The Year 2021 Looks Promising for the Virtual Restaurant Business

Sonal Mishra
Feb 1, 2021 · 5 min read

2020 was a year filled with disarray and letdowns. The food and beverage industry did face some difficult times too. However, it witnessed immense growth in trends that were budding before the pandemic wreaked havoc on the world.

Today, the vaccine is in sight and public fear has decreased to a large extent. However, it is unlikely that we’ll ever go back to the old normal. The traditional restaurant experience as we know it might just have changed forever.

With online ordering and food delivery becoming essential for restaurant survival, digital technologies, 2021 is full of promises for the virtual restaurant industry.

These are the restaurants with no brick-n-mortar store, no rooms for diners, and lack culinary concepts. These are well-equipped kitchens designed for delivery, most never becoming a diner’s destination.

Here’s some food for thought:

Supercharged by the crisis

Contactless food delivery might just have been the defining trait of restaurants in 2020. But it looks like it’s going to continue to rule the roost for a long time to come.

According to the National Restaurant Associations 2020 consumer trends, 52% of customers say they are more likely to have restaurant food delivered than they were two years ago. 67% prefer restaurants that offer contactless delivery.

Another study by Statista reveals more than 56% percent of customers say they don’t mind ordering from a restaurant that doesn’t have a storefront. All they care about is good reviews and delicious food reaching them on time.

Given the stratospheric rise of doorstep food delivery, virtual kitchens are getting set up all over the country to meet the demand! This is the perfect time for restaurants planning to expand to other neighborhoods and cities or even states. Setting up a virtual kitchen is a no-brainer in today’s world. If you want to add more revenue channels to expedite growth and profitability, this article on Kitchen-as-a-service can help you get started with your expansion plans.

Perks for Newcomers

Digital sales are expected to make 54% of all restaurant sales by 2025, which is a 70% increase from industry estimates before COVID-19.

Today, these numbers mean that virtual restaurants serve as an attractive option to young entrepreneurs chasing delivery dollars. Since virtual restaurant as a business model is synonymous with low real estate, labor, and upfront costs, small businesses and startups can leverage it to enter and test the market before going all in.

Changes in Customer Behaviour

Not able to sell much in Tacoma? Let’s move operations to Seattle! Unable to crack the competitor with the current menu, add new dishes, or completely change the menu, if you will.

Virtual Kitchens provide the flexibility and freedom that we need in today’s rapidly changing consumer economy. From the flexibility to modify and edit the digital menu on the go to renting out Kitchen facility in the hotspots to enable fast delivery, and of course, the perks of reaching a wider audience with just a few clicks of a button. Virtual Kitchens come with magic buttons that you can press at your will as per your, and your customer’s changing requirements.

High-Profit Margins

According to an article published by FNB News in 2019, a typical restaurant has an average profit margin of 3% while a cloud kitchen’s profit margin hovers close to 10%. Fast forward to 2021, the demand for food delivery has pushed the profit margin by +(-)5%.

How does that work? The basic premise behind virtual kitchen economics is that they do not have a physical space, don’t need waiters to attend and serve customers, and can manage entire kitchen operations with a handful of staff. Such kitchens rely completely on online ordering systems that can be implemented into the POS for a minimal cost per month.

In short, low overhead costs, high-profit margins.

Room for Experimentation

Traditional restaurants offer standard offerings, which may or may not be unique to each, but evolving as per the changing consumer demand can be a little taxing for restaurant operators. So for instance, if people are moving to plant-based diets or prefer farm to fork dishes, a typical dine-in restaurant will have to make a plethora of changes to the overall brand offering, particularly, the menu. Whereas, with a Virtual Kitchen, everything can be monitored, modified, and rearranged with little to no effort. Thanks to the technologies that such a business model is built around.

Moreover, virtual restaurants allow operators to run different brands from the same kitchen. Imagine having an ordering platform and/or mobile app that allows customers to order from all the brands that you own — one customer may want Pasta from one brand, another family of four hankers for Mexican pot and poke bowls, and everything can be ordered from a single place and delivered by the same delivery team.

Needless to say, such concepts foster a high experimental environment without additional investment, which is extremely beneficial for restaurants as a business.

Brands embracing one of the industry’s hottest trends

Sweetgreen has launched an online-only platform that offers customers menu options curated according to their preferences. A famous YouTuber recently launched 300 delivery-only restaurants in one day!

Virtual restaurants have been growing popular among reputed food chains as well. In August 2020, Smokey Bones rolled out two virtual brands — The Wing Experience and The Burger Experience, creating a total of 122 virtual restaurants at its existing 61 locations across the USA. Fat Brands have also invested $130 million to build virtual kitchens sing their existing restaurants.

Apart from the big fish in the industry, so many successful restauranteurs who may be serving in just one location, have started setting up virtual kitchens to expand their brand economically into new markets, through exclusive online ordering.

Summing up!

Virtual Restaurants have revolutionized the food and beverage industry. They offer an innovative way for the restaurant industry to expand into new markets affordably, and for new restaurateurs to enter the foodservice industry, without having to bear the burden of tremendous capital investment.

As operational costs continue to increase and business owners find new ways to deliver great food and service, virtual restaurants will continue to grow and provide restaurant operators the opportunities to earn robust profit margins.

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