In a telephonic interview with Restaurant India, Aditya Somani, private equity investment professional and advisor to Freshmenu, which is the first company to conceptualise and execute the ‘dark kitchen’ strategy at scale in the world, spoke about the success points of running such an operation in India, the challenges behind it, and how this model requires a lot of investment to make it scalable for franchising
What do you think are the pros and cons of running a dark kitchen model?
The success points of the dark kitchens are that their return on investment is attractive and they have the capability to try and test much more than physical restaurants. For instance, when a person walks into a South Indian restaurant, he or she expects idli and dosa and you really can’t offer Mexican. But in a digital restaurant, customers always have a choice to choose the dishes. This is the advantage that dark kitchens have.
Another unsaid and less understood aspect is the ability to manipulate demand. When it comes to physical restaurants, 100 people may walk in on Thursday and 250 people on Sunday, which means you cannot really control the footfalls. However, in digital platforms, you can manipulate demand. Physical restaurants can’t do this and will keep inventory for the next day. It works another way around also. For example, if something is selling well you can raise the price and maximise the profits. People usually only talk about economics but I am talking about how to create a much more rigorous business.
Therefore, in a dark kitchen, the ability to get feedback and act on it is a thousand times more than a physical restaurant. In a dark kitchen, every dish can be individually rated along with different time durations and locations. The kind of data and analysis that a dark kitchen sits on, a restaurant can’t even imagine. This kind of customer responsiveness and obsession are impossible in a physical restaurant. With physical restaurants, there are human biases, but here there are numbers, there are kitchen and dish ratings, and you can cut them in any manner you want. And now that every dark kitchen sits on huge volumes, nobody can hide under mistakes and excuses. These are numbers that represent reasonably large volumes. So they have statistical validity. The challenge I feel is that when you are running a dark kitchen model your chances of getting thrashings and complaints are higher on social media for every little mistake because giving feedback is much easier on this platform.
How are the operations of dark kitchens managed?
The fundamental operations are similar except that the bookings can be in much more volume. So, in a physical restaurant, typically, they have a widespread menu. You have some 20 types of paneer gravy, whereas here in dark kitchens, there are five types of chicken and so the order volume for a single dish can be much higher. The delivery operations are standardised. The only other thing where the operation is different is the technology backing in a dark kitchen, which magnifies the ability to handle order volume and that has its pros and cons. The good thing is you can track everything sitting in the kitchen. So, you track everything insanely to squeeze and get the product at the right time to the customer.
Is franchising in dark kitchens a scalable method?
What we have learnt is that the quality of food is paramount. We Indians can stand and eat anywhere, irrespective of our status, provided the food is good. When you go to the franchise model, the first question is if the franchise is expected to do full cooking or let’s say I set up a franchise model where I have 20 kitchens and 60-70% of the thing is done through a central kitchen model. If full cooking is not expected then I think a franchise model can be possible because if you are giving your menu and recipes to a franchisee, you can standardise the ingredients, supply chain, recipes and menu but even after you do it humans will be humans and there will be some variations.
So, only when a franchise is supposed to do a little bit of work, you can still think of franchise operations. Running a dark kitchen in a franchise model is, in my opinion, difficult. Also, it will require much more investment; you will have to train employees. The consistency level in cooking can only come when you are investing a lot in training. Nobody has done that kind of investment in India except for five-star restaurants. The franchise operations in likes of biryani are doing okay today because most such products are engaging in central kitchen cooking and much less work is being done in the delivery kitchen or franchisee kitchen. Many of them claim to be fresh, but the fact is that they are not at all fresh, the way you , me and our parents define fresh.
Is it better run by small entrepreneurs or better as corporate operations?
I think corporate is better suited because what stands out is marketing and branding efforts that can come only at a scale. People don’t come to you because you are at a great location or because your ambiance is nice. You have to consistently focus on the quality of the product and that will depend on the training, supply chain, and cost control, which is much more difficult in a small entrepreneurial setup. Also, you don’t have the resources to build the brand. There is also less scope of innovation there. However, in dark kitchens, people expect a lot of variety and this can only happen when you have a centralised kitchen operation and have consistency in operations. The reason behind people expecting a lot from dark kitchens is because they are spoilt by their experience in e-commerce. They want a lot of choices at 50% price of that of a physical restaurant.
Do we have enough talent for dark kitchens in India?
I don’t think we have any dearth of cooking talent. Since 90-95% of the industry is unorganised, there is no concept of training and certain professional behaviour in traditional F&B industry. Thus, while a person may cook well he may not know how to handle a team or how to behave in a team environment. The cultural challenges are the bigger challenges than a talent thing.