Are you a home chef, a budding food entrepreneur looking to tap into the cloud kitchen business opportunity, and don’t know where to start? This article is for those who want to start a cloud kitchen from home. Also read the cloud kitchen guide to get an overview of the industry.
The focus of this article is to help you to understand what does it take to succeed and also highlight some capabilities that you must build in your business.
The idea of a home chef serving a hyper-local market always existed. This got a boost with the advent of online platforms and virtual restaurants.
The government has contributed by having a benign policy and easy registration with the Food Safety And Standards Authority of India
So who should start a cloud kitchen from home?
Well, it is for those who want to dabble into the cloud kitchen business opportunity.
But don’t want to risk a huge amount of capital also for those who have less capital.
Home chef is another cloud kitchen business model which takes advantage of rising demand in online delivery.
Home-based food business for many food business operators is the first step in the online food industry.
After gaining confidence and measure of success the food business operator then transitions into food incubators and then if needed their own dark kitchen. It is a virtual restaurant that has really zero real estate costs.
When you’re starting a dark kitchen from home, you need to factor in that you are entering into a low-volume business.
Key Advantages Home Chef based Food Business Operator
Greater Trust Home-Based Food Business
One key advantage of starting a cloud kitchen from home is that people trust home chefs more than restaurants. There is an implicit guarantee that food from home will be safe and hygienic. At least this is what has been in my experience in this.
Greater Flexibility
The advantage of being a home chef is that you have greater flexibility and you can customize to a given situation unlike a restaurant brand.
High Touch
One of the most powerful advantages is that there is high touch this essentially means is that you can have personalised relationship with your end consumer as a home chef from a cloud kitchen. This aspect can give a traditional restaurant a run for its money.
Home-cooked food
There is a demand for home-cooked meals. An implicit guarantee that the food will be fresh and nutritious. There is an expectation that the quality of food will be far superior to any other conventional restaurant.
It is needless to say that low overhead costs and practically zero real estate costs make this an exciting business opportunity. The implied promises are that with no additional cost you can start a delivery kitchen from home.
Key Challenges With Home Based Cloud Kitchens
Higher Input Costs
There are some key challenges you will have higher input costs as you will not experience economies of scale like a typical restaurant will. In a sense, your food cost for the same dish will be higher. But don’t let that stop you. Also read why cloud kitchen fails to get another perspective.
Unreliable Logistics
The second big challenge is that the cost of logistics and the challenge to manage logistics will be much higher. You will need to factor in the cost of delivery services and if needed identify how to fulfill customer orders without depending on the online ordering platform.
Managing Food safety
Another unstated challenge will be to manage the food safety of your operation. Even though there is trust and goodwill for home-based chefs, you need to take measures to ensure that food safety is guaranteed. Food safety standards as specified by the Food Safety and Standards Authority of India (FSSAI) need to be followed and implemented. This is good both for you, the consumer, and the food industry.
Limited Storage
As a food business operator, you will constantly battle the limited food storage at your disposal. This is perhaps one of the biggest operational constraints you will face. This can be managed by having a limited menu and having advanced orders.
Marketing
Finally, there is marketing. It is the lifeblood of any business and whether you’re a big operation or just starting out from your home. This is something that needs to be addressed and skills in marketing need to be developed when you’re starting a cloud kitchen from home.
Develop Some Capabilities
Building systems
You need to build systems that will cover areas like finance, marketing, production, managing people, managing guarantee of quality, and order fulfillment.
The larger idea is not to overwhelm you by building the systems, but that whether you’re a small operation or a large operation. These capabilities need to be built-in.
It is convenient to ignore building systems. You may suggest that your business is so small that it does not matter or you just doing this for earning some residual income but my submission is that you need to use this opportunity to start building systems.
My argument is that because you a small you can slowly iterate and fine-tune your systems. Traditional brick-and-mortar restaurants don’t have the luxury of time and space to develop the systems.
You may think that because you can cook you are entitled to run a food business but you will soon realize like all restaurant owners and dine-in restaurants it is systems that will guarantee your success and not just your culinary skills.
And you need to start thinking about it right at the beginning before you start your operations.
Managing Finance
You need to keep your mind to develop some capabilities managing finance, you need to be able to understand very clearly how much money will be put in and how you will get it back.
Managing Marketing
You need to clearly establish how you will get customers and get them back again and again.
Managing Quality
Reliability is a cornerstone of service business and it is true for you too. The knowledge of cuisine or food must be translated into a consistent meal experience. Your knowledge in food safety must be translated into food that is safe for your end consumer. You need to develop systems for food safety and hygiene in your kitchen.
The achievement of these goals does not come by wishing but by adopting quality control systems.
Managing Production
Most food entrepreneurs are tempted to look at culinary skills as a work of art. You need to take a hard look at your food production process and system as it so that you can consistently make the same food every time at the same cost every time.
Order fulfilment
The delivery of food items may be done through food delivery apps or through your own initiative. We need to have a system to reliability and predictability deliver the food on time, safe and at the right temperature.
How To Start Cloud Kitchen From Home In 3 Steps
Planning
In the planning stage, you plan your concept, evaluate the numbers needed to succeed and plan a roadmap to get customers.
Documenting
You want to answer the question, how you will cook the food and how you will run your operations. You need to put this on paper.
Implementing
In the third stage, you want totake key steps to launch your cloud kitchen from home. At this level you want to get assets in place.
Planning Your Cloud Kitchen From Home
In the planning stage, we need to carry out market research. In market research, you need to understand who your customer and what they need. You need to use this information to clearly articulate your cloud kitchen concept.
The next thing which you need to carry out is financial planning where you need to very clearly articulate your cloud kitchen business opportunity. What money will be put in and how you will get it back. Is there any special equipment that needs to be added to your kitchen? As business owners, you want to clearly understand what is your operational cost. The success of your cloud kitchen model depends on this.
Thirdly in the plan. In the marketing in the planning stage, we need also to establish a marketing plan as to -
There Is no need to be very long or intricate in your planning but it is extremely important that you get your plan down on paper
Documenting Operations Of Cloud Kitchen From Home
The next stage is documenting.
In this stage, we need to document your recipes and cost them out. Have a very clear understanding as what is the cost of production for each of these menu items.
You need to also have a clear operation plan. Here you want to focus on who are your key vendors and whether your business requires registration. You need a special focus on customer service. This is your most powerful advantage over other delivery-only models.
Implement Your Cloud Kitchen From Home Project
In the third stage, you want to implement a project. At this level you want to get assets in place.
This might involve a trial run, getting your website up and running, to food photographs building alliances while starting your home-based cloud kitchen.
Checklist to start a Cloud Kitchen From Home Food business
- Market research.
- Plan your menu keeping in mind your potential customer.
- Plan and verify additional kitchen equipment needed.
- Plan Your Finances to know your cloud kitchen startup cost.
- Plan your marketing-how you will get your customers. Your initial marketing campaign.
- Plan your food safety checklist to ensure food safety & hygiene.
- Plan your order fulfilment checklist.
- Document your recipes.
- Get FSSAI Registration, Municipal License and GST registratio. A company registration may not be needed.
- Get listed on food delivery platform.
- Get your suppliers.
- Food products and other raw materials.
- Packaging.
- Tieup with your delivery partner or delivery services and online ordering platform.
- Consider developing your own online food delivery and ordering channel like website, whatsapp for business or your own local whatspapp groups.
- Get your marketing communication tools.
- WhatsApp, website, printed menu, flyer.
- Launch.
- Congrats now your are a business owner.
Licenses For Home-Based Cloud Kitchen
The government of India has come out with a license policy for any home-based food business operator with a turnover of over 12 lakhs. I think this recognition by the Food safety authority of India will help to guarantee the product quality and will serve you well. If you just starting out exploring the FSSAI website. Some of the licenses are issued by the local municipal corporation.
Who is Food Safety And Standards Authority of India
Food Safety and Standards Authority of India (FSSAI) is a statutory body established under the Ministry of Health & Family Welfare, Government of India.
FSSAI is a food safety regulatory body and issues food safety licenses.
How can I get an FSSAI license for cloud kitchen from home?
The food safety license procedure is now done through Food Safety Compliance System (FoSCoS) is an enhanced version of the Food Licensing and Registration System (FLRS) which was launched in 2012 for issuance of pan-India FSSAI Licenses and Registration.
According to the business insider article in June 2020, FSSAI launched a new cloud-based food safety compliance online platform called Food Safety Compliance System (FoSCoS), which replaces the current Food Licensing and Registration System (FLRS).
“FoSCoS is conceptualized to provide one point stop for all engagement of an FBO [Food Business Operators] with the department for any regulatory compliance transaction,” according to the government press release.
FSSAI Food safety License criteria for business eligibility are listed in this notification. Essentially the food authority wants everybody to get registered.
This is possible because if taken a benign look for food safety requirements for home kitchens.
In my view, this is a very generous and pragmatic view by authorities. They have three criteria of basic, state, and central registration.
The fees are nominal and the registration is a prerequisite if you want to be any business through a food aggregator. The business eligibility criteria are listed in this release.
Here below is an excerpt from a press release by FSSAI .
“While people with an annual turnover of less than Rs 12 lakh can apply to register
themselves by paying Rs 100 online, people with a turnover of Rs 12 lakh or more need to
pay Rs 2,000 per year online and apply for a license,” said designated food safety officer, Dr K Tamilselvan.
To apply online people can log onto foscos.fssai.gov.in, choose home-made food option and
fill the forms. A food safety officer will visit the kitchen within 30 to 60 days of the
application being submitted.
“We will inspect their personal hygiene including clean and cut nails, a hand wash and vessel washing facility in the kitchen, wearing of gloves, masks, aprons and hair nets even without covid-19 in the equation, use of safe raw materials like oil, butter and ghee only from labelled containers, ensure they don’t reuse oil, check refrigeration and freezer
temperatures and instruct them on colour usage guidelines,” said Tamilselvan. “If there are
issues, we will give them time to rectify it,” he said.
To ensure quick compliance, food safety officers will start listing all home-based operators
in their area and issue notices to those who are yet to apply for regularization. If it is not
done even after a notice has been issued, legal action will be taken against the operator
end of quote.
Prepare For Success – Negative Preparation
As a food business operator, you need to prepare for success, and you can prepare for success by having negative preparation. Essentially you prepare for failure and mitigate these risks by planning the number one goal is to have a sustainable business that can transition into the next step of having its own outlet.
So what is needed to succeed what is the criteria for success,
Criteria For Success Home-Based Food Business Operator
Building a successful cloud kitchen business From Home
Generate Demand
The first thing we need to generate demand. While you are marketing or doing a tie-up of different online ordering platforms, we need to keep in mind that you cannot trust others for your success. Your marketing program needs to depend on you itself. The modus operandi of the online ordering platforms is to connect entrepreneurs with customers through their food aggregator app. Now there are specialized online ordering platforms for home-based food business operators. Although they offer discovery they unwittingly resulting price competition.
You don’t want that.
Consider owning your own digital marketing initiatives to capture customer data and customer profiles.
Some channels for demand to facilitate online order are:
Residential colony WhatsApp group
Social media channels
Food Delivery -Homefoodi or Conosh. These food delivery aggregators are unlike Zomato and Swiggy as they serve home chefs.
Advance Orders
One area of success is that you need to have a business model which depends on advance orders. This will allow you to manage your production capacity and give you the necessary time to prepare for the production and service of these orders. Customers are willing to wait for quality food and order in advance.
Catering in your business model.
You need to give consideration to having a catering business. Catering is a very powerful business opportunity. It is a high ticket business and has a wide trading area. A full-fledged restaurant may have more resources to offer catering services as they have bigger commercial kitchen space but this is an opportunity that even you can tap into. It is quite likely that you have orders of a single item in a large quantity. Or you can cater to small house parties which may have several food items.
Alliances
One of the areas which you need to focus on is to build alliances. This can help you to widen your network and wide in your sources of getting business inquiries. However, as mentioned earlier, please do not depend only on them.
Trading Areas
You need to define your trading area and this is essential so that you can focus on your marketing efforts in the specific area and food delivery service. As mentioned before, even though you may have tie-up with food aggregators. It is advisable that you don’t only depend on them. The trading area will vary by your concept. Some concepts may be limited only to the society and the others could service the entire city.
High ticket business
If you have a choice to be cheap or expensive. My advice is to be expensive. There is a lot of trust and goodwill for home-based chefs and people are willing to pay a premium price. It is well made and hygienically made and you can charge a premium price.
Get a coach.
While starting your home-based kitchen, you will face a lot of challenges and it would be advisable to get a coach so that you can have a resource where you can bounce ideas.
You also need to keep learning, so that you can keep upgrading your skills and make the most of the business opportunity.
Some food concept which are successful as home-based chefs.
Bakery
Bakery is one idea that is very powerful for home-based chefs. As a food entrepreneur, it gives you a high margin low-volume business and food preparation depends on advance orders. There are many bakers who start from home and then transition to retail outlets.
Regional food.
Regional food is making a big comeback and I see it as a niche product that can command high value. Regional food is unique and people have started of different cuisine like Assamese or Odia and this can work very well.
Here is a small interview by Eat Treat of Marwadi Khana. Note her comments to advance orders, min order, and tapping catering business opportunities.
Biryani
Biryani, this again depends in advance orders and is possibly the most favoured menu category in Indian food. And biryani also works very well for catering. It also requires less production space.
Essentially, you must do food which you love and understand and keep building systems to succeed.
Summary
They key takeaway that even if your first venture is small, by systematically planning you will set a strong foundation for your business.
