The new breed of cloud kitchen entrepreneurs understands that brand recall and distribution are the play, that building a brand is a long-term game, and that they need to have demand on their side.
They, therefore, acknowledge that food tech aggregators-Swiggy and Zomato-are a necessary evil and are making efforts to understand the dynamics of working with them.
Placing an order in a customer's hands within 25-35 minutes of an order, which is key for repeat orders, requires mastering both the art of preparing food and delivering it.
Therefore, it is becoming increasingly evident to cloud kitchen brands that they should focus solely on their speciality-cook good food quickly-and leave the rest to specialists that have a platform for ordering and the infrastructure to deliver food.
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"The trend is changing," says Ashish Tulsian, Co-founder and CEO of cloud-based restaurant management software firm POSist Technologies.
"Just like how retail brands work with e-commerce marketplaces, food brands are also employing professionals to manage aggregators. They make sure pricing is uniform across aggregators, negotiate hard on commission, and manage promotions. They see bargaining power as a function of brand pull," he adds.
Food tech aggregators charge their cloud kitchen partners anywhere between 15 per cent and 30 per cent of the order value as commission to host the brand on their platform and deliver an order.
Of course, in-demand brands command the lowest commission rates since their customer acquisition cost, for aggregators, is minimal.
Meanwhile, cloud kitchen infrastructure providers, who offer plug-and-play stations with end-to-end services, are expected to grow faster than brands.
Also Read: Cloud Kitchens Dish Out Success, But No Clear Winners
In fact, pre-COVID-19, they were anticipated to grow at double the rate of the classic full-stack firms, according to RedSeer Consulting.
"Infrastructure service providers have faster growth ahead because scaling up responsibilities are distributed. A platform provider who knows how to build kitchens and has integrations with aggregators is able to open up new spaces faster without worrying about getting brands or building brands," says Rohan Agarwal, Associate Partner, RedSeer Consulting.
Junaiz Kizhakkayil, Founder and Group CEO of cloud kitchen aggregator Loyal Hospitality, says the mantra for kitchen infrastructure services is to ensure occupancy and effective utilisation of kitchen capacity, while selectively accepting brands so that both kitchens and brands are profitable.
Loyal Hospitality's aggregator brand Kitchens@ works with 80 domestic and international brands, including Mainland China, Empire, Chai Point, A2B, Domino's, Taco Bell, and Dunkin' Donuts. About 90 per cent of its profit comes from 22 brands and there was zero churn in the past year, Kizhakkayil claims.