A cloud kitchen, also known as a ghost kitchen or virtual kitchen, is a commercial kitchen space that provides food businesses with the facilities and services needed to prepare menu items for delivery and takeout. Unlike traditional brick-and-mortar locations, cloud kitchens allow food businesses to create and deliver food products with minimal overhead. Here are some key points to understand about cloud kitchen businesses:

• Business Models: There are different approaches to running a cloud kitchen, ranging from adding an opportunistic delivery-only brand to an existing restaurant kitchen to running a purpose-built commissary kitchen housing multiple brands. Some cloud kitchens are dedicated spaces rented or purchased by a brand solely for their own use, while others are shared spaces where multiple restaurants rent space to prepare food for delivery-optimized menu items.

• Benefits: Cloud kitchens offer several benefits, including lower operating costs, low startup costs, reduced maintenance, and lower costs. Since cloud kitchens are involved in the customer journey from order placement to fulfillment, they get access to a lot of customer data, which can be utilized to optimize processes, orders, and delivery times as well as staff scheduling, thus improving efficiency. Cloud kitchens also advertise through social media or delivery apps, which can reach a wider audience while eliminating the need for narrow marketing channels.

• Technology: A cloud kitchen requires an integrated technology system for accepting online orders, processing payments, and managing inventory. Since customer acquisition is achieved through digital platforms, cloud kitchens heavily invest in technology that leverages the entire business operation. Apart from technology, major investments can also include well-equipped kitchen infrastructure and trained manpower, such as chefs and delivery drivers.

Cloud kitchens are quickly gaining popularity in light of the booming food delivery business. Multinational investment bank UBS estimates a 16% compound annual growth rate (CAGR) for online food delivery, which is an estimated increase from $49.4 billion in 2018 to $365 billion in 2030.