Home / Industry / Retail /  Restaurants go easy on cloud kitchens as dine-in bounces back

NEW DELHI : Large restaurant chains that rushed to open cloud kitchens and double down on virtual first brands in the pandemic said they are focusing more on their dine-in business and prioritizing deliveries via existing stores.

With dine-in services getting shuttered at the onset of the pandemic, several food brands stepped up efforts to expand delivery services. Many also forayed into cloud kitchens and virtual brands given the general consumer demand for food online. Most now admit to going easy on opening standalone ghost kitchens. However, others said they continue to scale up their delivery-only brands given the success they have seen in the model.

Sagar Daryani, co-founder and CEO at Wow! Momo, which had opened 19 stand-alone cloud kitchens post the pandemic, said they will follow a more hybrid model, building stores that service both dine-in and delivery. The company operates three fast-food brands. For several chains that have for years invested in pure-play dine-in formats, cloud kitchens were an alternative revenue stream during the pandemic and not a primary one, he said.

“I feel it is always going to be a hybrid model. During the pandemic, delivery was the only mode of survival, so a lot of the physical players shifted to delivery and did a lot of virtual brands from the same restaurant with different cuisines. Many people who did cloud kitchens as a means of survival are now witnessing fewer orders or are not looking at expanding those kitchens and are back to expanding physical outlets," Daryani said. Although Daryani plans to open 25 cloud kitchens in 12 months, in all the company will open 250 stores.

In 2020, food services firm Lite Bite Foods Pvt. Ltd that operates popular restaurant brands such as Punjab Grill, You Mee and The Artful Baker, among several others, had announced plans to launch over two dozen cloud kitchens to take its own brands online in a significant way. Rohit Aggarwal, director, Lite Bite Foods, said the company is back to prioritizing growth and expansion of its dine-in formats. “We thought it (cloud-kitchens) could be a long-term thing but now we think dine-in has bounced back. At the start of the pandemic, we did not think dine-in would come back. Right now it’s (cloud kitchens) not the priority because the funds are limited, manpower is limited, we want to optimize on that," he said.

Meanwhile, deliveries from existing outlets have gone up in general, lowering the need to open stand-alone cloud kitchens. “Earlier we used to do 5—7% delivery orders; now it is 20-22%, so every restaurant can double up as a delivery hub," he added.

However, others are certain of the “long-term" potential of food delivery and will continue to invest behind and build delivery-first brands. “Yes, there has been a slump in delivery demand recently, with dining-out opening up; however, Impresario continues to believe in the long-term potential of the delivery business and is as committed towards it. We will continue to invest in it," said Riyaaz Amlani, CEO and MD, Impresario Handmade Restaurants. The firm that operates chains such as Social and Smoke House Deli will continue investing and ramping up cloud kitchens at a “steady" pace, he said. Estimates from consulting firm Redseer peg cloud kitchens in India to be a $3 billion opportunity by 2026.

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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