February 22, 2023

Cloud Kitchens vs Restaurants – Which is Superior?


Unprecedented times bring about major changes as businesses have to navigate through tough circumstances in order to stay afloat and keep their operations running. The F&B industry has seen significant changes over the last few years, by and large due to the global pandemic. Many restaurants were forced to make unforeseen adaptations in order to keep their doors open, while others shifted to a whole new business model in the form of CloudKitchen® delivery kitchens.

As the dust has begun to settle from the havoc wreaked by the pandemic, a new storm is brewing within the F&B circle, which revolves around CloudKitchen® delivery kitchens vs restaurants. Questions continue to be asked about which one is superior. This, of course, varies from person to person, but we at Chef Collective have ventured on a mission to provide a comprehensive insight into both business models so that you can make an informed decision on which one is truly right for you. 

The right location

Finding the right location is incredibly important for both CloudKitchen® delivery kitchens and brick and mortar eateries, as it is one of the keys to their overall success. 

Normal restaurants

Since restaurants require a physical location, they need to make sure it is as centrally located as possible and in an area with plenty of customers. Attracting people through the door can be an uphill battle, especially considering the number of people that are working remotely or moved to a flexible work schedule. What’s more is they will have to compete with plenty of neighbouring eateries, meaning they have to offer something different in order to capture the attention of potential diners. 

That’s just half the story, though, as there is a torrent of costs that cascade down from rent to staff to permits and the overall design of the restaurant itself. If you are running a restaurant, it has to look the part so that it emits an inviting atmosphere. It also needs to reflect the type of cuisine you specialise in. For example, if you are running a burger shack, it has to be designed to convey that message instead of providing mixed signals that may confuse your clientele. 

Cloud kitchens

Being situated in larger facilities run by CloudKitchen® delivery kitchen suppliers like Chef Collective, businesses that operate out of these kitchen units already have an established customer base to target since they will be situated in central locations that are brimming with offices, schools and residential neighbourhoods rife with people placing orders on a daily basis. 

On top of this, CloudKitchen® delivery kitchens can serve more people in a wider area as they generally partner with multiple food delivery companies.

Rent payments

Rent can be a make or break factor for a lot of businesses, so if you are wondering which side is better off in the battle between CloudKitchen® delivery kitchens vs restaurants, it is the former as they pay a whole lot less. 

Normal restaurants

Traditional restaurants have to fork out a lot on rent as they take up more real estate and need to be in the thick of the action, which doesn’t come cheap. In Australia, such establishments are usually about 200 square metres in size and require an investment bordering on A$1 million. 

Cloud kitchens

Given that they occupy much smaller spaces than regular restaurants – approximately 16 to 25 square metres on average – CloudKitchen® delivery kitchens in Australia tend to need an investment of A$23,000, which is a far cry from that of brick and mortar stores. Due to this, it’s understandable why many newcomers would pick this business model to start off with, as they don’t have to take such a massive financial risk right from the get-go. In addition, many long-standing restaurant owners are now becoming more switched on to the idea of using CloudKitchen® delivery kitchens when moving into new markets, as there is no guarantee they will strike gold immediately. 

Staff costs

In the next round of CloudKitchen® delivery kitchens vs restaurants is the staff costs. Obviously, this one, once again, goes to the former as they require anywhere near as many employees as eateries with a physical location.

Normal restaurants

All restaurants need a diverse range of staff with different expertise, whether it be waiters, bartenders or general managers. This costs a lot of money as we are not talking about one of each. Furthermore, the people you hire need to be trained as you want to provide the best customer service to your diners so that they keep frequenting your business in the future. In Australia, restaurants hire up to 30 people, which accounts for a healthy portion of the monthly costs the business incurs. 

Cloud kitchens

Since CloudKitchen® delivery kitchens don’t offer dine-in services and operate in a much smaller space, they eliminate the need for many of the employees that traditional restaurants would typically have to hire. All in all, they need about 1 to 3 chefs to prepare the food to be delivered to customers. If things start to get busier, they can look at the prospect of increasing their workforce. 

Operating costs

Ranging from ingredients to packaging and the technology being used, there are plenty of operating costs restaurants, and CloudKitchen® delivery kitchens have to bear. That being said, it is the brick and mortar establishments that have to pay a higher price. 

Normal restaurants

Traditional restaurants, as mentioned above, have to pay a lot for their ingredients, takeaway boxes, menus and POS systems, among other things. These costs will go up further if they offer more than one type of cuisine as the supplies they need will increase. Add staff and a professional website into the mix, and the amount that needs to be spent on operational costs surges even more. 

Cloud kitchens

They are not exempt from the costs needed to make the food for delivery orders, meaning they will also have to pay a lot for ingredients. Where they have the upper hand, though, is that CloudKitchen® delivery kitchen providers like Chef Collective offer top-notch technology that makes everything much easier and more convenient. All orders coming in can be viewed on one tablet, even if businesses have joined forces with multiple food delivery firms. It is also worth noting that CloudKitchen® delivery kitchens need websites, too, especially considering they rely on online orders, so they will need to add this to their list of operational costs.

Setting up

When it comes to setting up the match-up between CloudKitchen® delivery kitchens vs restaurants, a lot of it depends on how much equipment will be needed to ensure business operations run as smoothly as possible. But, where CloudKitchen® delivery kitchens do have an advantage is the time needed to open their doors and start serving customers.

Normal restaurants

The equipment needed will depend on the type of food being served and the number of patrons that the restaurant can handle when fully booked. It is vital to keep the basics in mind, such as pots, pans, utensils, etc., but don’t forget specialist equipment if you need it to make certain types of dishes. Be sure to have extra stock on hand in case plates break or utensils get damaged. For those who operate fine dining restaurants, you will have to spend even more on equipment as it needs to ooze class and match the elegant feel and atmosphere. 

Cloud kitchens

Equipment will be the focal point for CloudKitchen® delivery kitchens as they cannot afford to have substandard equipment when taking plenty of orders. They will also save a lot of money on plates and cutlery as they don’t require it since they don’t have any customers dining in. But, even when running a CloudKitchen® delivery kitchen, it doesn’t mean you won’t need specialist equipment. If you offer certain types of dishes on your menu that are cooked in a specific way, make sure you can do it because your business’s reputation is on the line.

Profit margins

This is one of the biggest determining factors for people who are undecided on which side to pick when it comes to CloudKitchen® delivery kitchens vs restaurants. Profit is integral to survival, and while profitability is fully achievable with both models, it all comes down to which one best adheres to the needs of your business.

Normal restaurants

Given that they have more costs to bear, the time required to become profitable is generally longer for brick and mortar restaurants. To put this into perspective, the time needed for eateries in Australia to break even is about 5 years, which is a long time to keep your doors open without making money. However, if you are able to provide an exceptional dining experience or offer unique food that becomes a talking point in the community, there is a good chance you can accelerate the time taken to become profitable. 

Cloud kitchens

With fewer costs and a customer base they can target right away courtesy of the central location of CloudKitchen® delivery kitchen facilities, businesses operating out of these kitchen spaces usually need about 6 months to break even. But, with more and more people ordering food online, the possibilities are endless when it comes to how much money you can make if you play all your cards right. 

Marketing costs

In this day and age, every business across all industries has marketing dollars set aside as they know it can help them get ahead of their competitors if it’s done correctly. In regards to CloudKitchen® delivery kitchens vs restaurants, the same applies for both types of businesses as they need to connect with their customers and earn their trust by building a personal connection with them.

Normal restaurants

For traditional brick and mortar restaurants, they have to hustle to attract more diners to their physical location. In order to accomplish this, they have to be active on social media and share regular but interesting updates about their business in order to keep their customers hooked. 

Joining forces with influencers is another excellent way to get some street cred, as their followers will flock to your establishment if it is recommended by one of the many social media stars in Australia. Why stop there, though? Go one step further and create a special promotion or discount based around an influencer and have them promote it on their social media accounts. This will surely make you the talk of the town.

Cloud kitchens

All of the methods that work for regular restaurants are also applicable to CloudKitchen® delivery kitchens, especially considering that they rely on online orders coming in to keep their business afloat. There is an even greater need to reach out and stay connected with their customers, which means they have to really put some pep in their step and come up with a brilliant marketing plan. 

The choice is yours

Now that you know the stark contrasts between CloudKitchen® delivery kitchens vs restaurants, it’s up to you to make the choice of which route you want to go down. 

Ready to start your own CloudKitchen® delivery kitchen in Australia? Complete the form below, or feel free to reach out to us

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