Complex Made Simple

The new rise of kaykroo with the shift to cloud and hybrid kitchen concepts

The cloud kitchen phenomenon is taking over especially as COVID-19 is making it almost impossible for F&B outlet to thrive or at least survive

The digital food hall, the first of which will be launched in Dubai Silicon Oasis in December this year Sweetheart Kitchen recently announced a $17.7 million Series C funding round The KaaS model provides kitchen space and operations to either existing restaurants or virtual brands

Man’oushe Street. Who hasn’t tried it and became instantly addicted to it? 

Foodtech startup kaykroo is behind the brand as well as several others, and now it is shifting its concept from brick and mortar to cloud kitchens with 10 virtual brands or more. 

The cloud kitchen phenomenon is taking over especially as COVID-19 is making it almost impossible for F&B outlet to thrive or at least survive.

Kaykroo’s developing food concept 

kaykroo, the United Arab Emirates-based Foodtech startup with a focus on wholesome comfort food, has raised $4 million in a pre-series A funding round

Over the last decade, kaykroo has successfully launched Man’oushe Street, The Good Bowl, Bak Bak Chicken, Wrapped, Fern El Balad, and Hummus Brothers and ten additional concepts are in the pipeline to be launched over the course of the next few months.

Existing restaurants are to be converted to cloud kitchens using a network of 15 delivery and takeaway-centric smart kitchens and brand residences, including kiosks and pop-ups, across Dubai, Abu Dhabi, Sharjah, Ras Al Khaimah, and Al Ain.    

Man’oushe Street launched in 2010 that grew to 30 locations expanding into Saudi Arabia, Bahrain, Oman, and Jordan now accounts for 80% of its business sold on food ordering platforms like Deliveroo and Talabat.

Jihad El-Eit, Founder & CEO of kaykroo, said, “For many, 2020 has been a year of unprecedented challenges.  For us, it was the year of reinvention.”

One of these is a “digital food hall”, a physical location where customers can dine in and order any dish from their roster of virtual brands, something it defines as a “brick and click” model.

The digital food hall, the first of which will be launched in Dubai Silicon Oasis in December this year.

Read: If you can’t handle the heat, get out of the Cloud Kitchen business

A market shift from sit-in to delivery 

Data from Eat App suggests that dine-in numbers are 55% below pre-COVID-19 levels in the UAE.

Food delivery subscription platform ‘Munch:On’ expects 30% of all restaurants in the UAE to shut down by the end of 2020. 

Delivery became a lifeline for restaurants during the lockdown, spurring growth in delivery apps, and cloud kitchens.  

The food delivery sector is expected to grow at a rate of 6% annually for at least the next five years. 

The region’s food delivery is set to be worth $4 billion by the end of this year according to Statista. 

kaykroo alone has fulfilled one million orders since the start of 2020.

Uber co-founder Travis Kalanick sold most of his shares in the mobility giant to launch CloudKitchens, securing a $400 million fund injection.  

Cloud kitchen revenues in the UAE and Saudi jumped 160% from 2018 to 2019 to more than $65 million. 

Statista shows that the Middle East and North Africa (MENA) market was worth $3 bn last year, $2 bn of which from the UAE and Saudi alone.  

Dubai-based Food to Go, which initially launched as a cloud kitchen, has moved into developing its own virtual restaurants, while Sweetheart Kitchen, which recently announced a $17.7 million Series C funding round, has been aggressive in its expansion plans. Even Majid Al Futtaim, developer of the Mall of Emirates is looking into establishing its own cloud kitchens.

Read: Food to Go, new cloud kitchen receives first round of funding for nationwide expansion

B2B Kitchen as a service (KaaS)

Several cloud kitchen operators and Kitchen as a service (KaaS) providers have also come up in UAE and they provide the infrastructure, equipment, and utilities to facilitate the operations.

In 2017, Deliveroo launched a new kitchen concept in Dubai. It was the first-ever remote kitchen that provided a shared kitchen space for free to some of the famous restaurants such as, Burger and Lobster, Clinton St. Baking Company, and Joga.  

The KaaS model provides kitchen space and operations to either existing restaurants or virtual brands. Startups like Kitchen Nation and OneKitchen supply a fully-fitted space to individuals or small brands who pay about 14,000 Dirhams ($3815) in rent every month. This model essentially works like a co-working space for chefs.

Others like iKcon and Kitopi that raised $89 mn in funds also employ their own chefs to cook the meals.

The KaaS business model currently accounts for 60-70% of the cloud kitchens market in the region 

Virtual restaurants and brands

While KaaS and satellite kitchens rely on existing brands, the virtual restaurant operators like Sweetheart Kitchen create their own brands and menus, usually centered on offering a variety of one dish, like salads, or poke bowls, or falafel wraps.

Sweetheart Kitchen currently has 18 brands in Kuwait and 30 in the UAE including Wingo (chicken wings) and Affordabowls (grain salad bowls).

While the virtual restaurants have their own kitchens and cook their own foods, virtual brands focus on the creation of the brands and menus only, leaving it to third party operators to prepare, cook and deliver the food, and in Dubai, The Leap Nation and Cloud Restaurants currently dominate this space, while other players are slowly beginning to emerge.

According to RedSeer Consulting, satellite or cloud kitchens account for 60-70% of the market while virtual restaurants and brands account for 20-30%.

Benefits of cloud kitchens 

Multiple cloud kitchens collaborate with food aggregators and delivery apps to deliver food to their customers.

This way, food arrives hot and fast.  

Operating a cloud kitchen is more affordable requiring less infrastructure and operational costs, allowing such businesses to compete on rates and attract more customers.   

Cloud kitchens have also made it easier for people to place an order with more than 60% of people preferring to order food via an app.

When it comes to launching a cloud kitchen, it takes just one month on average from idea to start of operations, whereas a brick and mortar restaurant can take at least 4-6 months to open.

According to Peter Schatzberg, founder of Sweetheart Kitchen, a typical restaurant can process 15-20 delivery orders per hour, but a cloud kitchen can process 60 with just even one employee.

In short, cloud kitchens aim to maximize the utilization and revenue per square foot of kitchen space and this is making them very popular.