Kitchen infrastructure companies that offer restaurateurs and food entrepreneurs purpose-built commercial kitchens (both private and shared spaces) as a turnkey expansion solution.

Players in this segment focus on creating virtual restaurant concepts or digital food brands, usually chef-created or celebrity-inspired, for licensing or franchising by third-party kitchens. These companies do not usually have their own kitchen facilities but partner with restaurant franchisees that prepare the meals using underutilized space in their existing kitchens.

Players in this segment are companies that wholly own and prepare several delivery-only food brands. Meals are either prepared in an independently-owned kitchen facility or through underutilized third-party kitchens using the cloud kitchen’s own staff. These food brands are not available for licensing or franchising by third-party kitchens.

Kitchen infrastructure companies that provide purpose-built commercial kitchens as a turnkey expansion solution and also manage end-to-end operations on behalf of restaurateurs and food entrepreneurs (e.g. recipe-based food preparation, staffing and day-to-day kitchen management).

Defining the future of the restaurant business.

Cloud Kitchens

Overview

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    Offering flexible kitchen rentals to lower foodservice costs
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    Cloud kitchens started as the restaurant industry’s equivalent of co-working spaces, in the form of shared kitchen spaces. Cloud kitchens are usually located in industrial districts, vacant warehouses, or unused parking or storage facilities, offering restaurateurs an alternative to expensive restaurant real estate. Clients can instead rent multiple fully-equipped cloud kitchens for flexible amounts of time. Cloud kitchens allow chefs to test their products or more established restaurants to expand their reach without spending on opening full-service restaurants. 
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    While inspired by the co-working model, the most notable advancement enabling cloud kitchens has been online food ordering platforms. Increasingly, the growth of the cloud kitchen space has also given rise to virtual restaurant brands—chef-created or celebrity-inspired delivery-only brands uniquely suited for cloud kitchen preparation.
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The market size for US cloud kitchen operators is estimated to range between USD 1.6 billion and USD 3.4 billion by 2026

Market Sizing

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    The restaurant industry was hit hard by the Covid-19 pandemic, with a majority of dine-in restaurants forced to shut down as authorities aimed to contain the outbreak. As of December 2021, around 80,000 restaurants in the US had temporarily or permanently closed since the onset of the pandemic, down from 110,000 (17% of all restaurants) at the peak of Covid-19.
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    This has, however, created potential market opportunities for the industry, as cloud kitchens have the potential to help restaurants cater to the growing demand for delivery-only services. Cloud kitchen operators have seen a spike in funding and new partnerships to expand operations and grow the sector.
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        In July 2021, Kitopi raised USD 415 million to accelerate expansion in Saudi Arabia and Southeast Asia as well as to expand its tech stack.
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        In October 2020, Nextbite raised USD 120 million to strengthen its virtual restaurant brand business, including launching new virtual brands, hiring a VP to develop more celebrity-backed brands, as well as recruiting a culinary director and a branding expert from Chipotle.
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        In July 2020, Karma Kitchen raised USD 319 million to buy the freeholds of its cloud kitchen sites and work toward opening 53 new sites across the UK and broader Europe over a five-year period.
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COVID19-IMPACT

Market Mapping

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    A variety of cloud kitchen models are currently under development with the most popular being commissary kitchens - commercial-grade kitchens where foodservice providers can safely and legally prepare meals without having to own and maintain the facility themselves. Incumbents dominate the operator-managed cloud kitchens segment, with new players also rising in prominence due to their end-to-end value proposition for restaurant brands. Virtual restaurant brands also represent a popular segment due to the ease of expansion through third-party kitchens. Independent cloud kitchens are less common in part due to their limited potential to reach scale. 
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    The majority of companies in the operator managed cloud kitchens segment are in the growth stage. The virtual restaurant brands segment features a balance between companies in the early and growth stages while the commissary kitchens segment mostly has early-stage players.
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The Disruptors

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    Cloud kitchens have been gaining popularity in the US, with a few startups obtaining substantial funding to expand their businesses. By 2021, well over USD 4 billion had been invested in cloud kitchen startups. 
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    CloudKitchens is the emerging leader in this space, having attracted the highest funding in the industry—well over USD 1 billion was raised during 2019–21. The company’s investors include Uber Co-founder Travis Kalanick and the Saudi Arabian Public Investment Fund. With a strong presence across the US, the company has leveraged funding to venture into Mexico, the UK, and India through a series of acquisitions. 
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    Increasingly, players in the space are veering toward creating virtual restaurant concepts or digital food brands, even embarking on crossborder partnerships to take their brands to new territories. These companies mark a departure from the capital-intensive kitchen infrastructure model prevalent in the industry. Rather than operating and managing their commercial kitchens, some players focus on developing food brands that can be franchised by third-party kitchens. Creating Culinary Communities (C3) is a noteworthy player in this arena, partnering with MENA-based cloud kitchen operator Kitopi to launch major C3 brands across 150 locations in the Middle East and Asia. Both players also attracted capital infusions in 2021, with C3 raising USD 90 billion in two rounds and Kitopi drawing USD 415 million in a funding round led by Softbank’s Vision Fund 2.
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    The industry has also experienced incursions from pure-play online delivery management platforms looking to leverage their tech stack to launch their own cloud kitchen businesses. Nextbite (formerly Ordermark) is a classic example.
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Disruptor Funding History

The Incumbents

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    <b>Online food aggregators remain popular entrants to the cloud kitchen space</b>
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    Different types of players in the restaurant delivery supply chain are now exploring the cloud kitchen space. These include third-party delivery platforms and supermarket chains, who have entered the market via partnerships or backward integration strategy; third-party aggregators such as DoorDash and Deliveroo, who have now started to backward-integrate into the restaurant delivery value chain and are providing cloud kitchen services for existing restaurants on their platform, as well as services for original brands; and retail stores such as Walmart and Kroger, who have expanded into this space using their store network to set up cloud kitchen facilities in collaboration with cloud kitchen operators across North America. 
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