Dark Kitchens Offer High Profits as the Online Delivery Marketplace is Burgeoning

A major chunk of population in India, especially the working class and students, are heavily dependent on online sites like Zomato and Swiggy to order their loved food and satiate their hunger. With such an outreach of online food delivery apps/websites, Indian restaurateurs are aligning themselves with the trend by either dissolving their brick-and-mortar restaurants completely or introducing dark kitchen variants for the online delivery ventures.

A restaurant-model with no storefront, not tables and chairs, no diners at all – dark kitchen is one of a kind business model that is shaking up the entire restaurant industry with its low-investment structure. Cutting so many errands aids the concept in becoming a high profit-low risk model. Faasos, being one of the biggest examples of dark kitchen category, was once a QSR chain but has completely transformed itself into a dark kitchen-based venture and expands via franchising.

Thanks to the Burgeoning Online Food Delivery Market

The online food delivery market in India was valued at Rs 45.58 billion in 2017 and is expected to grow at CAGR of 38% for the forecasted period of FY2018 to 2023. While taking a closer look at the online food delivery market, it is revealed that the dark kitchen category constitutes to a major share in the growth of the online food delivery market in India with a 30% market share.

With the rise of food-tech start-ups and the increasing internet penetration across the country, the online food delivery market is showing no signs of slowing down anymore. This is one of the biggest reasons why big brands like Faasos are going forward with the concept of dark kitchen. The burgeoning online food delivery market is yet another growth deterrent of dark kitchen industry.

Aggregators Launching their Own Dark Kitchen Ventures

The online food delivery market is constituted by another market of aggregators that are now heavily influenced by the Dark kitchens. The 70% shareholder of the online food delivery market, aggregators are the brands like Swiggy, Zomato, and FoodPanda that are offering online food delivery in partnership with restaurants but do not have kitchens of their own.

Cloud kitchens are major threat to the aggregators as the restaurants are themselves taking the lead to deliver the food to their customers by starting their own dark kitchens instead of partnering with the aggregators.  The increasing competition is forcing the aggregators to venture into the dark kitchen category to match the pace and to break the competition. For instance, Zomato has come up with its own dark kitchen named ‘Zomato Kitchen’. In fact, aggregators from other industries are also venturing into dark kitchen category, for instance ‘Uber Eats’.

Low-cost Model Entices Franchisors and Franchisees

As per the general notion, the operational cost of a restaurant is very high. This is because of various factors like startup costs, real-estate or rent costs, interiors, IT, inventory, manpower, salaries, material cost, and other miscellaneous expenses like safety and security, and so on. Whether it is about starting a restaurant afresh or it’s about owning a restaurant franchise, the total investment in a restaurant could easily go up to Rs 80 lakhs to 2 crore.

On the other hand, in a dark kitchen, so many of the expenses get cut down. It doesn’t require investment on real-estate and interior costs. The investment in a dark kitchen franchise could be from Rs 22-25 lakhs for an area of 150-200 sq ft with an expected breakeven period of 12-24 months.