In today’s post I’ll walk through what the current economics look like for 3P (logistics) restaurant food delivery in the US and how I see that evolving in the long-term.
Thank you! By cloud kitchens I assume you mean dedicated commissary kitchens for delivery that can be rented by restaurateurs?
I think it's an interesting space with a lot of greenfield but at least to my knowledge no one has really nailed the model. So, for now it doesn't really impact industry volumes or economics.
The reason traditional food delivery works is because you can leverage your labour and rent costs (both 25-35% of revenue) while also running your take-out and dine-in as your primary business. You lose this leverage with dedicated commissary kitchens.
The other challenge is that cloud kitchen brands have to build a brand and customer base from scratch where as traditional restaurants are adding incremental orders to their existing base, so there's no additional COA.
That being said, a lot of smart people and capital have entered the space, so I'm confident *something* will eventually come out of it.
Great article! Curious to know your thoughts on how cloud kitchens could potentially impact economics of this space?
Thank you! By cloud kitchens I assume you mean dedicated commissary kitchens for delivery that can be rented by restaurateurs?
I think it's an interesting space with a lot of greenfield but at least to my knowledge no one has really nailed the model. So, for now it doesn't really impact industry volumes or economics.
The reason traditional food delivery works is because you can leverage your labour and rent costs (both 25-35% of revenue) while also running your take-out and dine-in as your primary business. You lose this leverage with dedicated commissary kitchens.
The other challenge is that cloud kitchen brands have to build a brand and customer base from scratch where as traditional restaurants are adding incremental orders to their existing base, so there's no additional COA.
That being said, a lot of smart people and capital have entered the space, so I'm confident *something* will eventually come out of it.
Sorry just to clarify, I'm just talking about the US - there might be a completely different dynamic in other markets.