Professional Documents
Culture Documents
Etp Cia 3
Etp Cia 3
CIA III
Submitted By
RESHMA MENON
2027153
Contents
Introduction .............................................................................................................................................................. 3
Business Opportunity............................................................................................................................................... 3
Source S Or Trends For Cloud Kitchen .................................................................................................................. 3
Challenges For Cloud Kitchen................................................................................................................................. 5
Comparison With Traditional Business Models ................................................................................................... 6
Market Analysis ....................................................................................................................................................... 6
PESTLE Analysis ................................................................................................................................................. 6
Porter's Five Forces Model .................................................................................................................................. 7
Business Canvas Model ............................................................................................................................................ 9
Financial Analysis .................................................................................................................................................. 10
Financing ............................................................................................................................................................ 10
Cost Structure .................................................................................................................................................... 11
Forecasted Financial Statements ...................................................................................................................... 12
Technical Analysis .................................................................................................................................................. 14
Value Chain Analysis Of Home Bistro ............................................................................................................. 14
Mckinsey 7s Framework .................................................................................................................................... 15
Soft Elements ..................................................................................................................................................... 15
Hard Elements .................................................................................................................................................... 15
Key Performance Indicators Of Cloud Kitchen .............................................................................................. 16
Legal Analysis ......................................................................................................................................................... 17
Selection Of A Business Structure .................................................................................................................... 17
License From The Food Safety And Standards Authority (FSSAI).............................................................. 17
Eating House License/Health Or Trade License ............................................................................................. 17
Fire And Safety License..................................................................................................................................... 17
Income Tax Pan (Permanent Account Number) ............................................................................................. 17
GST (Goods And Services Tax) Registration .................................................................................................. 18
Shops And Establishments License .................................................................................................................. 18
Legal Formalities For Listing ........................................................................................................................... 18
Benefits ................................................................................................................................................................ 19
Appendix ................................................................................................................................................................. 20
INTRODUCTION
Among the many things that the Covid-19 pandemic hit last year is India's food industry. With people
locked up indoors and dine-out options ruled out, food delivery became the nation's go-to option.
Cloud kitchen businesses find themselves at an acute advantage in the current scenario. This market
has been growing in India for the past five years at a rate of 5%.
A cloud kitchen is primarily a restaurant kitchen that accepts incoming orders only through
online ordering systems and offers no dine-in facility. Cloud kitchens are also known as dark
kitchens, ghost kitchens, virtual restaurants, and satellite kitchens. Cloud kitchens can have their
online ordering website and online ordering app, or they can accept orders through the various food
delivery platform. Since the primary source of revenue for these internet restaurants is through the
different food ordering platforms, such as Swiggy, Zomato, etc., the rapid development in food
delivery services has been driving the growth in this market. Faasos by Rebel Foods, Hoi Foods and
Biryani by Kilo are some of the famous examples of Cloud Kitchens.
Increasing development in junk food and eating outside habits within the Indian demographic feeds
into the rise in profits of such businesses, making it a desirable business model.
In this pandemic situation, nobody knew that it would badly hit on the Food & Beverage, which led
to the growing concept of cloud kitchen that helped end consumers to enjoy restaurant-like food at
home and made generate earning foodpreneurs.
BUSINESS OPPORTUNITY
1) Stiff Competition:
Stiff competition in the industry, along with decreasing margins, has resulted in the closing
down of many restaurants. The food-tech start-ups - from the big houses to the mid-sized and
small ventures are moving to cloud kitchens to beat the competition and survive. Mast
Kalandar has shut down restaurants in two of its four cities to cut down the cost. Ammi's
Biryani has closed down some outlets and converted to a cloud kitchen.
2) Changing Customer Preferences:
With increasing time crunch, customers are increasingly opting for home delivery options. As
the number of delivery orders increases, restaurants are now moving towards cloud kitchen
operations. Zomato's operation is slightly different in this aspect. Instead of using its own food
in the Kitchen, it is giving other restaurants its kitchen space to cook and get the food
delivered.
6) India's demographics
With a large youth population, India is an opportune consumer market. Away from their
homes for education or employment, the millennials are highly dependent on online food
ordering.
The changing lifestyle patterns of urban India – high disposable incomes and busy
schedules – further add to the demand. Smartphone users in India have grown past 500
million boosting the popularity of online food ordering.
2) Logistics costs
While saving on the real estate costs, the model has an additional logistics cost. The cost of
last-mile delivery has to be carefully managed. It becomes further challenging since the
demand tends to peak during lunch and dinner hours only, thus further increasing delivery
costs.
The key to solving this challenge is to have a good menu/brand selection, so that order
distribution is uniform throughout the day, using technology extensively to make logistics
efficient and to look at ways to club orders together. It is also important to reach a high
number of orders per Kitchen so that logistics become efficient.
3) People-driven operations
The cloud kitchen business is operationally intensive and highly dependent on humans, both on
the kitchen side and the last mile delivery side. This makes processes dependent on human
decision-making, prone to errors and inconsistency.
The attrition levels are also very high, leading to further investments in training a large new
workforce over and over again. In order to scale successfully, cloud kitchens have to put
immense effort into building proprietary technology platforms that substitute human
judgement.
With high-end equipment and Ml-driven technology models, cloud kitchens can ensure
seamless operations across functions: food preparation, inventory forecast, last-mile logistics
and more.
Customer Acquisition Higher customer retention due to better control of quality and taste
4 More contextual customer data in terms of food preferences
Cost (CAC)
MARKET ANALYSIS
PESTLE Analysis
Political
Current trends affect the online food industry. As public health policies are focusing on fresh food
ingredients with lower sugar and sodium, the food sector is adding healthier options to its menus.
Political regulations such as food quality, hygiene, packaging, food safety, and wages require cloud
kitchens to adhere to standards.
Economic
The rate of unemployment, which is currently at the rate of 6.1%, affect the online food delivery
system. Healthier food options are pricier compared to fast food or instant food. But the convenience
of readily available food outweighs cooking food from scratch. The discounts and promotions offered
by cloud kitchen as well the convenience are promoting the greater expansion of the food business.
Moreover, interest rates, taxation, and consumer expenditure explore the opportunities prevailing in
the online food industry.
Social-cultural
Consumer's wants and healthier options affect the trends of the food industry. Consumers have
become conscious in terms of hygiene, safety, calories and nutritional value of food offered. Demands
for organic and whole food, vegan and pescetarian diet is becoming the lifestyle of the younger
generation. Also, with the increase in the migrant population, there is a surge in demand for 'Regional
food'. To attract more customers, cloud kitchens are implementing their own branding makeovers.
Social media and health Gurus have also made consumers aware of a healthy diet.
Technological
Technological advancement in terms of packaging, food labels, food brands and food production can
give a competitive edge. Technology has helped cloud kitchens to roll multiple brands from the same
Kitchen. E.g. Fassos is using brands Behrouz for Biryani and Firangi Bake. The online food delivery
segment has transformed from a local to an inventory-led business model. Cloud kitchen are using
their websites to provide information on calorie intake, allergy, nutritional value and promotions.
Legal
The food industry in any country is affected by laws. Food norms and laws have affected food quality
and nutritional standards. The food items should be produced in a safe, clean and healthy
environment. In India, consumers will be provided with all the necessary information, as per the Food
Safety and Standards (FSS) Act, and only fresh food to be delivered to consumers. Also, food
products offered for sale are subjected to sampling at any point in the supply chain. Packaging, Waste
management and Marketing & Sales laws create new demands in the online food industry.
Environmental
Changing government laws and norms have made the online food industry adopt a greener approach.
The food-related regulations and quality standards have turned stricter in every country. With
stringent quality and safety standards, the food brands are pressed to adopt strategies towards waste
management, environmental movements, energy-saving initiatives, and children food. Adopting a
greener approach has helped to enjoy improved customer loyalty and sustainable development
Rivalry
The rivalry or competition among the Cloud kitchen is the next big thing in the foodservice industry
as several well-known brands are entering the space. Since the entry barrier is less, it is easy for a
start-up to enter the existing players market. There are several cloud kitchens operating in different
micro-markets of cities.
Mast Kalandar restaurants operated by Spring Leaf Retail was one of the earlier known brands to get
into cloud kitchen. They shut stores in some of the cities and started operating centralised kitchens.
FreshMenu, Box8, Biryani by Kilo, Faasos, Bhukkad and Ammi's Biriyani are other brands that are
operating in this space. These brands are existing in the market for more than eight years and have
strong control over the online food ordering sector. New entries in this area are Kabuliwala (Kolkata),
Goila Butter Chichen (Mumbai).
Designed for: Designed by: Date: Version:
The Business Model Canvas
Key Partners Key Activities Value Propositions Customer Relationships Customer Segments
This work is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported License. To view a copy of this license, visit:
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Home Bistro is a partnership business between Reshma (Administrative Head) and Vineeth (Gourmet
Chef) wherein the initial capital and profits would be divided equally amongst the two partners.
FIXED COSTS
• Rent
• Kitchen Equipment
• Licenses
• Staff Remuneration
• IT System
VARIABLE COSTS
• Utensils
• Food Packaging
• Raw Materials
• Miscellaneous Expenses
FINANCING
• Equity
• Liabilities
o Loan of 4.5 Lakhs from Pradhan Mantri Mudra Yojana (PMMY) - Under SHISHU
Category (Application Checklist attached in Appendix for reference)
Type of
Item Additional Details Per Month Per Annum
Cost
Kitchen Rent 150 sq ft 2500 30,000.00
Modular
45,000.00
equipment
Exhaust & Fresh
15,000.00
Air system Fixed
FSSAI/GSTIN/
Licenses 12,000.00
Health
Staff 2 staff members 20000 2,40,000.00
Revenue
Purchases 20,000
2,00,000
Operative Expenses
Salaries 2,40,000
Utilities 60,000
Assets
Non-Current Assets
Licenses 12,000
Current Assets
Inventory 60,000
Utensils 45,000
TOTAL 7,71,900
Shareholder's Funds
Capital 3,00,000
Non-Current Liabilities
Current Liabilities
TOTAL 7,71,900
For every order
placed with Home
Bistro, a 24% Gross
Commission will be
charged on bill
amount including the
taxes.
This commission goes to Swiggy and Zomato for the use of the food ordering platform as the business
avails the service from the companies to reach out to consumers.
TECHNICAL ANALYSIS
Inbound Logistics
Cloud kitchens will purchase raw materials from fixed, well defined and numerous suppliers. Most of
the suppliers are local grocery shops or farmers, supplying directly to the cloud kitchen.
Operations
Based on Hub and Spoke model, the cloud kitchen will have a central kitchen with several delivery
hubs. Some of its operations are –
• A large kitchen space with several chefs and staff members preparing food items.
• To increase the efficiency of the supply chain in terms of technology, capacity and purchase options.
Outbound Logistics
Cloud kitchens work on the principle of providing the best quality food and service at a great value in
a clean and hygienic environment. We will focus on innovation, energy conservation, waste
management and sustainable packaging to build an environmentally friendly and sustainable business.
We will also focus on higher customer retention by controlling the taste, quality and price.
Services
Cloud kitchens are meant for just delivery of food under various brands to consumers upon orders
taken. The focus is on reducing the delivery time with distributed cooking.
McKinsey 7s framework
Soft Elements
Staff
Due to the lack of a dine-in or takeaway facility, cloud kitchen does not require any wait staff but only
requires a highly skilled kitchen staff. In a cloud kitchen, the same chef may prepare the food of
different brands, or there may be different chefs assigned for each brand. In addition, there may be a
requirement for delivery boys, accountants and kitchen helpers.
Skills
In cloud kitchens, the kitchen staff should possess good culinary skills to cater to the taste needs of
different brands. In addition to this one accountant, cum receptionist should have good interpersonal
and communication skills.
Shared values
The core values of cloud kitchens that enhance leadership are customised offers, minimum tap
processing, reliable and speedy delivery, impressive packaging, and consistency in quality.
Style
The styles that help in the growth of cloud kitchens and in achieving organisations' goals are user-
friendly apps, very clear positioning in terms of cuisines, especially healthy food, top-notch packaging
and delivery service, quicker than average delivery services and budget meal options.
Hard elements
Structure
Cloud kitchen is a restaurant without a physical outlet, in which the food is prepared for all sorts of
deliveries. It worked on the hub and spoke model. The business model runs around virtual
websites/apps, via which they take orders. Slowly the business is expanded by opening more units in
different locations.
Systems
Cloud kitchen uses processes and procedures which influences day–to–day activities like product
development, customer relationship management, quality improvement, cost leadership. It also adopts
a range of systems like recruitment and selection, training, performance appraisal, quality control etc.
Strategy
Cloud kitchens are focusing on a myriad of strategies to keep the business lucrative. The strategies
used are reusable packaging, consistency in quality and taste, shortening the delivery time, offering
customised products, minimum tap processing, extensive feedback system, regular follow up and
improvement.
1) Customer Loyalty:
As per market research, the most successful small businesses earn 70% of their revenue from
repeat and loyal customers. Hence businesses should keep a record of orders of repeat
customers.
2) Powerful Promotions:
Cloud kitchens should monitor the effectiveness of promotions offered and check whether
they are redeemed through delivery. This data will also help them to calculate the ROI of
marketing campaigns.
3) Accuracy:
Cloud kitchens have to monitor in terms of orders remade, and orders sent back, or how many
complaints received from customers. The staff should be trained accurately to accommodate a
customer's special requests or food allergy requirements in order to avoid waste from orders.
Also the modified orders should be accurately priced to make sure the bottom line is not
affected.
4) Competition:
Many businesses grow well in a competitive environment. Cloud businesses can track the
number of promotions other pizzerias launch, their menus, their delivery reach, etc.
5) Employees:
Metrics related to the employees is an indicator of how well the delivery part of the business
is working. There is a need to track metrics, including sick days or call-offs, labour turnover,
and length of employment, to assess how delivery is working from the employee's point of
view.
6) Labour Costs:
Labour is considered as one of a restaurant's top expenses, so cloud kitchens are expected to
keep these costs under control. There is a need to monitor total labour costs and labour hours
to make sure delivery activities are profitable and not strenuous for the business.
7) Promised Time:
Hungry people are impatient, especially if their scheduled delivery is late. There is a need to
track delivery POS system, to check how many orders arrived late. Cloud kitchens need to
watch how many coupons are distributed for free, make-good attempts n respond to late
deliveries and what the impact is on profits
LEGAL ANALYSIS
As the cloud kitchen is operating on a small scale, Registration with the FSSAI would suffice.
However, the type of license depends on the services provided and the scale of operations. Some
documents required in this regard are valid ID and address proof, email address, phone number,
affidavit, declaration of food safety management plan, food category, kitchen layout plan, etc.
1. Other labour law registrations like Employees Provident Fund (EPF), Employees State
Insurance (ESI), Contract labour registrations, etc. will apply in case the number of employees
crosses the thresholds prescribed under the respective legislations.
2. Trademarks may also be registered in order to protect and grow the brand.
Once the dark kitchen owner has all the licenses in place, listing the same on Zomato or Swiggy is a
fairly simple process. The kitchen owner drops in a query with Zomato or Swiggy and a
representative would then get in touch with them to understand their business and requirements. Upon
submission of the necessary documents, menu, logo, etc. the request is processed and the kitchen goes
live on the Zomato or Swiggy app.
2. PAN Card,
3. GST Registration,
4. Cancelled cheque,
As far as setting up kitchens with Zomato or Swiggy is concerned, the owner is required to enter into
an agreement with the Service Provider for the establishment and development of the kitchen as per
specifications and also invest in the kitchen space.
Benefits
Partnering with a brand like Zomato or Swiggy is a sure shot to success for any small entrepreneur.
Some of the key advantages of listing are:
• Hassle-free delivery,
• Customer feedback,
While listing on Zomato or Swiggy offers several benefits, there are a few disadvantages as well;
some of them are:
• High rate of commission – 24% of gross commission levied on every order placed with the
restaurant
1. Conflict of interests – The issue of conflict of interest between the restaurants/ cloud kitchens
listed on the platform versus the platform’s own cloud kitchen brands. Given that the
competition in this segment is extremely severe, it is but natural for the platforms to market
their own products preferentially and this dual role played by the platform both as a
marketplace and competition disrupts the level playing field between the players as it
inherently puts the platform on a higher footing. It becomes all the more important since all the
platforms run on the basis of algorithms that are under the control of the platform.
2. Unilateral and unfair terms of contracts – The report also states that the platforms, by virtue
of their market share, customize the contracts in their own favour and provide barely any scope
for negotiation with the cloud owners/ restaurants. Some of the terms that are often imposed
upon restaurant partners are:
o Deep discounting – Though the restaurant owners can participate in these deep
discount offerings at their will, they did agree that non-participation reduced their
visibility on the platform. Such discounting practices steeply affect their revenues,
sometimes, to the point of unviability of the business.
o Bundling of delivery services – Delivery services are often thrust upon the restaurant
owners along with listing services. This has a dual impact, first, the restaurant owner
may not be in need of delivery services, and second, the choice of first delivery
between the various restaurants’ vests with the platform; thus, there could be
preferential treatment towards some restaurants over others.
APPENDIX
Application No: Date
Name of Bank
Application Form for Loan under Pradhan Mantri Mudra Yojana (PMMY)
(For Loan upto Rs. 50,000/- under Shishu)
Education Qualification Illiterate Upto 10th Upto 12th Graduat Professional Others
e
KYC Documents Voter ID No. Aadhar No. License NO, Any others
ID Proof
Address Proof
Telephone no. Mobile No Email
Line of Business Elisning
Activity(Purpose) Proposed
Annual Sales IRE. in lakh Proposed
I/We hereby certify that all information furnished by me/us is true, correct and complete. I/We have
no borrowing arrangements for the unit except as indicated in the application form. There is/are no
overdue / statutory due owed by me/us. I/We shall furnish all other information that may be required
by Bank in connection with my/our application. The information may also be exchanged by you with
any agency you may deem fit. You, your representatives or Reserve Bank of India or Mudra Ltd., or any
other agency as authorised by you, may at any time, inspect/ verify my/our assets, books of accounts
etc. in our factory/business premises as given above. You may take appropriate safeguards/action for
recovery of bank’s dues.
Date:___________________
Received by________________
…………………………………………………………..Cut Here…………………………………………………………….
Acknowledgement slip No.…………………..for loan application under PMMY (Applicants copy)