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‘Cloud kitchens’ is an oxymoron

Cloud kitchens (the category, and not just CloudKitchens the startup service) is essentially WeWork for restaurant kitchens.

Instead of buying an expensive restaurant site on a heavily-walked street, a cloud kitchen is developed in a cheaper locale (an industrial district perhaps), with dozens of kitchen stations that are individually rentable for short periods of time by chefs and restaurant proprietors.

Mike Isaac and David Yaffe-Bellany talk about “the rise of the virtual restaurant” at the New York Times, while Douglas Bell, contributing to Forbes, wrote that “Deliveroo’s Virtual Restaurant Model Will Eat The Food Service Industry.”

Latent in these pieces (there are dozens of them published on the web) lies a superficial storyline that’s appealing to the bright but not detail-oriented: that there are high software margins (or ‘cloud’ margins if you will) to come from a world in which kitchen space is suddenly shareable, and that’s going to lead to a complete disruption of restaurants as we know them.

In fact, this supposed rise of the cloud kitchen gets at the real crux of the matter: the true ‘expense’ of restaurants isn’t rent or labor, but in fact is really marketing: how do you acquire and retain customers in one of the most competitive industries around?

Isaac and Yaffe-Bellany argue that restaurants will join these meal delivery platforms to market their foods.

Instead, it’s the meal delivery companies themselves that will take advantage of this infrastructure, an admission that actually says something provocative about their business models: that they are essentially inter-changeable, and the only way to get margin leverage in the industry is to market and sell their own private-label brands.

Cloud kitchens is an interesting concept, and I have no doubt that we will see these sorts of business models for kitchens sprout up across urban cities as an option for some restaurant owners.

But the reality is that none of the players here — not the cloud kitchen owners themselves, not the restaurant owners, and not the meal delivery platforms — are going to transform their margin structures with this approach.

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