performance of each menu item. For example, food operators could monitor if there is a higher trend of ordering from a certain food category over the others at a specific mealtime. If a trend is identified, food operators could work on the existing menu to extend the product line. 

Evolution of Cloud Kitchen Concept

An increasing number of food companies are exploring new business opportunities based on the cloud kitchen model. They are exploring the use of cloud kitchen spaces to supply raw food ingredients to their restaurants.

This means that food companies would prepare the raw food ingredients in bulk at the cloud kitchen (such as marinating the meat, washing and cutting the vegetables). When these ingredients reach the restaurants, the chefs can use them directly for cooking. This increases productiveness and reduces manpower costs for the restaurants. Hence, having a centralised kitchen for preparation of food ingredients is more pragmatic for restaurant chains.

The traditional model of a central kitchen in Singapore typically runs in premises which are rented from government agency or private real estate companies. Alternatively, the site could be owned by the food company itself. These kitchen sizes are usually substantial for bulk preparation of food ingredients. However, restaurants which require a small kitchen space for simple bulk preparation of ingredients may find running a central kitchen in the traditional model to be costly. Unlike traditional central kitchens, cloud kitchens offer just the right size of space required by the companies. In addition, the equipment and prerequisite programmes come together with the cloud kitchen, making the model a lot more cost effective. 

The New Normal: How TÜV SÜD can support your business?

The popular saying goes, “in the midst of every crisis, lies great opportunity”. Although Covid-19 has slowed down the global economy, it has changed the economic environment and how businesses are conducted. Many food companies have identified changes in consumer lifestyle and demand, and thereafter adapted and gained new business opportunities by tapping onto the cloud kitchen business model. 

As a trusted partner of choice for safety, security and sustainability solutions, TÜV SÜD continues to support businesses in enabling continuity of operations in the new normal while ensuring the health, safety and well-being of employees & compliance to legal and regulatory requirements.

Ensuring the health & safety of your employees and customers

Food safety & Occupational Health and Safety are important aspects that cloud kitchen operators need to take care of.  As a global provider of auditing and certification services, TÜV SÜD provides dedicated second and third-party audit services covering food safety, occupational health & safety, environmental management and business operations. 

Examples of management systems include ISO 22000 Food Safety Management Systems, ISO 45001 Occupational Health & Safety Management Systems, ISO/PAS 45005:2020 Occupational health and safety management—General guidelines for safe working during the COVID-19 pandemic and ISO 22301 Business Continuity Management Systems and more.

With audits and ISO certifications by TÜV SÜD, businesses can improve their competitiveness in this fast-growing market and give their customers a peace of mind.

Complying to legal and regulatory requirements

The framework of COVID-19 hygiene and safe management measures include the recommendations of the World Health Organization (WHO), as well as local regulations including Safe Management Measures for Workplaces issued by the Ministry of Manpower which businesses in Singapore are required to comply with.  Based on the applicable regulations, TÜV SÜD has developed a COVID-19 Safe Management⁺ Audit to help assess your compliance to the regulatory framework. 

Mitigating cyber and data protection risks

As cloud kitchens are heavily dependent on digital technology, it is important for businesses to ensure that measures are put in place to mitigate cyber and data protection risks. Through our wide range of audits, assessment & certification services for cyber security, data protection and management systems, TÜV SÜD can support you in risk analysis, elimination of security vulnerabilities and ensuring the overall resilience of your business operations. 

For example, cloud kitchen operators can boost consumer confidence by verifying their conformance to personal data protection standards and best practices with the IMDA Data Protection Trustmark (DPTM) certification.

The concept of cloud kitchen is likely to attract more investment as consumer demand rises. It is a market which should not be underestimated for its charm and capacity for potential growth. Who knows in the next decade, cloud based kitchens could be taking up a significant pie in the F&B industry?


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Cloud Kitchens Concept Blog by Ru Yan

Ong Ru Yan

Auditor

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