Can cloud kitchens be a viable option in Egypt? Cloud kitchens are gaining momentum in other parts of the Middle East, thanks to the rapid rise of these cloud kitchens. New cloud kitchen operators are popping up all over the region. There are also startups that offer tech solutions for these delivery-only kitchens. These startups hope to duplicate the success of Dubai-based iKcon which was purchased by Reef Technologies and Kitopi in a Softbank round.
Cloud kitchens are a recent addition to Egypt’s foodtech sector. Egypt is known for its dominance of talabats and elmenus in the delivery of food. The slow pace of growth is due to low awareness and low penetration in online food ordering.
Food Nation, the first Egyptian cloud kitchen that can host 35 brands, is leading the charge. Tivoli Dome is Heliopolis’ physical food court that powers the company. Smart kitchen spaces specifically designed for delivery-only restaurants It is planning to establish the country’s largest cloud kitchen, set to accommodate over 41 kitchens.
Ahmed AlNaggar (project manager at Food Nation), said the move was intended to increase awareness and encourage more restaurants in this ever-growing market to embrace it.
“This comes in sync with global trends impacting restaurant business; cloud kitchens are becoming a global norm in the F&B sector due to their cost and operational efficiency. This is where the future is for Egypt’s restaurant business. But unlike global markets, there is a massive lack of awareness about cloud kitchens here,” he adds.
To help its virtual restaurants increase brand visibility, the company offers dinein services in one its locations. The company hopes to build customer trust by offering dine-in services in one of its virtual restaurants. Alnaggar explained that this will lead to greater adoption of cloud kitchens.
The growing interest in cloud kitchens by entrepreneurs stems from a desperate need to find a solution that would help restaurants rebound from the effects of the current pandemic. This is why most of the cloud kitchen operators in Egypt have adopted the “kitchen as a service” (KaaS) model, offering brands and restaurants kitchen space to lease.
Mostafa Wahdan is co-founder and CEO of Chef House, a KaaS virtual restaurant that also offers delivery services. He says his main goal was to help restaurants survive, by giving them the ability to expand their delivery areas and reach new markets.
Sixty percent of restaurants close within the first five years of their operations. Eighty percent close after five years. Many restaurants are in financial trouble and are losing millions. [Egyptian]Every year, they earn over £100,000. Wahdan says, “We started this business to assist business owners to revive and build a moat on such a red sea market.”
Cloud kitchens are proving to be an economical solution for many restaurants looking to expand geographically. However, delivery-only models have their own challenges. Restaurant owners must spend significant amounts on their marketing strategies in order to attract customers. Many small restaurants cannot afford to pay the marketing expenses and are unable or unwilling to switch to cloud kitchens.
Online food delivery
Cloud kitchens should focus on online delivery. But this is not the case in Egypt. In Egypt, the majority of food orders are placed by phone rather than online. Cloud kitchens cater to both offline and online users.
Online food delivery is only scratching the surface. It is unlikely to make huge leaps in the near future. This way of ordering is new to the Egyptian consumer. We chose to go online. [strategy]We were just starting out to get things moving. It doesn’t matter if the order is placed online, or offline. Wahdan states that she will visit customers wherever they may be.
Cloud kitchens are still considered early-stage markets with low VC activity due to the fact that online sales make up about 6 percent. Last month, Egypt-based “cloud hub operator” Takery raised pre-Seed funding round, with plans to secure up to $3 million in 2022. With this raise, Takery would be the country’s first cloud kitchen operator to raise VC funding.
Cloud kitchens will become more mainstream and more customers, along with businesses, will turn to online ordering. This is due to the fact that many KaaS startups offer their restaurant clients the possibility to collaborate with food delivery aggregators, such as elmenus, Talabat, and Talabat.
Michael Asaad is founder of Toro Cloud Kitchens. He believes cloud kitchens have a lower popularity than other sectors due to substandard food delivery logistics.
Delivery logistics that is fast and efficient would be the real game changer. Deliveries and packaging are still a problem area for businesses that focus on delivery. Lots of food doesn’t travel well, resulting in the overall customer experience taking a serious hit,” he says.
The traditional models of on-demand delivery become inadequate and less suited to the increasing customer demands.
“The market boasts a lot of players when it comes to food delivery, but we have to come up with an alternative model for food delivery business and cloud kitchens, that is faster and more efficient,” adds Asaad.
As the market grows, cloud kitchens will see more players. There are more virtual restaurants that will open and close quickly. To ensure sustainable growth, this market requires continuous investments in customer-centric innovations.