Impact of food aggregators and cloud kitchens

Food aggregators and cloud kitchens were born out of the need to expand F&B operations. When customers couldn’t visit restaurants, kitchens reached them, mostly through food aggregators

Kamlesh Barot

Necessity is the mother of invention! Food aggregators as well as cloud kitchens were born out of the need to expand F&B operations. Unoccupied blankets are a threat to every foodservice owner/operator. When customers could not visit restaurants, kitchens reached customers primarily through food aggregators.

Conventionally, there was a void of an agency that could fill seats during off-peak hours of operation for restaurateurs. They have always wanted to increase their attendance and increase their income. Food aggregators then approached them to fill that void and said, “We’ll take commissions and offer discounts for bringing people in, to fill your unoccupied blankets, before and after your peak hours.” Regular customers, who enjoyed the menu items at their patron restaurant, brought home leftover food or ordered take-out, to be consumed off-site later. The next progression was to have the restaurant staff deliver the same to them when they couldn’t visit each other.

Again, food aggregators have encroached on this space with the same commission offer, for delivery of food ordered with them, to the restaurant’s own customer. Alternatively, and proactively, some restaurateurs took up space in less prime locations than their own visible and expensive establishments, began to deliver more like a commissary to their known customers. From former managers and chefs setting up their own kitchens remotely, aided by a finite number of delivery people, to a food aggregator now specializing in deliveries.

As economics taught them that “repetition is the essence of learning”, food delivery agencies led to specialization and vertical expansion where they dabbled in table reservations and large discounts, such as hotel aggregators. With this step and many more like withholding data from customers who have never belonged to foodservice aggregators (FSAs), killing the golden goose for them, premium loyalty cards that have no been launched only to include a select few, are sold to one and all, even reducing the fees they charge.

A fact that is surely visible with the attitude of the FSA is the FOMO factor (fear of missing out), which manifests in all their activities with a deep sense of envy, strongly affecting self-esteem. These few moves and more, have placed the ASPs from the seat next to us, across the table with our industry. Success went to their heads and they began to take one-sided positions, much like the online travel agents (OTAs) of hotels to replace their ex-parte agreements and commissions, in the market replacing the work of team from a win-win position to an autocratic lose-lose proposition. .

The pandemic has taken an ugly turn with half of food and beverage outlets calling it a day. Social distancing and only deliveries allowed during Covid19, have swung the sales for aggregators, with so many restaurants on liquidation, given momentum to “Cloud Kitchens”. While the industry was bleeding with the unreasonable Cascuta, eating away at their wafer-thin margins, the parasites themselves could not bear the cost of establishing their market share, recording losses of up to INR 25,000 per minute, according to a report. The customer had the last laugh.

Although a few deep-pocketed brands have tried to establish their own delivery infrastructure, but volumes haven’t increased the extra load on their margins either, many have come back and succumbed to the FSA – a necessary evil.

Deep discounts and table reservations made it easier for customers, but it wasn’t that aggregators had brought new consumers to restaurants. The same customers who were regulars at these restaurants were now using the deep discounts and making their reservations on the aggregation apps, needlessly invoking commissions to pay.

On top of that, for the deliveries made, as well as the reservations given, the aggregators withheld customer data, which if they had shared it with the restaurant, would have gone a long way in creating that much-needed teamwork between them. This data primarily belonged to the restaurant and not the aggregator, but is not yet shared.

One of the biggest challenges cloud kitchens faced was retaining talent. CDPs and sous chefs who could showcase their creativity in the restaurant began to feel claustrophobic, under the rug in the remote kitchen, unlike the strategically located outlet that was screaming on its brand, all over the plaza du market. The first opportunity they had to enter the main restaurant, they quit their jobs at the Cloud Kitchen.

During the time of the three virus waves, the main cause for concern about sanitation, hygiene and team vaccination was that guests were guessing less conspicuous places, which took away the cost advantage that it had compared to traditional restaurants. . The Cloud Kitchen business suffered.

Although set-up costs were lower for Cloud Kitchens, competitive pricing and commissions paid to delivery agencies removed their incentive for growth. Menus that were first designed to catch the eye, in a fine dining restaurant, were too tricky to produce and the cargo rushed for more than half an hour to the customers location, never to be refreshed, leaving only QSR menus as an obvious choice for Cloud Kitchens.

In summary, despite the many detours this industry is taking in these trying times, the old and new normal recipe as my brand of “revival” remains, traditional brick-and-mortar restaurants!

AUTHOR BIO: Kamlesh Barot is Director, VIE Hospitality

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