The Uber founder is venturing into the cloud kitchen domain. However, around 12 years ago, two Indian founders initiated the development of a cloud kitchen company that is currently generating an annual revenue of 900 Crores. This is the fascinating story of Rebel Foods:
It’s crucial to clarify that Rebel Foods is distinct from Zomato or Swiggy; it doesn’t operate as a food delivery tech platform. Rather, it operates more like a chain similar to McDonald’s but with a key distinction – a primary focus on an online delivery revenue model.
Rebel Foods boasts impressive statistics:
- 4,000 virtual restaurants
- 350+ cloud kitchens
- Presence in 40 cities (tier 1/2)
- Operations in 7 countries
India has 3 crore restaurants with 90 lakh workers, and only 30% fall under the ‘organized’ sector. The rest are comprised of dhabas, food trucks, street stalls, and hawkers. The disruption in the food industry has been limited to the organized sectors.
So, what did Rebel Foods successfully navigate? Let’s delve into the key aspects:
- Overcoming Location Challenges:
- The revenue potential of a single food joint is closely tied to its location. When Rebel started as FAASOS with 50 locations, it struggled to break even due to high rent costs.
- Online Take-Aways Dominate Revenue:
- Small eateries serving on platforms like Swiggy and Zomato generate a significant portion of their revenue online. Rebel questioned the need for physical stores when online customers didn’t frequent them.
- Emphasis on Software Engineers over Chefs:
- Recruiting and retaining skilled chefs is a common challenge for Dhaba owners. Rebel addressed this by creating extensive Standard Operating Procedures (SOPs) and automations for each recipe.
- Reducing Raw Ingredient Wastage:
- Restaurants often struggle with balancing supply and demand, leading to food wastage. Despite multiple brands in one kitchen, Rebel reduced wastage to less than 2% for most outlets.
- Non-Linear Scaling in Cloud Kitchens:
- Between 2016 and 2018, Rebel opened 50 new cloud kitchens (a 30% growth) while achieving a staggering 500% revenue increase. Each of the 50 locations translates to 900 individual brands on Swiggy and Zomato.
- Shared Common Costs:
- Rebel kitchens operate without server staff, and the cleaning staff serves the entire kitchen. This results in extremely low operational expenditure per brand, with a capital payback period of less than 12 months (typically, it takes 3 years).
- Plug & Play for Direct-to-Consumer (D2C):
- Businesses like SLAY Coffee leveraged Rebel’s model, scaling to 100+ locations in 12 months. Other notable additions include Wendy’s, Mad Over Donuts, Haldiram, Chai Point, and Anand Sweets.
The only caveat is that this entire model relies on Swiggy and Zomato, meaning Rebel doesn’t own its customer base, a challenge that Domino’s has effectively addressed.