CloudKitchens and impact on commercial real estate
One of the most interesting businesses I’ve recently come across is CloudKitchens. In a nutshell, they provide infrastructure and software to enables food operators to open delivery-only locations with minimal capital expenditure and time. Really smart.
Running a restaurant is tough usually because of the high fixed cost base and operating costs that consume you as a business owner. That is why very few companies survive. Most food entrepreneurs I know end up failing or require a large capital investment to scale their operations until they become profitable. Getting big has its own problems.
One of the things I’ve been thinking about is how the UberEATS and food delivery model impacts commercial real estate. I spoke to Domain last year about this trend and the impact it will have on the commercial real estate space.
Here are my updated thoughts on the CloudKitchens concept more broadly.
Small retail sites become attractive
A restaurant or cafe can only seat a certain number of guests. Let’s say 30 tables on average. If you have 100, 200 or 300 guests, it starts to become very difficult. You have to operate with high efficiency or increase your price. God forbid, you might even have to open a second or third location. Restaurants don’t scale well.
However, with food delivery, there is much more upside. You can feed many more people without having to physically sit them on your own tables. They can eat at home. I’ve been thinking about how this impacts commercial space. All of a sudden, smaller locations that are neglected because of their limited size become attractive.
But larger commercial kitchens seem to make more sense
While my thoughts have been on smaller commercial space, the CloudKitchens concept sounds a lot smaller. Based on what I’ve read, they take large, unattractive and non-mainstream sites and turn them into commercial kitchens which chefs can share and sell their product online. Think WeWork for food entrepreneurs.
No need to worry about tables, bookings, wait staff, expensive rent and high upfront costs in setting up a commercial kitchen. Absolutely brilliant. It’s an added bonus that ex-Uber CEO Travis Kalanick will become the new CEO after a $150m investment.
My key takeouts 🍔
I fairly certain this has the potential to disrupt the restaurant and commercial food market. Having Kalanick at the wheel makes it even more compelling. It’s early days but I can see the huge efficiency gains from having one single, co-shared kitchen as opposed to many smaller and fragmented real estate locations.
It will also have an impact on commercial real estate use and mix. Cloudkitchens needs sites to scale its operations and just like WeWork’s disruptive force in office, there will be a similar flow-on effect on the retail and commercial space.
Peter Esho is the Co-Founder of CRIBZ, a sales support platform for real estate companies. Connect with Peter on LinkedIn here.
