Is there a chance for cloud kitchens to succeed in Egypt?

The rapid prosperity that The cloud kitchen sector in the UAE began to spread and reached other parts of the Middle East as new cloud kitchens emerged across the region along with start-ups offering technical solutions for these delivery kitchens in hopes of achieving the same success as startups like Ikcon In Dubai, acquired by Reef Technologies, and Kitopi, which secured $ 415 million in a round of financing led by Softbank.

In Egypt, where Talabat and Elmenus dominate the food delivery scene, cloud kitchens are the latest addition to the food technology sector, but the pace of growth has been somewhat slow, hampered by a lack of awareness and low online food orders.

Food Nation is the leading company in Egypt, launched in Cairo in 2020 and established its first cloud kitchen accommodating 35 different brands. With the support of Tivoli Dome, a food court in Heliopolis, the company offers smart kitchen spaces specifically designed for delivery-only restaurants. The company plans to establish the largest cloud kitchen in the country and is expected to house more than 41 kitchens.

According to Ahmed El-Naggar, project manager at Food Nation, the move is aimed at raising awareness and encouraging more restaurants to transform their business into this growing model.

He adds, “This move coincides with global trends affecting the restaurant business, as cloud kitchens have become the world standard in the food and beverage sector because of their cost and efficiency of operation. This is the future of restaurant business abroad and in Egypt too, but unlike world markets, we suffer from a lack of awareness of cloud kitchens here. ”

In an effort to help its virtual kitchens and support the spread of its brand, the company offers dining services at one of its locations. “Having dining areas on cloud kitchens will play a role in building customers’ trust in these virtual brands, which will support the adoption of the concept of cloud kitchens,” explains Al-Najjar.

In short, the growing interest of entrepreneurs to enter the cloud kitchen sector stems from the urgent need to provide a solution that can help restaurants recover from the repercussions of the pandemic in the country. Therefore, most cloud kitchen operators in Egypt adopt the KaaS “kitchen as a service” model and provide rental space to brands and restaurants.

Mostafa Wahdan, co-founder of Chef House, a KaaS cloud kitchen that operates a range of virtual restaurants, says his main reason for starting his business was his desire to help restaurants continue to work and enable them to expand their delivery services and expand to new areas.

Wahdan adds: “60% of restaurants fail in the first year of operation, and 80% of restaurants close indefinitely after 5 years of operation. Restaurants struggle to survive and many of them lose millions of (Egyptian) pounds every year. We have it starts The company seeks to help business owners revive their brands And build a ditch in this market that is dominated by the Red Ocean strategy. ”

Cloud kitchens have proven to be an economically viable solution for many restaurants seeking geographical expansion without building physical premises, but the model that only provides delivery also faces a myriad of challenges. Restaurant operators have to spend large sums of money on marketing strategies to gain customers, which results in many small restaurants not being able to switch to this model, or relying on cloud kitchens simply because they cannot afford marketing.

Online food delivery

Ideally, cloud kitchens should be built around the online delivery experience, but this does not have to be the case in Egypt where most food delivery orders take place over the phone rather than the internet. Therefore, cloud kitchen operators tend to provide both online and offline users.

Wahdan says: “Internet food delivery is still in its infancy and it is not expected to make big leaps, at least in the short term, as the Egyptian consumer is not yet used to this way of making their orders. We have chosen to start an online (strategy) as operating procedures Ready to work, I personally do not care if the order is online or offline, I will go to the customers wherever they are. ”

The fact that online sales account for almost 6% of total food and beverage sales is the reason why the cloud kitchen market is still considered at an early stage with little activity by venture capital firms. Last month, Egyptian “cloud center operator” Takery secured pre-funding, with plans to secure up to $ 3 million in 2022. After this round of funding, Takery will become the first cloud kitchen operator in The State gets venture capital funding.

Eventually, as cloud kitchens become more widespread, more customers and businesses will switch to online food ordering, especially since most KaaS kitchen-as-a-service start-ups offer their restaurant customers the opportunity to partner with food delivery platforms like Elmenus and Talabat.

Michael Asaad, founder of Toro Cloud Kitchens, believes that the reason behind the cloud kitchens in terms of popularity is that the level of logistics in the food delivery sector is less than required.

“When delivery logistics get faster and more efficient, then the game will really change,” he says. “The delivery and packaging phase remains a problematic phase for delivery companies, as many foods are difficult to transport which leads to a frustrating experience for customers.”

As customers’ expectations increase, the traditional on-demand delivery models that exist now become insufficient and insufficient to meet the increasing demands.

Asaad adds, “The market boasts a lot of players in food delivery, but we need to design an alternative model for faster and more efficient cloud kitchens and food delivery.”

If we look to the future, the cloud kitchen market will come out with more players with a greater demand, and the chances of starting virtual restaurants will increase and fail quickly. Continuous investment in customer-oriented innovations is essential to ensure sustainable growth in this market in the future.

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