Cloud kitchen. Dark kitchen. Virtual kitchen. We have heard of these terms ever since Covid-19 turned the F&B industry upside down and forced almost every restaurant to consider going off-premises in one way or another.

Though it’s now impossible for restaurateurs to ignore the large appetite for this new model, one brand in Malaysia has been operating via a cloud kitchen even before the Covid-19 outbreak.

Since September 2019, KyoChon Malaysia has launched three cloud kitchens in partnership with GrabFood.

This is despite the South Korean fried chicken chain’s success and growing presence (they currently have 22 stores in Malaysia alone).

Set the Tables spoke to Terry Goh, one of the co-owners and director of KyoChon Malaysia on what it takes to launch a cloud kitchen and why the concept is not for every restaurant.

How did KyoChon Malaysia venture into the cloud kitchen model?

The demand for food delivery services has been growing. As our dine-in outlets are located in malls around Malaysia, we typically pay high rent or percentage of sales.

Thus, it makes very little sense to operate a delivery service from our existing dine-in stores with such high-cost structures.

Cloud kitchens enable us to serve the growing demand for delivery at a lower cost, remove the operational burden from our dine-in stores and reach out to customers we are unable to reach.

As all our orders are cooked fresh, there’s at least a 15 to 25 minutes wait time.

If we added a delivery capability to our dine-in outlets, diners would have to wait longer for their food even if my team was cooking as fast as they physically could.

How does a KyoChon Malaysia cloud kitchen operate?

Let’s start with the build-up. We build our own kitchens because KyoChon 1991 has specific proprietary kitchen technologies and processes.

Our kitchens are using cloud-based point-of-sale systems and are cashless and paperless.

We receive orders directly on our iPads, which have been integrated with GrabFood’s application programming interface, so there is no cashier and no service crew to key in orders.

Our kitchens don’t accept any walk-in customers or any payment either; they only prepare and pack the food ordered by our customers.

What is the difference between your dine-in and cloud kitchen stores?

Limited menu and different menu configurations are the biggest differences.

The menus at our dine-in stores and cloud kitchens are not the same, and we also created different portion sizes as the maximum capacity a delivery rider can carry is limited.

As business owners, you’ve got to configure your menu to maximise that value.

The time it takes to construct a cloud kitchen is significantly shorter, as opposed to six to eight weeks for our restaurants.

The renovation cost is also significantly lower. While our kitchen equipment standards and requirements are the same as our restaurants, there is no need to incur other costs of fit-out associated with dine-in restaurants to create a nicer dining ambiance, so furniture is unnecessary.

The return on investment is a lot faster in comparison to dine-in stores.

What were your challenges when you first started?

Finding the right location was the biggest challenge, and it will continue to be the biggest challenge for any cloud kitchen.

The idea is to target customers that would likely order within the delivery range. You do not want to cannibalise your market.

The second challenge was to find the right format, such as accessibility, which will cover the smaller details such as how do your delivery guys find the location and where do they park, for example.

The next format to think about is the kitchen size and equipment. We can start from 800 square feet, with a majority of that kept for storage, but enough kitchen equipment is needed to be able to service the orders anticipated.

What are the other challenges that need consideration? 

Delivery commissions are a big challenge for any merchant if you plan to work with a food delivery partner.

There are cheaper options like last-mile delivery services where you take orders directly from the customer (online or on the phone) and arrange for delivery.

We tried this for a limited time but didn’t have much success with it – there were too many incidents where we were unable to find a rider to deliver food to our customer on time.

It also cost us a lot more as we often compensated our customers.

Do you think new restaurateurs should go into cloud kitchens without any storefront?

Delivery platforms are algorithm-based. Your brand’s visibility is dependent on the number of searches within the app or platform.

There are about 16,000 (and counting) merchants on GrabFood’s platform alone. If you only have a virtual presence, how would your customer have the desire to search for your brand, especially if you’re new?

If you rely exclusively on ads on the platform, you may get a few trials but most customers would prefer to order with brands they have tried or visited before.

Also, if your brand only operates exclusively in the cloud kitchen space, it’s hard to build a long-term brand affinity with your customer through memorable experiences. They’ll never be able to taste your food when it comes straight out of the kitchen, or when it’s nicely plated and served in a nice setting.

I think cloud kitchens should be complementary to existing restaurants, and not used as a standalone platform.

For KyoChon 1991, physical store presence still matters to us. As they say, “out of sight, out of mind”, and we definitely do not want our customers to forget us.

This article first appeared on Set the Tables.

Set the Tables is positioned to inspire and educate those already in the industry as much as the aspiring reader who dreams of a future in the food business, and maybe even the merely curious tantalised by the vast and irresistible universe of food and drink.