Traditional Hospitality vs Delivery Kitchens – Why the Model Must Change
The trend towards delivery kitchens started when Deliveroo first launched their Deliveroo Editions in 2015, and it was reacting to tension in the market caused by the traditional model. The old way of setting up hospitality businesses was expensive and slow – and needed shaking up.
Below we outline the difference between traditional models and the fast-moving delivery kitchen model, why it had to change and how it’s shifting the way the hospitality industry will operate for the next decade and beyond.
Small operators have little chance with the traditional model
Hospitality has moved at a glacial pace for decades. Operators have chosen themselves a location, created an interior look that matches its brand and designed a menu that will attract customers. The next stage is putting huge amounts of time and resources into a launch – with marketing and promotions which cost lots and take time to return value. After this, the team need to build up their brand recognition and customer base by providing a great customer experience before branching out to a new location, after months or years.
Even the big chains can spend years building up their brand at a handful of locations before building a large portfolio of sites. This takes investment and expertise: market research, data and advice from real-estate and brand experts.
We haven’t even mentioned the costs of setting up a physical location: renovation, services, design and equipping a destination restaurant can cost hundreds of thousands of pounds.
So, with the traditional method, a large team must work for months to ensure they have the right premises in the right street of the right town – bringing with it delay, and large amounts of costs: per premises it can be £500K or more with the traditional method. And remember, all this expenditure comes before you have earned a penny – which means your ‘burn’ of money is very high, and the risks are even higher.
This puts a huge amount of pressure on a fledgeling business – and means if you don’t have a large amount of capital, you are at a huge disadvantage – and your business is at huge risk from day one.
This is where delivery kitchens are different – and could transform hospitality.
The new model: delivery kitchens reduce upfront costs and make innovation easier
Lots of people within and outside the hospitality industry may see Delivery Kitchens as a threat to the traditional bricks-and-mortar sites. I disagree: the delivery kitchen model complements the existing restaurant operation and if anything, it supports it.
Before the pandemic, the hospitality industry was going through a time of challenge – expensive rents in high-footfall sites plus a crowded market and reduced visitor numbers to retail centres had seen several high-profile restaurant chains going out of business in the previous few years.
But where are the replacement operators going to come from? As we’ve already seen, it’s expensive and slow to start up your own restaurant concept – with a high chance of failure in the current market.
Therefore, the delivery kitchen model is becoming, and will remain, vitally important to the hospitality industry.
If you are considering starting a commercial delivery kitchen, it can cost you nothing to set one up. This is because Deliveroo and other people in the space only charge a licencing fee and/or a charge per transaction. If you pay per transaction you only pay more if you are more successful. In terms of speed, setup can take just a few weeks. A delivery kitchen can be designed around your operation and making it more efficient, not designed around the vagaries of the site you’re in. And of course, you won’t need front of house staff, printed menus, branded clothing or any of the other costs associated with running a destination location.
Restaurants can focus on giving their customers a good experience, whilst a delivery kitchen can focus purely on food delivery to their customers. If COVID-19 has taught us anything, human beings need interaction: restaurants are a key driver that brings people together to create experiences.
Modular delivery kitchens: Quick and easy to deploy
A modular solution was how the first delivery-only kitchens were created in 2015 – they were quick to put together, easy to deliver and could be operational fast – often on the day of delivery.
There is also a scalability bonus – it’s relatively easy to design modular units so you can add additional units later if you need more capacity. So, scaling your operation is simply a case of ordering a new unit and adding it on.
Whereas with the traditional model, you might, if you were very lucky, add two sites in a year, with delivery kitchens you can scale quickly with demand – adding 10 sites in a year and growing revenue by 20x in the same period is not unheard of.
Delivery-only kitchens are going to be a vital part of the recovery of the hospitality industry and a part of it going forward. In the future, restaurants will open after their concepts are tested and established, their menus will have gone through several iterations, finding the most popular dishes and tastes. Many more restaurants will launch in a physical location with a profitable delivery business behind them that doesn’t disrupt the operation of their main kitchen. Restaurants that started as delivery kitchens will begin to dominate the high street over the next 5-10 years, and they will be stronger than those they replaced that didn’t have a delivery concept behind them.
Fast-Fit Walls Transforming Internal Spaces, Double-quick
Delivery kitchens have started to build in popularity in the last year – our enquiries since Christmas are up 1,000% YoY because hospitality operators are starting to understand how delivery-only commercial kitchens can help them build a business.
The consequence of this is there is more demand for land in and around large population centres to host modular kitchens. Now outside space is at a premium, operators are starting to look at interior spaces. But they are, typically, very expensive and complicated to convert into kitchen spaces.
Just 12 months ago, our sales pipeline was exclusively enquiries for our modular units and mobile trailer kitchens, to be deployed in brownfield sites, car parks or industrial sites.
Today, a lot of operators are looking to transform internal, industrial spaces into multiple professional kitchens, without breaking the bank.
So, we created Fast-Fit Walls: modular walls that can be installed in hours and are designed to make it easy to install power and other services wherever they are needed. For fast-moving businesses with changing priorities, they can also be taken down and moved very easily – should an operator find one of their kitchens a huge success and want to increase its floor space.
The traditional hospitality model isn’t dead – but it doesn’t work for much of the market. Cost, time and risk have conspired to create a situation where only the wealthiest, or those prepared to take a massive risk would get into the hospitality game.
Thanks to Delivery Kitchens, costs of entry are lowered and there’s a chance the hospitality industry could become more sustainable and more equitable.