One of the concepts that has become extremely popular in the recent years is that of virtual restaurant. This has allowed restaurant owners to significantly lower their costs and run a successful delivery only restaurant.
As the demand for food delivery has been increasing since the pandemic, there has never been a better time for restaurants to expand their reach with virtual restaurants. Not only will this allow restaurants to expand their reach but will also help them save significant costs and experiment with different menus.
Let’s explore how you can start a successful virtual restaurant and take advantage of this business model.
What is Virtual Restaurant?
A virtual restaurant unlike a traditional brick and mortar restaurant doesn’t have a physical store front. It is also known as a delivery only restaurant or cloud kitchen. These restaurants operate through online food delivery services such as Jahez or UberEATS. Their store front is their online presence and there is no option for dine in.
A virtual restaurant can operate out of a traditional restaurant or can operate separately in a shared kitchen space such as the capital food cloud kitchens. More than 6 million people use food delivery apps in Saudi Arabia allowing restaurant owners to reach a huge number of customers.
It is the best option for those who want to start a restaurant without having any money. The only investment that is needed in starting a virtual restaurant is that of kitchen equipment.
How Does Virtual Restaurant Work?
Compared to a traditional restaurant with dine in options, virtual restaurants have a straight forward workflow. These restaurants go through the following steps:
- A virtual restaurant has to have a strong online presence. This can be done through their own website or mobile app but most of these restaurants work with third party food delivery platforms such as Jahez or UberEATS.
- The virtual restaurant can upload their menu items with images on these online platforms. They usually have limited menu offering and offer only those dishes which they specialize in. This allows them to focus solely on efficiency.
- When an order is placed the food is prepared and packaged in a virtual kitchen facility. This can be a shared kitchen space or a separate kitchen inside a restaurant.
- Most of the virtual restaurants offer two options for their customers. They can either pickup the food directly from the virtual kitchen or the virtual kitchen will deliver the food to them through a third party delivery service.
- To build a successful brand image virtual restaurant heavily rely on customer ratings. These ratings help them stay on top of the delivery apps and get more orders.
What Are the Benefits of Virtual Restaurant?
Are you a chef? Do you have food recipes that people love? Are you a food truck owner? Are you looking to start your own restaurant but don’t have a lot of money? If you are in any of these conditions then starting a virtual restaurant might be the best option for you because:
- With virtual restaurants you can save significant costs because you do not have to maintain a storefront, hire staff or purchase dine in furniture. You can start easily just by renting a kitchen space and buying the essential equipment.
- With virtual restaurants you have the flexibility to try out different menus. If there is a new trend all you will have to do is update your menu in the food delivery apps and you are ready to go!
- If you want to reach new customers virtual kitchens allow you to do that quite easily. You can rent a kitchen in any location where you want to reach customers and start offering your food there.
- The biggest advantage of virtual kitchens is that you can easily enter the food and beverage industry. You do not need significant upfront investments to setup you restaurant.
- With virtual kitchens you have the ability to make changes to your offering according to the data from customers. As virtual restaurants work through online delivery platforms they can collect data such as customer reviews and number of orders. This can help them fine tune their menu and make changes.
- If the demand for food increases virtual kitchens can easily scale up just by hiring a new chef. Meeting high demand can be very difficult in a traditional restaurant compared to a virtual restaurant.
- Virtual kitchens can also allow you to reach customers beyond just your own marketing efforts. If you are using third party delivery applications it can help you increase your visibility and get in front of new customers who have not heard about you before.
- Compared to traditional you will get high return on investments in a virtual restaurant.
Challenges for Virtual Restaurant
While virtual restaurants can prove to have high ROI there are still some things you need to consider before you open your own virtual restaurant.
Maintaining Consistency
As virtual restaurants experiment with different menus it may sometimes become difficult for them to maintain the same quality in their food.
High Delivery Costs
Virtual restaurants relay on third party food delivery apps to get their food delivered. They are charged a certain amount of fee for each order that is delivered. For restaurants that are just starting out this fee can sometimes become overwhelming.
Building Up a Reputation
The reputation of virtual restaurants is highly dependent on online reviews. You will find it difficult to convince your customers to leave reviews. Sometimes your competitors might leave negative reviews on your profiles to discourage purchases from you. You will need a dedicated marketing team in place if you really want to scale up your virtual restaurant.
Exhausted Employees
Although you will not have many employees in your virtual kitchen but still you will need some people to cook, process and maintain your virtual kitchen. One of the major problems faced by virtual kitchen owners is that their employees work hard throughout the day and are usually exhausted. This can effect the quality of food and also efficiency of the virtual restaurant.
Direct Relationship with Customers
Although virtual restaurants can build relationships with clients through online platforms and reviews but there is no direct contact between the restaurant owners and the customers. Compared to traditional restaurants virtual restaurants find it difficult to maintain and build a deep connection with their customers.
Increasing Competition
As the concept of virtual restaurants gained popularity in 2019 more and more restaurants have switched to this model because of its lower costs and higher returns on investment. This has caused an increase in competition in the recent 4 years. You should have unique offerings in order to stand out in the market.
Teach Challenges
Running a virtual restaurant requires you to have a strong online presence. All of your operations will be handled online so you need to be active on more than one app the same time. You can hire a dedicated media or tech person to handle the tasks for you but it will add up to the extra costs.
Make sure that you have a good understanding of social media platforms and online delivery apps before starting your virtual restaurant.
Food Delivery
Virtual restaurants are delivery only restaurants which means that if the delivery is not timely they might get a negative feedback. Ensuring that your food arrives hot and on time to your customers can sometimes become a challenge especially if you are working with 3rd party delivery service providers.
Business Models of Virtual Restaurants
There is a common misconception that there is only one business model for ghost kitchens or virtual restaurants. There are a number of different ghost kitchen models. Lets take a look at some of them here:
Single-Brand Virtual Restaurant:
These type of virtual restaurants serve a specific segment of the market. They have a clearly defined menu and target audience and work under one brand name. For example a virtual restaurant that only sells sushi will be called a single brand virtual restaurant. They meet the demand for a specific food style in a specific location.
Multi-Brand Virtual Restaurant:
In this type of virtual restaurant a single brand might offer several different food styles under different names. All of the food is prepared in one locations but with different branding and styles. For example a brand named XYZ might prepare burgers in their virtual restaurant and in the same kitchen they also prepare sushi under the name ABC. This allows them to fully utilize the kitchen space and increase profits.
Hybrid Restaurant Model:
With this model a traditional restaurant with dine in option also operates a virtual restaurant from their kitchen. The menu items of the virtual restaurant are not served within the premises of the restaurant. They are only available for delivery or takeout.
Collaborative Virtual Kitchen:
This virtual restaurant concept is quite common in Riyadh. In this type of setting several cloud kitchen restaurants might operate under the same roof. They might share equipment and staff sometime creating a collaborative environment.
How to Start a Successful Virtual Restaurant?
Starting a virtual restaurant might not always be easy especially when you have no past experience in the culinary world. Lets look at the steps that will help you start your own successful virtual restaurant.
Have a Good Concept:
Before you launch your virtual restaurant it is important that you have a concept and a plan in place. You may be passionate about several different concepts. The best way to choose from among the concepts is to go for the one that you have more experience with.
You do not want to have a ME focus when starting your virtual restaurant. You need to make sure that the food and menu you are deciding on is in demand in the market. Imagine having the best food but no one is ordering that food from you.
You will also have to decide upfront on the business model you will be going for. You can decide the business model on factors such as time, investment and resources. If you have limited resources the best option for you will be to go for a shared kitchen space.
Conduct a Market Research
Market research is important for almost any business out there. Before you decide on the type of dishes you will introduce in your virtual restaurant it is important to know who your target customers are.
The biggest mistake that a lot of virtual restaurant owners make is that they think the whole market is their target audience. If you follow this approach you might end up not reaching anyone.
You have to decide some important things such as:
- The age of your target customers.
- Taste preferences of your target audience.
- Find out what is working for your competitors.
- Look at the platforms that your competitors are using and take inspiration from that for you own marketing efforts.
Doing this will give you a good understanding of how your target customers behave and respond to different things online. You can use several different tools for market research such as:
- Google trends
- Quora
- Facebook Groups
- Similar Web
Craft a Business Plan
A business plan will be your guide to success. After going through the research you will get an idea of the do’s and don’ts for your virtual restaurant. You can use this knowledge to create a plan for the next few months to a years depending on how fast changes happen in your industry.
Some of the important things that your virtual restaurant business plan must include are:
- Business Description
- Market Analysis
- Business Model
- Menu Development
- Marketing and Sales Strategy
- Operational Plan
- Supply Chain and Inventory Management
- Quality Control and Food Safety
- Delivery Logistics
- Financial Projections
Create a Strong Online Presence
After conducting a market research you will get an idea of where your target audience are. You do not want to overwhelm yourself by being present on all platforms. Find one or two platforms where your target audience is present and build a strong presence there.
You should have a strong content plan that educates, informs and promotes your brand. As your restaurant is only present virtually you will need to make sure that you create the best content.
Plan your content in advance for a month and don’t forget to add special offers and sales. Post about trending topics such as independence day. This will give the chance to reach more people and gain more visibility.
Choose Your Menu Niche
For virtual restaurants it is important that they choose a specific niche. To choose your niche first find out what are your available options. Once you have a list of available options you can research and see the competition and demand in each niche.
For example if you want to start either a burger restaurant or a sushi restaurant you will research the competition and the demand in each of these categories. If the demand for both sushi and burgers is high but the competition is low in the sushi restaurants you can start off with a virtual restaurant that offers sushi.
Find a Good Location for Your Virtual Restaurant
Finding a good location is probably the most important step in starting a successful virtual restaurant. If you are starting a virtual restaurant from an already established traditional restaurant then you probably don’t need to worry about this step.
If you are starting from scratch then it is important that you choose a strategic location for your restaurant. You need to keep several things in mind when choosing a location.
The first one is the availability of delivery services within the location. You need to make sure that the location is not far from offices and homes because you do not want your food to arrive late.
You also need to consider the size of your virtual restaurant. You should have a list of equipment’s that you will need in your virtual restaurant. This will give you an idea of the size of location that you will require.
Cost is another important factor here. You do not want to overpay for the location. As you are not maintaining a store front you do need really need to go for something really expensive especially in the beginning. Just make sure that the location you choose is clean.
Good Branding is Important
The first impression of your food is really important. You do not have to spend a lot to get the best branding. You can choose a few brand colors and then design your logo and packaging using those colors. You want your brand to stand out and your packaging to be attractive.
Research suggests that food packaging in some cases is more important than the food itself. When creating your packaging it is also important to use materials that will keep food warm even if the delivery is late.
Comply with the Regulations
Regulations might be different in different locations. You will have to obtain the necessary license’s before starting your virtual restaurant. If you are starting a virtual restaurant in Riyadh you need to get a food and beverage licenses. You will need the following paperwork:
- Address proof
- ID of all the shareholders
- Trade name and confirmation proof
- Article of association
- Memorandum of association
- Bank transfer letter
You can find out more about the legal requirements of starting your restaurant in Riyadh here.
Join Food Delivery Apps
You will need to join different 3rd party food delivery apps in order to increase your visibility and get more orders. You will need to submit the images of all your menu offerings on these platforms and should be active there to start processing the order as soon as it is placed.
Marketing is Important
After taking these steps it all comes down to how you market your food online. You will need to craft engaging content that will create interest and engagements within your target market.
Social media platforms such as Facebook now offers an option for detailed targeting. This means that you can target people within a certain geographic location and with certain interests. You can take advantage of this feature to promote your food within your locality and attract new customers.
Launch Your Virtual Restaurant
Once you have gone through all of these steps you will be ready to launch your virtual restaurant. You will be ready to get your delicious food into the hands of customers. Make sure that your facility is clean and that your food arrives warm into the hands of your customers.
You can also motivate your customers to share videos or images of your food on social media. You can then repost those on your own social media platforms to build authenticity for your brand.
Key Takeaways
- It is important that you go through a planning phase before launching your own virtual restaurant.
- You don’t need to target everyone you just need to target one segment of the market.
- Try to keep everything as minimalist as possible.
- Never compromise on quality in a virtual restaurant
- Make sure the food arrives warm into the hands of customers.
- While starting a virtual restaurant might be cheap compared to a traditional restaurant. You still will need a significant upfront investment.
- Make sure that you have a strong online presence to build authenticity for your virtual restaurant.
- Customer reviews will help you stay on top of the food delivery apps. Motivate your customers to leave positive reviews about your food.
