Thanks to technology, a range of industries are finding new ways to serve their customers better and adapt to change more quickly than before. In the restaurant industry, one of the disruptors is the emergence of cloud kitchens.
Being digital-first and easier to start-up, cloud kitchens face stiff competition from other cloud kitchen businesses alongside other traditional types of restaurants. The key to standing out from the competition? Digital transformation!
Established restaurant chains are also leaning into this model, launching new brands and restaurant concepts to diversify and expand their market offerings.
This guide gives you an overview of how you can achieve your goals by adopting a digital transformation strategy. We’ll cover:
- The existing state of cloud kitchen businesses, including the challenges that they face, where their tech is now, and where it could be to solve these challenges.
- Outline some technology solutions, such as Enterprise Resource Planning (ERP) systems, that can help your cloud kitchen to delight its customers and scale seamlessly.
- A simple step-by-step guide for making the key moves to digitally transform your cloud kitchen business or brands.
Cloud Kitchens and the Food Delivery Service Market
With more and more people ordering online, the cloud kitchen (also called ‘ghost kitchen’) industry is booming and set to become a $1 trillion industry by 2030. A cloud kitchen differs from other restaurants because they do not have a brick-and-mortar venue where customers can walk in to order and dine inside.
Instead, orders are taken via food ordering and delivery platforms like Hunger Station, Jahez and Talabat, with the food being prepared in a private venue and then sent out for delivery to the customer. With a good enough venue, it’s possible to prepare orders for various food concepts and brands in one place.
However, the lack of a physical storefront means these businesses must excel in digital marketing, order management, and delivery logistics to gain and retain customers. The opportunity is great, but becoming the leader of the pack is not a simple walk in the park!
Cloud kitchens have a number of advantages:
- They have lower startup costs and barriers to entry.
- They can adapt and improve their menu and offers to capitalize on opportunities and changes more quickly than traditional restaurant businesses.
- They are much easier to scale up and down dynamically with changing needs and demands.
- They’re easier to grow and operate because there is less complexity to manage compared to traditional restaurants; they also tend to have an easier time with gaining and using their digital footprint, or data.
- They can grow quickly and efficiently by repeating their successes and scaling them into other towns, cities, regions, and countries.
In cloud kitchens, the returns on investment can greatly increase as you add more successful locations. For example, while the return from one cloud kitchen might be equivalent to your initial investment (1x), adding more successful cloud kitchens can double this return (2x). This differs from traditional brick-and-mortar restaurant chains, where adding new locations typically results in a steady, linear increase in returns rather than a multiplicative increase.
They also have a number of challenges:
- They risk being in saturated competition with other cloud kitchens, making differentiation very important.
- Being digital businesses, cloud kitchens need to engage their market and customers online; they need to get their digital presence and marketing right.
- Customer reviews are of critical importance; a hitch in delivery times, the ordering process, or poor customer service at the door can all lead to critical reviews being stamped onto the business’s only shop fronts – their digital ones.
They also face much of the same challenges as traditional restaurants, including effective inventory management, financial reporting, revenue attribution, waste minimization, system integration, and more. They have to keep the customer experience engaging and rewarding so that they stay relevant and have high recall value.
You can beat traditional restaurants through better pricing, delivery times, food quality, and greater agility, but you need technology to do that. You need it to work together harmoniously and enable your people to focus on what matters: delighting your customers.
Where Things Go Wrong: The Operational Challenges of Cloud Kitchens Without Digital Transformation
Digital transformation enables your business to streamline its operations, use data to drive success and profitability, respond to changing demands quickly, and efficiently scale.
Here’s some signs that your cloud kitchen business can benefit from digital transformation:
You’re struggling to manage orders and deliveries from a range of channels: Leading to errors, inefficiencies, missed orders, and dissatisfied customers.
It’s hard to prioritize your investments and efforts using data: Because datasets are disparate and hard to bring together across various apps and channels.
You’re losing time and money to fragmented systems and processes: Meaning that everybody, from your kitchen staff to back-office team, is using more time to get the work done while ensuring quality.
Your inventory is not as efficiently managed as it could be: For example, inventory turnover ratios or inadequate preparation for daily demands are leading to inefficient usage of stock and order fulfillment times.
Profitability is getting lower: There’s a lack of oversight and control over things like inventory costs, revenue attribution, and portion control, among others.
Delivery platforms are eating into your margins and control over customer experiences: A key priority is achieving extremely competitive delivery times while taking back margins from food ordering and delivery platforms.
If your cloud kitchen business fits the shoe, don’t worry. There are technology solutions that can help you enhance your competitiveness and profitability while streamlining how you work.
How To Digitally Transform Your Cloud Kitchen Business
Using technology to beat the competition and delight your customers is key. Here’s four simple steps and some technology solutions:
1. Identify Your Pain Points
You may already relate to some of the pains above in this article, but it’s worth thinking critically about the causes behind them and solutions that can help. You can work with stakeholders across your business, including technology consultants, to help you to find pain points across your business that technology can help with.
2. Map Technology Solutions That Can Help
- Cloud kitchen management software to streamline a range of processes, including menu , order, and inventory management, as well as handy reporting and integration capabilities with an ERP.
- Integrated cloud POS systems that connect with other digital tools such as your KDS, accounting, and inventory management software. It is crucial to ensure integration with POS for cloud kitchen businesses.
- Enterprise Resource Planning (ERP) systems to unify and synergize your business processes across finance, sales, front-end operations, staff, inventory and supplier management, marketing and promotional offers, and much more. Find out more here.
- Consider digital marketing tools such as SMM and SEO software, a CRM, and online advertising tools to take your marketing beyond the food and delivery platforms. Integrable with an ERP, these can lead to better margins and expand brand awareness and loyalty. You can use these channels to empower revenue reconciliation with the aggregators. Also consider if the systems help you to sell menu as well as inventory items; for example, your own version of sauce (Peri Peri). Can it also support you if you choose to offer brick and mortar dining experiences later on?
3. Create An Implementation Roadmap for your Digital Transformation
You need a clear implementation roadmap for your projects that considers how to find, implement, and integrate your new technology and tools, as well as define their success. An ERP and technology implementation partner can make this process a smooth one for your business while ensuring you get the most value from it.
4. Implement and Continuously Improve With Feedback
Implement the roadmap using a milestone approach. Celebrate and measure success and make adjustments as needed. After the initial implementation, engage with staff working at the front and back-end of your business to get feedback and further suggestions, and ideally, collect feedback from customers to measure the success of your digital transformation.
Choosing A Technology Partner for Your Digital Transformation Journey
Selecting the right technology partner is critical. Look for providers with experience in the F&B sector, particularly those who understand the nuances of cloud kitchens and the restaurant industry as a whole. They’ll be able to help you identify and implement technology solutions tailored to your goals and operations, rather than the other way around.
They’ll be able to help you to seamlessly integrate your tools, channels, and systems together and align your IT efficiently and securely to enable the process.
Final Thoughts
Cloud kitchens have a range of competitive advantages and opportunities compared to traditional restaurant businesses, which is prompting many chains to adopt this model. However, they also come with their fair share of challenges.
By driving digital transformation with technology, you can sharpen your competitive edge and outsmart, out-deliver, and outpace the competition while driving profitable growth. A technology partner for that journey can make a world of difference for the process. Curious to see how digital transformation can take your cloud kitchen business to new heights? It’s time to talk tech with Think Tribe.
ThinkTribe: Proven ERP Implementation Specialists Delivering Profitable Value to Global and Regional F&B Brands in the Middle East
Welcome to ThinkTribe, the premier choice for ERP implementation in Dubai and throughout the vibrant Middle Eastern landscape. As seasoned specialists in system integration and ERP solutions, we excel in fostering profitable and scalable growth for businesses spanning various sectors, leveraging state-of-the-art technology solutions. We’ve helped everyone from regional F&B brands to global enterprises to streamline their technology to drive their goals.
Whether you’re eager to harness the power of ERP for your enterprise in Dubai or any other part of the Middle East, seeking tailored advice to select the ideal solution, or requiring hands-on support throughout the implementation process, our dedicated team is here to support you at every turn. Reach out to us today, and let’s propel your business towards success together.
