In this blog, we will understand ‘how to start profitable online food business from home.’ We can start an online food delivery business from home in a dark kitchen format with low investment. Online food delivery business is one of the favorite business ideas of entrepreneurs specially after lockdown. Online food delivery business is gaining popularity because it can be done from the home also. But before we understand how to start online food business from home we need to understand more about dark kitchen.
Other names for the dark kitchen are cloud kitchen, virtual kitchen, or ghost kitchen. To begin with, first, we will understand how this online food business model of the dark kitchen came into existence, followed by its advantages and disadvantages. Then we will understand how we can do this food business from home. Having a complete view of the online food business model will enable in making an informed decision.
Table of Contents
What is the Dark kitchen Food Business?
Dark kitchen refers to the food business model where only the delivery of food happens and a customer is not served directly. Usually, food delivery apps like Zomato and Swiggy do the delivery.
Due to the dark kitchen or online food delivery business, the food business is changing rapidly. Hence, we can give the title of ‘disruptor of the food business’ to the dark kitchen. It is so because the dark kitchen is a low-cost business model that has given the option to start a food business from anywhere and serve customers in a completely new way. And now, this option is becoming mainstream.
Change in Technology and Consumer Behaviour
One of the primary reasons for the success of the cloud kitchen is up gradation in technology. There was a time when if someone did not want to eat home food, then that person used to go out and eat. Over a while, people started calling for home delivery, but from food joints, they would have tried earlier. But now the time has completely changed. Today people ask for the delivery of food from food joints where they have not tried before. And they can do this by reading the reviews and ratings given by other costumers on food delivery apps and their website.
On the one hand, there is a change in technology. And on the other hand, there is a change in the consumers themselves. This changed consumer is not hesitant to try new food and order from new places. Today’s food consumer is willing to experiment with a new kind of food. Hence this change in consumer behavior has prompted eating joints to experiment with new types of food. Many of such food businesses are becoming mainstream.
How did the concept of Dark Kitchen come into the food business?
The need for the Dark Kitchen arose because the competition, along with expenses, was increasing in the food business. It is a known fact that it costs a lot to build and run a restaurant. Restaurants have a higher setup cost and other expenses to run, such as rent, stock, salaries, material cost, and few more. So it became essential for entrepreneurs to come up with a food business model that is economical to set up and did not cost much to run. And when food delivery apps came, and people changed the way to order their food, the entrepreneurs found the dark kitchen model worth trying. Some entrepreneurs tried this new food business model, and they got the desired success. For this reason, this food business model started expanding rather quickly.
As a result of the dark kitchen model, today the food business has become much about the taste, quality, and price of food. Furthermore, things like location, ambiance, and extensive menu have become unimportant.
How Much Is the Market Size of Online Food Business In India?
The organised market for online food delivery in India is approximately ₹ 928 crores as per NRAI’s India food service report 2019. If we include the numbers of unorganised players then this number will go up substantially . But the most important fact is that the cloud kitchen market is growing at a rate of 35% annually. And it is believed that as the demand for online food delivery will grow, the market of cloud kitchen will also increase. Moreover, it is likely to grow even faster in the post-coronavirus economy.
Advantages of Dark Kitchen Online Food Business
Smaller Setup Cost Of This Food Business
The setup cost of a cloud kitchen food business is much less than the restaurant’s cost. Because there is no arrangement for customers to sit, so it does not require any sitting space and reception area. As a result, the space required is smaller in comparison to a restaurant. Additionally, as the customer does not come, so things like ambiance do not matter. Due to which, the interior cost, which is a significant expense, for any restaurant is minimum.
Besides, there is no need to take commercial space in the main market for a dark kitchen. Hence the property deposit is significantly reduced or becomes non-existent if somebody decides to operate from home.
Less Operational Expenses
Less operational expenses mean lower running costs. Because the space required in a dark kitchen is less and that too, it is not needed at the prime location, so the rent is less. Additionally, customers are not served directly. Hence the staff is also less, which reduces the salary expenses. Besides, the costs mentioned, some other costs are also not there in the dark kitchen. This reduces the cost of running a food business.
Quick ROI Recovery
The inherent strength of the dark kitchen food business enable fast ROI (Return On Investment) recovery. Firstly, the cloud kitchen has a lower operational cost. Therefore it gives a higher margin. Secondly, the setup cost of a dark kitchen is less. We know that, when there are a higher margin and less setup cost, then the time required to recover the ROI is shorter. In conclusion, due to low operational and setup expenditures breakeven period of the dark kitchen food business is quicker, and the return on investment period also reduces.
Success with limited menu
There is another big difference in dark kitchen and restaurant, which is the size of their respective menu. For instance, in the dark kitchen, the menu is a small and focused, unlike restaurants with an extensive product range in their menu. A dark kitchen can do well even if it has just 12-15 products in its menu, provided the taste, quality, and price are according to the expectation of its customers. Limited menu helps in reducing the cost of stock. As, with limited menu less ingredients are stocked.
Disadvantages of dark kitchen online food business
Firstly, as most of the delivery happens through food apps, whether delivery arrives on time or not, it is not in the dark kitchen owner’s hands.
Secondly, if a customer has a complaint at the time of delivery, then it is the delivery apps that handle the customer complaint. The dark kitchen owner has no control over the handling of the complaint.
The third point is that the dark kitchen owner is entirely dependent on food delivery apps for business. For some reason, these apps remove someone from their platform, then the whole business crumbles.
How To Start Online Food Business in Dark Kitchen Format?
First of all, an individual has to decide among the following two options to start online food business
(1) Franchise of a dark kitchen brand
(2) Start its brand in the dark kitchen segment.
If an individual wants to take a franchise, it will have to do a google search for franchise opportunities in the cloud kitchen. The franchise opportunities that will appear in the search will have to be contacted depending on the budget. Of all the contacted franchisors, some will respond, and some will not. Subsequently, after a discussion with the franchisors who responded, that individual will shortlist the most suitable franchise opportunity.
If the individual wants to start their own online food business in a dark kitchen format, then the following steps will be followed. But before moving ahead, please understand that the dynamics of doing business has changed entirely since the arrival of Coronavirus. So at such a time, what should a business person do? And how it should handle the changes in customers? On that, I have written a blog that could be read here.
10 Steps to start Online food business from home in the dark kitchen format
Decide On Type of Property
First thing to decide is whether the online food business will operate from a commercial space or home. It is a fact that both options have their strengths and weaknesses. Hence we need to consider them before making any decision. Like, If the food business operates from commercial space, then there is an outgo of the rent. While there is no outgo of rent in case the same business operates from a house. On the other hand, doing business from a commercial space lets the possibility of having a more extensive kitchen setup than a home-based business, which obviously will have limitations. Therefore, this decision requires careful deliberation.
Decide The Food Niche
Next important decision is to decide, food niche to enter. This niche could be something like Chinese food or fast food or even something like parathas. Here the thing to keep in mind is that the menu can not be as extensive as a restaurant’s menu. Instead, a focused menu on a theme or product is the norm. The focused menu is essential because most of the consumers who order online, first decide what to order. Then after that, they select from where to order. Usually, consumers prefer to order from the brand that is known for that product. So any brand that not recognised for its niche, may find difficult to survive among the rush of food brands.
Decide Brand Name
After deciding the niche of the food business, it is time to determine a brand name. If that brand name can define the food business, then brand will enjoy high recall among the customers. For example, if the food business is of parathas, then the names like Desi Parantha or paratha 15 or any other name conveying the themes could be considered. The point made here is that any name that can convey to customers the theme of the food business is the best option.
Regulatory Registration & Approval
After the finalisation of the brand name, the next immediate step is to go for the FSSAI registration and other approvals. There is an option to register with FSSAI from this link. Additionally, other approvals vary from state to state. Hence that needs to be checked at the local level.
Menu finalisation happens either by the individual or with the help of a chef. Followed by placing the order for kitchen equipment. There is no need to place the orders for all the new pieces of equipment. A mix and match of new and second-hand equipment could be done to reduce the cost. If somebody is hugely keen to reduce the cost of kitchen equipment, then the option of all the second-hand equipments could also be explored.
Team & Training
Now comes the most critical part. That is deciding the team that will run the show and arrange for their training. In case of home business, where only family members are involved, they would also require the training. Depending on the experience, training can vary. A rigorous training helps in consistence in the taste and quality of the food served.
Now, coming towards the next point, which is very important, is the pricing. At the time of deciding the price, all expenses, such as setup cost, operational cost, delivery expenses, cost of raw material, commission by food delivery apps and other relevant expenses are required to be considered. Additionally, it is essential to find the pricing by competition also.
Tie-up With Food Delivery Apps
Once all the approvals and registrations are in place, then comes the time to have the tie-up with food delivery apps like Swiggy and Zomato. Through visiting the website of these companies here and here, the tie-up request can be initiated.
Marketing & Sales Promotion Budget
Whenever a business starts, marketing, and sales promotion are integral to success. To begin with, there should be a budget for various marketing and sales promotions activities. As a rule, the budget makes it easy to track which initiatives are giving good returns and which are not. This will enable in making necessary changes in strategy from time to time. Also, many sales promotion strategies do not require any money. Hence there should be any fretting on account of sales promotion expenses.
If you understand Hindi, then you can also watch this video on the topic.
To conclude we can say that if we approach the process of starting a food business from home in a systematic way then that business can turn into a profitable business.
In this blog we understood that
What is dark kitchen food business.
How changes in technology and consumer behaviour enabling the main streaming of dark kitchen. Thus paving the way for people to start online food business from home.
Furthermore, we understood, why and how the business of dark kitchen started and its market size in India.
Not only we read about the advantages but also about the disadvantages of the dark kitchen business.
Additionally, we also understood, how to start online food business in dark kitchen format along with the step by step guide.
With this we sum up the topic ‘how to start from home a profitable online food business’.