Cloud Kitchens and a Fresh Menu

Zodius Capital & Lightspeed Ventures-backed FreshMenu is betting on a space where delivery aggregators find it challenging to play; building cloud kitchens with lower prices, in-house food and quicker delivery, albeit with a limited menu

In 2014-15, as delivery aggregators in India’s foodtech sector came close to a breakthrough, their customers realized that ordering food is as expensive as dining in, with aggregators profiting through delivery fees. This gap led to the emergence of a new model in the foodtech sector; one called cloud kitchens or delivery-only kitchens. Although in this, the menu consists of a limited variety, the prices are often lower, the food in-house, and delivery fast and on the go.

One such company which is making deeper forays into this space is Freshmenu. “Whether you step out to have a meal on the high-street or it comes to you, the overall pie has expanded”, explains the 38-year-old Rashmi Daga, its founder. “The macro shift in India is that people rely on food cooked outside their home”, she adds.

Three years into the business now, FreshMenu started with a focus on delivering to people the same quality of food they get when they step out for a meal. Having started out with a limited menu, the team realized that if it wanted to stand out, it would have to go beyond tried and tested dishes. For instance, on FreshMenu, the food catalogue is always changing and the food is delivered hot. “We wanted to make our menu more contemporary and our delivery convenient”, says Daga.

Our approach has been to behave like the ‘Press 9’ for food; additionally, we latch onto trends very fast. For instance, when super grains became extremely popular, we were very quick in terms of execution and bringing the food on the table


What’s on the table?

Right from quinoa and super grains to burrito bowls and steel-cut oat jars, FreshMenu has something for anyone looking to eat in. “Our approach has been to behave like the ‘Press 9’ for food; additionally, we latch onto trends very fast. For instance, when super grains became extremely popular, we were very quick in terms of execution and bringing the food on the table,” adds the strictly vegetarian founder. Typically the company takes three weeks to conceptualize and launch a new dish. Of course, for delivery-only kitchens, expanding its product to new food categories and changing its catalogue every few months is a continuous process.

The only moment of truth for such businesses is when the food is up for tasting and for the most part, staying true to one’s mojo. “There is so much mediocrity when it comes to food delivery that if you have someone focusing on the product and service as well as quality, taste and reliability they will stand out”, explains Daga.

Arriving at the right model

While food quality and delivery service are rather important, repeat orders are an extremely crucial element of food delivery businesses. Daga, an Indian Institute of Management, Ahmedabad graduate explains that with 26 kitchen locations across the country, FreshMenu sees strong repeat metrics – as much as 60-65 per cent of the customers give repeat orders. On its good days, the startup does 10,500 orders a day across Mumbai, Delhi (including Gurgaon) and Bengaluru. It has a total of 800+ people who make up its kitchen staff. FreshMenu plans to increase these numbers once it makes deeper inroads into cities like New Delhi and Mumbai. Its busiest market however, is the IT capital of India, Bengaluru.

Unlike some of its competitors, FreshMenu’s model is not based on a central kitchen nor does it have a food re-heating model. “We cook last mile in all our kitchens which means that when you order from FreshMenu, your food was cooked 30 minutes ago”, adds Daga.

After having raised US $17 million (around Rs 110 crore) in a round of funding led by Zodius Capital with participation from existing investor, Lightspeed Venture Partners in January 2016, the startup is not looking at raising money any time before September 2017. “We want to focus on streamlining our operations in existing markets by opening up more kitchens, getting more deliveries going and increasing our menu size before we figure our next set of expansion and fund raising plans. With respect to kitchens, we want to make sure they are never more than five kms away from a customer,” she says.


As the team shifts gears on expansion, they will need to maintain consistency across categories – be it speed, variety or quality of food. That is quite precisely, the main trade off between delivery aggregators (who have in the recent past faced multiple challenges) and cloud kitchens.


Understanding Customers Better

For now, the team is heavily focused on customer engagement, which is a lot about learning food habits and patterns. Daga and her team are also focusing on depth (in their existing markets) and getting people to use FreshMenu more regularly. “We are planning to go deeper into New Delhi and Mumbai and are also looking at newer cities and kitchen locations across India. These geographical expansions will happen in the next three to six months”, explains Daga.

As the team shifts gears on expansion, they will need to maintain consistency across categories – be it speed, variety or quality of food. That is quite precisely, the main trade off between delivery aggregators (who have in the recent past faced multiple challenges) and cloud kitchens.

Carving a niche

While cloud kitchens may take a number of risks out of the equation, especially logistical, delivery aggregators are a reality and serve a need if you want to order from somewhere tried and tested. The experience will always be different in both. “Although delivery aggregators are here to stay, over the years, customers will realize that the experience with ordering on the cloud is so much better that they will start gravitating towards the cloud kitchen”, adds Daga.

Cloud kitchens, which make their own food and deliver to customers, tend to be faster and easy on the pockets in comparison to delivery aggregators, which deliver food from restaurants and in a lot of cases take longer as they have to pick up food from the restaurant. With multiple tech giants like Facebook, Google and recently Uber, dabbling into food delivery, home grown companies starting cloud kitchens and, an estimation by Morgan Stanley on the online food aggregation business growing from almost nothing in 2014 to $4.4 billion in 2020, it goes without saying that the food app category has a basket of options for multiple winners.


Snapshot – FreshMenu

Founder:

Rashmi Daga

Year:

2014

Concept:

A cloud-kitchen model with limited but constantly changing menu, lower prices and quicker delivery

Investors: 

Zodius Capital and Lightspeed Venture Partners 

Presence:

Mumbai, Delhi (including Gurgaon) and Bengaluru