Cloud kitchens

Cloud kitchens only work where density is high

Cole explains the cloud kitchen economics: delivery-only math only works in hyper-dense markets because a short delivery radius (which requires density) is the only way to keep delivery cost and time low. In non-dense markets, operators churn out once they realize delivery-only revenue can't cover the model.

“And because you need the cost of delivery to be low and you need the time of delivery to be low in order to properly batch and keep it efficient, whether you're a third party or a self-delivery person and you've got your 3 kids driving around on a scooter delivering the food, doesn't matter. The delivery time has to be fast. The radius has to be short. The only way the radius is short is if the density is there. And so cloud kitchens are crushing, crushing it. Dark kitchen, cloud kitchen, whatever you want to call it, in hyper-dense markets.”

Steal thisOnly launch delivery-only kitchens where population density keeps the delivery radius short and the per-order cost and time low.

How a cloud kitchen cut restaurant startup cost from $500K to under $5K

Shaan explains he started a delivery-only restaurant out of a shared commercial kitchen rented at $19/hr, roughly $20/hr for ~8 hours a day, dropping startup costs from a needed half-million dollars to under $5,000. The storefront is just an icon inside the delivery apps.

“When we did it, we paid $19 an hour. Wow. To have access to this kitchen. And so like, think about that, you know, 8 times, you know, $20 an hour times 8 hours a day, that was our restaurant cost. So we went from needing half a million dollars to start our restaurant to doing it for like less than $5 grand.”

Steal thisLaunch a delivery-only brand from an hourly shared kitchen instead of signing a lease, slashing startup capital.

Travis Kalanick allocated ~$500M to ghost kitchens

Sam notes that Uber founder Travis Kalanick allocated roughly $500 million toward building ghost/cloud kitchens through his new venture.

“Travis Kalanick raised a— well, I don't know if he raised it. He probably used his own money, but he allocated something like $500 million to creating ghost kitchens or services for ghost kitchens.”

Cloud kitchens let you test and kill food brands overnight

Shaan explains the cloud-kitchen advantage: you can spin up a single-item delivery brand, and if nobody orders, take it down and launch a new cuisine the next day with near-zero overhead.

“So you could see, should I just make a hot dog only brand or a mac and cheese only restaurant? And like, you try the brand and if nobody's ordering from it, you just take it down and you just do a new cuisine the next day.”

Steal thisRun multiple single-item delivery brands from one kitchen; kill the losers overnight and relaunch new cuisines.