Today we’re going to be talking about the 6 different Cloud Kitchen business models.
Cloud kitchens (also called Ghost Kitchens) have been all the rage. It is a relatively new concept that has become extremely popular with changing times, they offer some big benefits compared to a dine-in restaurant model.
For those of you that aren’t familiar with the concept, I wrote an article explaining all their ins-and-outs, which you can find here.
This post will help you get a better sense of how to take advantage of these six different cloud kitchen business models so you can determine which one is best for your food business.
Without further ado, let’s dive right in.
1. The Independent Model
This is the most popular model, where your kitchen receives orders from multiple different third-party apps such as UberEats, DoorDash, and Grubhub.
Once you get the order from the app, you simply whip up your great food or beverage item, package it for travel, and set it at the front for the delivery driver to come pick up and take to your customer.
This model is based on one brand only. For example, let’s say you have this food brand called Wilson’s Waffles and you get an order through Uber Eats. You would prepare all the waffles at your cloud kitchen, and send it on its way. Simple, right?
The beauty about this model is the fact that it is super easy to operate. It doesn’t have many upfront costs and that’s the reason why this is the most popular business model.
Quick & Easy.
2. The Multi Brand Model
For those of you that are a little bit more ambitious and feels like you have more to offer, I would recommend the Multi Brand model.
It’s the same ordering process as the independent model: receive the order from an app, prepare it, and have the driver deliver to the customer. The only difference is that you’re running multiple brands out of the same kitchen.
For example, I’ll be running Wilson’s Waffles, but also Sushi Town and Donut Empire. All these different brands and food products are coming out of this one cloud kitchen.
Why does this model work?
You’re able to capture much more market share. Someone might feel like waffles today, sushi tomorrow and has a friend that wants donuts. This model allows you to profit from all of those cravings, catering towards more than just one person’s needs.
It also gives you the freedom to experiment with different offerings within your neighborhood, in turn allowing you to figure out which works best and expand faster.
Rebel Foods is a great example and does an amazing job with this model.
Rebel basically looks at their target demographic in the surrounding neighborhoods to see what popular items are selling really well in restaurants within the area. They’re able to gain insights about what food and beverages they should offer to capture even more popularity and enhance their chances of success.
You should take advantage of this model if you have multiple food concepts or brands that you want to test out and bring to the table.
3. The Mid-Ground Model
Once again, this is exactly the same ordering process as the independent model, but instead of getting orders delivered to your customers, they come order and pick up straight from your cloud kitchen location themselves.
Not a lot of cloud kitchens offer this type of model, so if you’re interested and signing up with a service in your area, you need to find out whether or not they offer support for pickup.
This is because most cloud kitchens are located in areas with a much less dense in population and walking traffic to take advantage of cheaper rent.
Who should take advantage of this model?
If you have a prime location and want to expand your possible income streams, incorporating pickup with the Mid-Ground model is the way to go.
4. The Brand Owned Model
This model will only allow you to receive orders with one third party delivery app. The app will force you to sign an exclusive deal with them and in turn, you create the item and then you get it delivered.
Why is that the case?
Companies like UberEats understand that cloud kitchens always sign up with multiple different third-party apps, which doesn’t provide brand exclusivity and the monopoly that they would prefer.
This is a common trend that we see happening more and more these days.
Let’s say Wilson’s Waffle contracts with UberEats. If we do decide to go with this model, the advantage is that the app will push a lot more business to you and advertise your brand more because their success is tied to yours.
Now, there is a disadvantage of this model:
Because you’re only banking on one platform, you’re basically putting all your eggs in one basket which can be quite dangerous.
Let’s say all of a sudden UberEats charges you $500 in advertisement fees. You have no choice but to pay them that amount, or risk losing all of your business.
This model can be beneficial to some businesses and should be judged on a case-by-case basis.
5. The Hub & Spoke Model
This model is usually for companies that are a little bit more established and want to have a bigger reach.
The only difference between this and the independent model is that there is one centralized kitchen who preps all of the offerings and then distributes them to multiple different locations.
For Wilson’s Waffles, I might create all my batter and toppings from this centralized kitchen. Then, I would ship them to many other individual cloud kitchens.
This model allows you to reach much more people in different areas around the city.
This is also not a popular model due to the higher investment costs. This model is more for advanced operators who want to have a larger market share within specific areas of their city.
6. The Outsourcing Model
Basically, the only difference between an outsourcing model and an independent model is the fact that your ingredients are pre-packaged.
All you’ll be doing is taking all the ingredients out of the package, putting the finishing touch on it, then giving the product to the delivery driver to drop it off.
Basically, I would buy some waffles from Costco, take off the wrapper, heated them up, add some sprinkles and syrup on there, and send it on its way.
This is also a quite a popular model because everything is outsourced already, the hard work is over.
However, customers will likely be able to tell. If it tastes like Eggos, why would they purchase from you? This is the main reason why I would not recommend doing the outsourcing model altogether.
The independent or multi-brand model allows you to carve a more unique and sustainable market space.
There you have it, the 6 Cloud Kitchen Models. Now you can be the judge and make the right informed choice for your business.
The determining factors come down to desired budget, stress level, work load, partners, and location.
At the end of the day, I would highly recommend you see Cloud/Ghost Kitchens only as a stepping stone to test out your concept. Virtual Kitchens rely on many different third parties which you want to avoid. You want to take control of your own destiny.
Once you’ve proven the concept and your brand it’s time to jump into a brick and mortar store to create more stable streams of revenue. You don’t want to be held around the neck by these third party apps because we all know they take a big margin from your revenue.
Always be thinking ahead to what comes next to future-proof yourself and your business.
If you want to learn how to build an online food business or a cloud kitchen from scratch, join my free masterclass where I go over how to transform your food idea into a profitable online food business.