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Business News/ Companies / News/  Restaurant chains look at dark kitchens to expand

Restaurant chains look at dark kitchens to expand

Dark kitchens are delivery-only kitchens which service areas where it is hard to open restaurants
  • KFC is now scaling its dark kitchens to expand its access to consumers in India
  • Bengaluru-based Chai Point already runs dark kitchens and is planning to add more of them (Mint)Premium
    Bengaluru-based Chai Point already runs dark kitchens and is planning to add more of them (Mint)

    A pick up in India’s food ordering and delivery ecosystem is making some of the country’s restaurant chains scale up what they call “dark-kitchens" or delivery-only kitchens, which service areas where it is hard to open a restaurant.

    New-Delhi based Lite Bite Foods, which runs restaurants such as Punjab Grill, Pino’s Pizza, and Zambar, said it will add at least 20 dark kitchens in this financial year to expand its business. Fast food chain KFC plans to scale up its dark kitchen concept after piloting it last year. Bengaluru-based Chai Point, which already runs dark kitchens, plans to add more on the back of growing consumer demand for convenience and access to food services across multiple channels. “People are ordering in a lot. We are evaluating various models of doing that. The idea is to increase the scope of business," said Rohit Aggarwal, director, Lite Bite Foods.

    The company, which runs more than 218 restaurants across India will add at least 20 dark kitchens in this financial year for some of its key restaurant brands, including Street Foods by Punjab Grill, Zambar Tiffin, Asia Seven Express, and Pino’s Pizza. Aggarwal said the company is scouting for locations across cities, “something in a residential area that is just a well-fitted kitchen and has delivery scooters."

    Sales from deliveries via aggregators such as Zomato and Swiggy account for 8% of Lite Bite Foods’ overall business, “but this could grow," said Aggarwal. The company said it is exploring ways of leveraging the existing delivery platform of aggregators, but could add its own fleet once its dark kitchens are operational.

    Dark kitchens are typically no-frills attached kitchens that are developed to service high demand areas. They work as back-end kitchens that service delivery orders.

    The move to expand dark kitchens comes as India’s online food delivery market is rapidly growing. In 2018, food aggregators clocked an annual gross merchandise volume of $1,700 million, a 130% jump from the previous year. These online food delivery companies now reach over 200 Indian cities, according to data from research firm RedSeer. Moreover, in December last year, online food delivery startup Swiggy raised a billion dollars in what was the biggest fund raising in India’s food technology market.

    “The cloud kitchen sector is dominated by heavily funded internet-first restaurant players with their core strength in tech, process and discount doles. However, as the consumers move up the value chain from convenience and affordability to aspiration, the scale will tilt towards full-fledged restaurant brands, which will leverage their existing physical infrastructure," said Rahul Singh, president, National Restaurant Association of India (NRAI).

    Equipped with delivery fleets and backed by huge funds, online food aggregators have also expanded the market for online ordering in India. As a result, the cost of customer acquisition for restaurants has come down, making the business of opening dark kitchens more viable, said Amuleek Singh Bijral, co-founder and chief executive officer of Chai Point. A few years ago, the quantum of delivery sales from aggregators for Chai Point were negligible. Today delivery via aggregators accounts for 75% of the company’s total deliveries. The chain has 150 stores, of which 10% to 12% are dark kitchens.

    “Today the customer wants access and convenience, irrespective of the channel they are being fed through," said Bijral. Keeping that in mind, over the next two years as the chain is set to double store count, the percentage of dark kitchens is expected to go up to 15% to 20%.

    A year after it started experimenting with dark kitchens in Gurugram’s Udyog Vihar area, KFC is now scaling its dark kitchens to expand its access to consumers in India. KFC runs more that 300 restaurants in India across multiple franchise partners.

    “The logic and model for cloud kitchens is being proven in many different ways," said Samir Menon, managing director, KFC India. “The company’s pilot of its dark kitchen has done much better than what we expected," he said. “We believe it is another way to increase access to the consumer. We are already working with our franchise partners to look at how we can expand the concept," said Menon who chose not to reveal the number of such outlets the chain will add in the coming year.

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    Suneera Tandon
    Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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    Published: 08 May 2019, 11:42 AM IST
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