How the cloud kitchen business model is helping turn failing restaurants around

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COVID impacted the F&B industry in dramatic ways. Few countries were prepared for the pandemic, and although some industries thrived with the opportunity, many restaurants started to struggle. One study found that 93% of restaurants in Singapore witnessed a drop in revenue, and 80% had to find ways to cut costs to stay afloat.

Such a dire situation caused many restaurant owners to look for innovative ways to keep themselves and their brand afloat during challenging times. One thing was for sure: even though fewer people were deciding to dine-in owing to pandemic scares and government restrictions, more were turning to online delivery services to get their food. Cloud kitchens offered traditional restaurant businesses the chance to modernise and streamline their operations, getting in on the ever-thriving food delivery model driven by companies like Deliveroo and FoodPanda.

A year on, and it’s become increasingly evident how these platforms have helped turn failing restaurants into profitable businesses once again.

Lower upfront & operational expenditure

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Restaurants made a name for themselves as complex businesses to run. Historically thin profit margins of just a few percent make running brick-and-mortar locations a challenging ordeal for many. On top of this, upfront costs that range from SGD$ 50-600k make expanding and opening new restaurants near-unaffordable.

Cloud kitchens offer an alternative to this, with opening costs as low as SGD$ 40k and operational costs a fraction of traditional restaurants. This is possible for many reasons, including the fact that the cloud kitchen business model often includes all the permits, construction, renovations, and more. Plus, the lack of a dine-in space removes the need for large front-of-house teams.

Taking advantage of a growing industry

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It’s no secret that the food delivery industry is expanding rapidly. Long before COVID, the market was growing year-on-year, signifying itself as a ripe opportunity for those willing to experiment with something new.

Cloud kitchens set you up for success in this new industry and allow food entrepreneurs to get a foot in the door before competition gets incredibly steep.

All the data restaurateurs ever needed at their fingertips

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The cloud kitchen model does not simply mean remote kitchens. Operators like Smart City Kitchens offer a suite of high-tech benefits in each kitchen space designed to help streamline and grow your business. In our cloud kitchens, all delivery apps and orders can be monitored and managed through a single tablet at the centre of the kitchen. Insightful data is also collected, allowing restaurants to see their most profitable dishes, find bottlenecks in their cloud kitchens, understand the most beneficial pricing models, and much more. This way, restaurants can stay organised and streamline their operations to maximise profits.

Quick setup times

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Our cloud kitchen spaces are turnkey solutions, meaning opening and expanding is a natural business progression – not a pipedream. Whereas a traditional dine-in restaurant can take up to a year to open, cloud kitchens take just weeks. This fact alone makes scaling up and down your business as it grows an easy and straightforward task.

Cost-effective expansion into new markets and areas in your city

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The location of your restaurant plays a huge factor in whether it will be successful or not. Having a dine-in restaurant way out from the city centre might offer cheaper rent, but without foot traffic you’ll struggle to get enough customers. Delivery-focussed restaurants and cloud kitchens are much the same – but with a different set of needs. 

Most delivery customers are ordering from home from residential areas. This is where most delivery-focused restaurants try to set up shop, but there are numerous other factors that come into play when deciding the ideal location including the type of restaurant, the tendencies of demographics in certain areas, and much more. 

The reality is, you never really know how well a restaurant will do until you move into a certain neighbourhood. We’ve done the research necessary to identify key areas in Singapore which have all the ingredients for success, but different brands will find different results. Cloud kitchens offer a more affordable way of expanding and dipping your toes in new markets to see for yourself how fruitful they are for your business. 

The magical combination of low risk – but high reward

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Working with a cloud kitchen operator like Smart City Kitchens, you’re able to do much more with far less money. Opening a traditional restaurant requires a huge investment – there’s no way around it. After committing to a location, you won’t want to pack up and go to a new neighbourhood if you’ve spent money on renovations, new equipment, and the lot. With cloud kitchens, you don’t have to commit to long-term leases, instead trying out new areas at a fraction of the cost before deciding to put down roots. 

Piggy-back off the success of third-party delivery platforms

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Third-party delivery platforms are a facet of the smartphone era and app economy. Although they’ve been on the rise before COVID struck, they are also amongst the lucky businesses that saw changing dining habits from COVID as an opportunity, not a disaster. In March 2020, applications to become a Deliveroo driver in Singapore surged by 80%.

Operating a cloud kitchen business model allows you to partner with these thriving businesses and capitalise on their success to create your own. By cutting down on a brick-and-mortar location’s inefficiencies, cloud kitchens help restaurants jump aboard the delivery economy and get their food in front of more hungry customers with less effort.

Want to learn more?

Interested in the cloud kitchen business model, and think your current or future restaurant could benefit from it?

Get started today with the team at Smart City Kitchens for a tailored approach and quotation.


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