Investing in Hoi Foods- The Scalability of a Cloud kitchen/ Food Tech Restaurant
Restaurants have long been known for their failures. 70% of restaurants fail within the first year of operations and around 85% of them close within the first three years.
Researchers at Cornell University believe that one of the major reasons why restaurants fail is that they don’t have enough operating capital. Restaurant owners spend so heavily on interiors and on making their restaurant fancy that they are unable to generate enough revenues to service these costs.
According to Harvard Business Reports, the on demand economy is attracting more than 22.4 million consumers globally and generates ~$57.8 billion in revenues out of which food and grocery delivery alone make up for $4.6 billion in annual spending.
With the growth of the on demand economy, cloud kitchens have become the new vastly accepted business model today. In India, affluent millennials on average spend Rs11,461 ($180) annually, roughly 13% of their total expenditure, on food. To capitalize on the growing number of home delivery orders each day, Swiggy a food delivery platform/ aggregator confirmed that it had already invested about $24.5 million in its cloud kitchens business that it calls Swiggy Access, and plans to pump another $10.5 million by the end of March this year.
We believe that Cloud kitchens will revolutionise the on demand food industry, driven by cheaper, better quality stanadarised food with multiple ordering options.
Cloud kitchen owners can do away with costs associated with front-of-house activities and can concentrate solely on food.
Some of the other major benefits associated with a cloud kitchen include
1.Lower Real Estate Costs
2.Low Operational Costs
3. Better Expansion Opportunities
Fassos (The Rebel Foods) is a successful Multi-brand (cuisine), single kitchen, multiple outlets, no storefront model.
Cloud Kitchens today are based on data intelligence such as area wise demographics of residents, popular cuisines and hyperlocal demand-supply, mainly addressing a neighbourhood with a 5-6 km radius, with relatively lesser restaurant options. This model is clever because it positions the separate brands as their own individual establishments. And having a single shared kitchen keeps operational costs low. This model closely resembles the original cloud kitchen model with no physical storefront. You could think of it as specialized cuisine based cloud restaurants, owned by the same mother brand, sharing the same kitchen
In June 2018, we invested in Hoi Foods, a cloud kitchen company that is creating an F&B footprint in multiple locations with standardized service levels and infrastructure. Currently, the company is based out of Delhi/NCR and Bangalore.
Although cloud kitchens are becoming more and more common on a day to day basis, what actually caught our attention is that Hoi Foods caters to hotels for food the way OYO caters to hotels for stays, improving the hygiene & quality of food and the overall experience of your stay at a low budget hotel memorable.
Simultaneously, even though operating in the food industry where the burn model is still leading and a sustainable business model is still missing, Hoi Foods is catering to the food delivery market at scale with a philosophy of keeping every order profitable and finding a unique sustainable business model where every stakeholder gets the benefit.
Last month they raised seed another round to further expand operations in Hyderabad, Mumbai, Pune and few tier 2 cities.
We at Jugnoo want to incubate companies that have a million dollar idea, are generating revenues and want to leverage our expertise in their growth process.
Through JCurve, our investment arm, we invest & aid in the growth of early stage companies that can leverage our professional and strategic expertise.
For any queries on JCurve, Please visit https://jcurve.co/.
You can also apply for our incubator program at. https://jcurve.co/#Apply-Now