Impact of food aggregators and cloud kitchens
Food aggregators and cloud kitchens evolved out of the need to expand F&B operations. When guests couldn’t visit restaurants, the kitchens reached them, mostly through food aggregators
Necessity is the mother of invention! Food aggregators as well as cloud kitchens evolved out of the need to expand F&B operations. Unoccupied covers are a threat for every food service owner/ operator. When guests couldn’t visit the restaurants, the kitchens reached the guests, mostly through food aggregators.
Conventionally, there was a vacuum of an agency that could fill up the seats in the operating lean hours for restaurateurs. They always wanted to increase their guest footfalls and increase revenues. Food aggregators then approached them to fill that void and said, “We’ll take commissions from you and offer discounts to bring people in, to fill up your non-occupied covers, before and after your rush-hours”. Regular guests, who were fond of their patronaged restaurant’s menu items, would carry home leftover food or order takeaway food, to be consumed off-premises later. The next progression was to request restaurant staff to deliver the same to them when they couldn’t visit themselves.
Again, the food aggregators encroached on this space with the same commission offer, for delivering food ordered with them, to the restaurant’s very own customer. Alternatively, and proactively some restaurateurs picked up space in not so prime locations as their own visible and pricy establishments, started delivering more like a commissary to their known clients. Escalating from ex-managers and chefs setting up their own remote kitchens, aided by a finite number of delivery boys, to latching onto a food aggregator specialising by now, in deliveries.
As economics taught them ‘repetition is the essence of learning’, food delivery agencies led to specialisation and vertical expansion where they got into table reservations and deep discounting, like hotel aggregators. With that step and many more, like withholding customer data that never belonged to the Food Service Aggregators (FSAs), killing the goose that lay golden eggs for them, premium loyalty cards that was initiated only to include a select few, is sold to one and all, even by discounting the fees they charge.
One fact that is surely visible with the FSA’s attitude is the FOMO (fear of missing out) factor, which shows in all their activities with a deep sense of envy, strongly affecting self-esteem. Those few moves and more, placed the FSAs from the seat beside us, to across the table with our industry. Success went to their heads and they started taking unilateral stands, much like the hotel online travel agents (OTAs) of replacing their agreements and commissions ex-parte, in the bargain replacing teamwork from the win-win stand to an autocratic lose-lose proposition.
The pandemic took an ugly turn with half of the food and beverage outlets calling it a day. Social distancing and only deliveries allowed during Covid19, turned the balances for the aggregators, with so many restaurants winding up operations, gave momentum to the “Cloud Kitchens”. As the industry bled with the unreasonable Cascuta, eating into their wafer-thin margins, the parasites themselves could not sustain the cost of establishing their market share, booking losses as high as INR 25,000 every minute, according to a report. It was the customer who had the last laugh.
Though a few deep-pocket brands tried to establish their own delivery infrastructure, but the volumes did not augment the additional load on their margins too, many returning back and succumbing to the FSA – necessary evil.
Deep discounting and table reservations facilitated guests, but it wasn’t that the aggregators had brought in new consumers to the restaurants. The same guests who were regulars for these restaurants, now used the deep discounts and made their reservations on the aggregator apps, invoking commissions to be paid, unnecessarily.
On top of that for the deliveries made, as well as the reservations given, the aggregators withheld the guests’ data, which had they shared with the restaurant, would’ve gone a long way in creating that much needed teamwork between them. That data primarily belonged to the restaurant and not the aggregator, but is not yet shared.
One major challenge that cloud kitchens faced was retaining talent. CDPs and Sous Chefs who could hone the credit about their creativity in the restaurant started feeling claustrophobic, under the carpet of the remote kitchen, unlike the strategically located outlet shouting about its brand, all over the market place. The first opportunity they got to get into the main stream restaurant, they quit their jobs at the Cloud Kitchen.
In the times of the three virus waves, the prime cause of concern around sanitation, hygiene and the team’s vaccination had guests guessing for not-so-visible locations which took away the cost advantage it had over brick-and-mortar dine-in restaurants. Cloud Kitchen business suffered.
Though establishment costs were lesser for Cloud Kitchens, competitive pricing and commissions paid to delivery agencies took away their growth incentive. Menus which were designed for eye-appeal first, at a fine-dine-in restaurants, were way to delicate to be produced and cargo rushed over half-an-hour to guests’ location, never to be refreshed, leaving only QSR menus as an obvious choice for Cloud Kitchens.
Summarily, as many detours this industry takes in these trying times, the old and the new normal recipe like my brand for “revival” remains, the traditional physical dining restaurants!
AUTHOR BIO: Kamlesh Barot is Director, VIE Hospitality
This article was published in BW hotelier issue dated '' with cover story titled 'MARCH-APRIL 2022 F&B SPECIAL'
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