Ravi Krishnan/Expert View
The food delivery market is growing at an incredible pace and is predicted to be worth around $936 billion globally by 2030. However, the industry operators extend a dynamic shift from restaurants to cloud kitchens with the facilities.
With high rental costs, unpredictable customer demand, and competitor challenges, traditional restaurants opt for the cloud kitchen model. Cloud Kitchen is a restaurant setup without a physical premise, where food is prepared and delivered to the customers by taking orders via online platforms or calls. There are over 400 cloud kitchens in various locations across the UAE. Perhaps 70% of restaurants in the UAE show interest in expanding their business to cloud kitchen setup.
The recent survey shows that the food delivery sector in Dubai is forecast to grow at an annual rate of 6% and is likely to outperform during peak tourist season. With the growing prominence of cloud kitchens, many restaurant operators have already repurposed facilities into cloud kitchens because of their lower premises costs without customer seating or waiting areas and create multiple revenue possibilities.
Entrepreneurs can also use cloud kitchen setup to test the market before starting a full-fledged restaurant.
Cloud Kitchen: Business models in the UAE
Cloud kitchens can operate in multiple models- online B2B and B2C delivery via apps, kitchen-as-a-service (KaaS) operators, virtual restaurants of food or restaurant brands, and full-fledged order-to-delivery food and beverage (F&B) service providers.
These cloud kitchen models help reach an extensive customer base, streamlining operations with low investment. Cloud kitchens perfectly fit the cosmopolitan culture of Dubai and meet the demand for quality, quick, and easy access to F&B delivery. With individuals opting for daily meal delivery and food concepts such as vegan, healthy, diet, and organic meal plans, the cloud kitchens create perfectly set niche menus that attract more customers for cloud kitchen deliveries in Dubai.
The emerging growth of cloud kitchens establishes an attractive investment opportunity for entrepreneurs in the UAE. The virtual kitchen scale business model has flourished in recent years with advanced technology and a unified supply chain.
Virtual Restaurants: Investment opportunities & benefits
The UAE has witnessed relentless growth of the cloud kitchen since 2019, accelerated during the pandemic, and faces an optimal expansion in upcoming years. Now, the fast-expanding residents and tourists in the UAE boost the in-demand for quality food in less time.
Tech-enabled cloud kitchens can consistently hold the market position of cloud kitchens in the UAE.
Here are a few benefits you can experience with virtual restaurants:
Less Infrastructure Cost
Cloud Kitchens offer lower startup costs than a traditional restaurant. Without a physical location except for a kitchen of around 250-300sqft space, cloud kitchens can reduce infrastructure costs.
Starting a cloud kitchen is ideal for entrepreneurs who can enter the F&B sector without a substantial workforce and with no high overhead expenses compared to a traditional restaurant.
Business expansion opportunities
As a cloud kitchen, there are different business models you can try your hand at, especially with delivery for daily meals, party orders, food delivery apps, multi-brand kitchens, or co-working kitchens.
Cloud Kitchens can receive orders even from various third-party food aggregators, giving more flexibility to reach broader customers.
Unlike restaurants, cloud kitchens are more flexible and a low-risk platform, allowing you to experiment with new menus to scale up to meet the demand of the customers.
Additionally, cloud kitchens can be a lucrative business venture in Dubai with an ever-increasing demand for food delivery.
Technology requirements for a Cloud Kitchen
Integration of technology streamlines from order management to delivery in virtual restaurants. Cloud Kitchens must also develop an online ordering website or mobile app. The centralised ordering system allows one to receive orders from different platforms and integrate them into a point-of-sale (POS) system.
Moreover, virtual restaurants can also use a kitchen display system (KDS), inventory management system, and integrated delivery system to optimise the entire operation and smartly deliver online orders.
Setup guide for Cloud Kitchen business in Dubai
If you’re looking to enter the cloud kitchen business in Dubai, consider the following steps:
Choose a location for the kitchen: There is no setup for a dine-in facility in cloud kitchens. However, kitchen operations require a place. One can set up a cloud kitchen in a 250-300sqft area, anywhere in residential or commercial locations.
Obtain the licences: Like any other business activity in the UAE, operating a cloud kitchen will require two licences.
To start any business in Dubai, one requires a trade licence. Trade licence allows individuals to conduct the cloud kitchen business.
It is necessary to attain a food license from the Food Safety Department (Dubai Municipality) to prepare and sell food. One must submit the complete kitchen floor plan to the authorities with all facilities and various food processing equipment while applying for a food licence.
Kitchen equipment and packaging: The kitchen appliances require operating the business depend on the menu. One can optimise the establishment costs for the kitchen as per the cuisine.
It’s essential to keep high-quality packaging materials, as this is a crucial customer touch-points and can make or break an F&B business.
Staff: Although cloud kitchens do not require ground or front-end staff for operations, a dedicated team is necessary for the kitchen.
Marketing: Dubai has a thriving market to tap into through relevant marketing strategies.
It’s essential to list cloud kitchen on online food aggregators and promote it through social media marketing to get the business off the ground.
As a food entrepreneur, cloud kitchens with efficient business operations to meet the latest delivery requirements can potentially increase the return on investment (ROI) by a large margin.
How can Ascent Partners help?
Ascent Partners is a boutique consultancy providing bespoke, end-to-end solutions from Company formation to VAT Consultancy, Accounting, and Bookkeeping services for entrepreneurs looking to set up their next venture in the UAE. We work alongside you to strategise, startup, and scale your business in Dubai.
Ravi Krishnan is General Manager at Ascent Partners. Views expressed are his own and do not reflect the news portal’s policy.