How Private Label Multi-Brand Virtual Kitchens Are Disrupting The Food Delivery Ecosystem (Even Amid COVID-19)
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It has been four years since I last wrote for Entrepreneur Middle East. Shortly after my last contribution, I joined Dubai-headquartered unicorn Careem as its Director of Business Development, and I was so fixated on our vision to redefine ride sharing in the region that I dedicated all of my time to achieving it. Indeed, even when Uber acquired Careem for US$3.1 billion last year, I believed I would be with Careem forever.
But then I was introduced to Peter Schatzberg, a serial entrepreneur who had come to Dubai to launch the region’s first private label multi-brand virtual kitchen. A few coffees and several conversations later, I joined Sweetheart Kitchen, and quickly realized that its distinct model of virtual kitchens would become the future of the food delivery ecosystem- one that could thrive even in times of crisis.
The private label multi-brand virtual kitchen model was invented to eliminate the various bottlenecks in the food delivery supply chain (aka capacity constraints) while ensuring independence from existing brick-and-mortar F&B operators. The model stands alone in its emphasis on lean manufacturing methodologies, whereby technology, food, and process are integrated into a single system capable of managing the rigors and unique attributes of food delivery.
The very nature of its design, which focuses on consistent food quality, minimal labor requirements, food safety and hygiene, brand ownership, and sustainable social dynamics, define why today, even in times of crisis, the Sweetheart Kitchen model is prospering, despite the closure of several F&B businesses. Here’s a deep dive into each of these factors:
1. Consistent food quality A multi-brand virtual kitchen manages hundreds of food items across a variety of food categories. In order to do so efficiently, such kitchens must use enterprise resource planning (ERP) technology and enforce best practices in hygiene, so that the process mirrors a food manufacturing production facility. Advanced technologies make the process simple and ensure food is consistent and of high standard. For instance, if you order an avocado toast from Bravo Avocado (a Sweetheart Kitchen brand), the item will always look and taste the same. The only process the kitchen cannot fully control is the last mile delivery, and this is where choosing the right delivery partners is important. But as food production becomes more efficient (e.g. more predictable by delivery tech), virtual kitchens will become the perfect partner for food aggregators to remove supply chain bottlenecks.
2. Minimal labor requirements Compared to Europe and the US, the Middle East is unique in that labor is more cost-effective and more available (and, in some instances, more reliable), which increases chances for profitability. Unlike dine-in restaurants, the virtual kitchen doesn't require front-of-house staff, and because tasks are highly specialized, one virtual kitchen employee, without the distractions of walk-in customers or payment processing, can handle far more order volume than one in a brick and mortar establishment. As virtual kitchens do not offer any dine-in facilities and thus possess lower overhead than already established restaurants, they can sustain profitability even during lockdown periods that we experienced recently. The virtual kitchen model cost structure simply has lower fixed costs (but much greater variable costs), which can be especially beneficial during periods of reduced sales.
3. Food safety and hygiene Reduced labor in conjunction with technology and process play key roles in improving food safety and hygiene. Having fewer people in the kitchen reduces the risk of contamination associated with contact. Prior to entering the kitchen, the staff undergo temperature checks and strict sanitization processes. Food is packed according to strict local municipality standards, and delivery aggregators have incorporated contactless delivery into their processes. Inventory management systems through our ERP ensure compliance with first-in-first-out (FIFO) inventory standards, resulting in only fresh meals being served to customers as well as reduced food waste. Not only are virtual kitchens more hygienic, but their systems also allow for greater sustainability.
4. Brand ownership A private label multi-brand virtual kitchen can develop new brands and menus without the need to add new infrastructure or receive permission from external third parties. While it requires an experienced executive chef who can utilize an existing universe of ingredients, as well as cooking processes to design new menus, flavors, and cuisines, it also requires a talented brand development team that can build brands that the consumer can identify with. Indeed, a lot of collaboration is required to roll out new brands.
5. Sustainable social dynamics With governments imposing restrictions on dine-in restaurants, food delivery has grown to achieve even greater levels of demand. There is a heavy reliance on delivery-only restaurants and food aggregator platforms. This gives virtual kitchens a massive opportunity to expand their services. With a long term sustainable business model in place, the multi brand virtual kitchen model will continue to grow by understanding customer needs and making data-driven decisions to introduce new cuisines and further refine internal processes.
Even today, in the age of COVID-19, it is the virtual kitchens that continue to build momentum- indeed, we at Sweetheart Kitchen recently celebrated the launch of new kitchens across the region. While we all hope that the pandemic will come to an end, hopefully sooner than later, I am certain that our dependency on food delivery will only continue to grow. As the world slowly goes back to normal, people will find themselves short for time, and virtual kitchens will become a bigger part of customers lives as they look for variety, affordability, and speed in delivery. Today, the virtual kitchen meets these three needs, and is a testament to the growth of the industry.