Virtual Restaurants, Cloud Kitchens or Self-branded kitchen chains are simply put, non-established brands of restaurants that exist to serve food only via delivery. They have become the new sunshine sector of the overcrowded F&B space, and have emerged as the major disruptors of an industry waiting for some much-needed innovation. As the costs of established brands in the F&B industry increase, leading to a rise in prices of their products, the smaller, independent brands are trying to grab a significant share of the market by working on a lean model of operations. While 2016 remained a disappointing year for the restaurant industry at large, virtual restaurants reported a significant growth-which in some cases was to the tune of 1000%!
Virtual Restaurants – Consistency, Cost & Control
Conventional restaurants prepare food meant to be consumed quickly. They also have limited seating capacity and many evenings are wasted while waiting for a table. With VR and self-branded kitchen chains, people can now sit back in their homes, laze about on the couch and enjoy lip-smacking meals. As self-branded kitchens mostly serve from a single kitchen outlet, the buyer’s experience remains consistent regarding the taste, pricing, quality etc.
Another major reason behind the popularity of virtual restaurants is their constant effort at bringing high quality, home cooked and freshly prepared food for customers, at a price which does not burn a crater in their pocket! Fancy hotels do not generally prepare food to be transported and then delivered, although it is difficult to recreate the same culinary experience which can be had while sitting and having a meal, reduced costs, a diverse menu and the comfort of one’s home makes ordering from VRs a much preferred option.
Post demonetization, the entire F&B industry suffered a lot as procurement of raw materials to receiving payments for food provided, all the transactions were done in cash which was hard to come by. On the other hand, however, the virtual restaurant ecosystem registered a growth rate of over 50% and online payments grew by more than 90% during the November-January period. The demonetization period was a watershed moment for the entire virtual restaurant industry, as the dependence on e-purchases increased for food. These restaurants provided complete facility of making internet payments even via apps and seamless order tracking options, making them the ideal option for those midnight cravings or even daily meals.
Lastly, rapid advancement in technology has been the most significant contributor to the fairytale growth of VR and self-branded kitchen chains. Digital wallets, variety of e-payment options and a well-developed communications network with a high proliferation of smartphones made the VR revolution possible. By keeping their operations light, avoiding real-estate and electricity costs and working through a cohesive IT team that coordinates order collection and delivery, virtual restaurants have managed to get higher profits and a better control over their operations.
Future of Virtual Restaurants
The organized food services industry is slated to cross Rs 2 trillion by 2020 according to various industry reports while the unorganized sector is estimated to be twice of that. This points to a CAGR of 20% across the organized industry. The pace of growth for virtual restaurants will be way higher than that of the physical restaurant industry, given the relative ease of scaling up compared to standalone sit down places. This unique business model also allows VRs to pass on significant cost benefit to the customer without compromising on the food quality, taste, hygiene or ingredients.
Thus, we can safely assume that self-branded kitchen chains and virtual restaurants will be the next mainstay of the Indian F&B industry. By providing food ‘anytime, anywhere’, the virtual restaurants have infused a fresh breath of life to the Indian hospitality sector. Considering their rapid growth and increasing popularity coupled with an enhanced access of the Indian population to digital tools, it can be safely assumed that the F&B horizon of India has hit upon a new star, which is not going to shoot down anytime soon.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the publication