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Cloud kitchens have been a lifeline for restaurants through the pandemic, providing operational continuity and ensuring cash flow. But the explosion of new eating and ordering methods has also led to issues with quality and consistency in the face of a changing business environment.
“During the COVID-19 lockdown, cloud kitchens have grown 100-fold as a business entity in the restaurant industry. Delivery has allowed us to survive the pandemic,” said UAE-based restaurants BB Social Dining and Philotimos Meze & Grill and retail brand Soule Soups co-founder Spero Panagakis said.
Like many others around the world who have been forced to close their doors to dine-in customers, the group has expanded its delivery operations, partnering with cloud kitchens to help with food production.
Cloud kitchens are commercial food production facilities that focus on takeout or delivery. They usually have no dine-in customers.
Panagakis said the cloud kitchen he works with has top-notch conditions and facilities that align with his restaurant brand’s own best-practice business principles. Takeout accounts for 10% of his restaurant business.
However, quality issues prompted them to switch partners several times before the company got there. Panagakis pointed out that one well-known supplier did not even take enough precautions to deal with the country’s scorching summer, despite strict agreements on operating standards.
“Four months after signing the contract, the environment in which the food was prepared did not meet our production standards during the hot summer,” he said. “Therefore, in order to prevent any health and safety risks to our customers, we have decided to terminate the lease immediately. This is not what we stand for as a brand that can support the cash flow position while potentially harming our customers.” (For reasons of confidentiality, Panagakis did not disclose the name of the cloud kitchen.)
A $1 Trillion Opportunity
Cloud kitchens could create a $1 trillion global opportunity by 2030, according to research firm Euromonitor International.
Together with dine-in restaurants, drive-thru restaurants and other limited-service restaurants, the cloud kitchen delivery and takeaway business will generate an estimated total revenue of Dh11.6 billion in 2022, said Monique Naval, senior research analyst at Euromonitor. These transaction volumes are expected to reach AED 12.1 billion by 2023.
“Due to the pandemic, restaurant delivery and takeout sales increased in 2020 and 2021. 2022 marks more dining opportunities and people willing and able to come together again to dine together. Changing consumer habits impact cloud kitchens It had a negative impact,” Naval said. She cited the example of the cloud kitchen unicorn Kitopi, The company is reportedly cutting 93 jobs, or 10% of its headquarters workforce (about 1.86% of its global workforce), as food service returns to normal.
Home delivery sales in the UAE accounted for 36% of all limited-service restaurants in 2020, falling to 32% in 2021.
Food businesses must adhere to strict operating regulations in the UAE.
efficiency as standard
“Cloud kitchens by their very nature need to be very efficient to be profitable,” said Sanjay Vazirani, chief executive of India-born catering company Foodlink Global, which recently brought its Art of Dum delivery brand to the UAE, promising to deliver it in customers’ homes.
In addition to the usual health and safety precautions, he lists some of the challenges cloud kitchens face. Teams need to be small, well-trained, self-sufficient, and able to operate in small and often shared spaces.
In the UAE, specific challenges relate to climatic conditions, shipping and logistics, and consistency (due to different preparation teams and uncertain ingredient availability).
“These challenges require a very comprehensive support and monitoring system to ensure consumers receive restaurant-quality food every time,” Vazirani said.
He focuses on efficient space planning, fit-for-purpose and sustainable packaging, and highly trained staff who can keep up with periods of high demand or operate multiple sites during quieter hours. Every Foodlink kitchen works according to standardized methods, and regularly maintains and upgrades the machines.
Finally, technology plays an important role, including integrated point-of-sale systems, inventory management to reduce waste, and data analytics to assess business trends and patterns.
While good food is undoubtedly important, tech savvy is critical to success,” he added.
Meanwhile, UAE-based Maristo Hospitality operates Popeyes Louisiana Kitchen, Sisi’s Eatery and Ralph’s Kitchen, a cloud kitchen incubator. Chief executive Gaurav Arora said the group was actively committed to maintaining high food standards across all its premises.
Arora said that, in addition to staff training and common quality control standards, the group has received an A rating from Dubai Municipality and Food Watch, and is ISO 22000 certified for international food safety management.
Arora said his biggest challenge came from third-party delivery channels.
“While our packaging is stable and can withstand various delivery-related issues, there are still some external challenges that are beyond our control.”
Solving logistical issues required a constant dialogue about feedback and efficiency conversations with his delivery partners, whom he described as “the most outstanding” in the market. “We trust external delivery sources, and with their cooperation and commitment, quality issues are rare for us,” he said.
When an order is late or in poor condition, his team’s first priority is to work directly with customers to resolve the issue. Steps include refunds and replacements and working with the shipping partner to resolve the issue.
double the quality
Panagakis of BB Social Dining has also stepped up quality control measures.
Cutting the menu down to items that can drive a seven-kilometer drive means doing away with dishes that are best eaten right away, such as ceviche.
Sourcing the right packaging also plays an important role. For example, Soule Soups products are pasteurized using high pressure rather than heat, and are packaged in recyclable and recyclable lightweight aluminum bags.
“Every effort has been made to ensure that the food arrives in the same condition as it left the kitchen, even though it may have been shaken in transit,” he said.
Likewise, he and his team frequently audit cloud kitchen facilities to ensure production standards are up to par.
“Physical stores have always been our core business. Having cloud kitchens is also a great way to support brand expansion, but there is no direct brand awareness other than through ordering platforms. There will be no compromise on either side,” he concluded.
(Reporting by Keith J Fernandez; Editing by Seban Scaria)
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