The Dialogue and Development Commission (DDC) of Delhi and the Department of Industries have identified the cloud kitchens segment as a potential job creator and proposed to boost the segment’s growth by easing regulations, setting up clusters in industrial areas and contribute towards skilling of their workforce.
As a part of the Rozgar Budget 2022-23 that plans to create 20 lakh jobs in the Capital in five years, the Delhi government is working on creating a Cloud Kitchen Policy. It had invited stakeholders on Tuesday to share inputs to facilitate the growth of cloud kitchen businesses in the Capital.
Reduce entry barriers
DDC vice-chairperson Jasmine Shah said that the government was very hopeful about the growth potential of the concept of cloud kitchens as an industry as its model is low-risk, cost-effective and scalable, allowing for high-profit margins even for players with less capital expenditure. He added that the government was working on reducing the entry barriers for new players in the segment and promoting their Ease of Doing Business (EoDB).
“Even without government interventions, the segment has managed to create a massive industry in a short period. We want to ease the entire process for the operators – from rents and licensing to infusion of transparency and reduction in procedural delays in getting statutory clearances,” Mr. Shah said.
The DDC has mooted setting up of cloud kitchen clusters in industrial areas to provide the segment with adequate space to expand with plug-and-play features like power connection, PNG connection, effluent treatment and common facilities like shared cold storage, parking space, etc.
According to the Delhi government’s estimates, there are currently over 20,000 active cloud kitchens in the city that provide substantial direct and indirect employment. The number of cloud kitchens in Delhi is growing at a rate of over 20% every year. “The domestic cloud kitchens market is expected to grow from $400 million in 2019 to reach $1.05 billion by the end of 2023 and $2 billion by 2024 according to a report by RedSeer Management Consulting,” the government said.
Issues to take into account
Operators of cloud kitchens feel that the major issues the government needs to take into account are the rise in rents when a particular area becomes a cloud kitchen hub, the monopoly that delivery and discovery apps currently have and the issue of clear licensing norms.
Ashwani Basantani who runs Cloud Kitchen Exchange, a company that helps restaurants set up cloud kitchens, says that these kitchens are often in areas close to posh localities to serve that particular area as rents are cheaper.
“For every Greater Kailash-I, there is a Zamrudpur and for every Saket, there is a Saidulajab where rents are cheaper. But owners are left to the mercy of landlords who decide to increase rents when more players come in and then the entire business gets derailed,” Mr. Basantani said.
On the delivery front, he says that commissions being charged by food discovery and delivery apps are almost 30%. If the government is serious about cloud kitchens, they will have to do something to break the monopoly of food apps as restaurants will not be profitable if they pay such high commissions.
Talking about licensing, owners say that to run a cloud kitchen, they need only an FSSAI licence as the law does not specify what a cloud kitchen is. They are often left explaining to officials that they do not need any other licence.
Enoki Hospitality president Porus Arora said, “The reason people are opening cloud kitchens is because it requires a low budget and allows for a speedy set-up. Obtaining licences require a lot of money and the process is lengthy as well, thus, defeating the key differentiating factors of the segment.”
National Restaurant Association of India (NRAI) secretary general Prakul Kumar says that in the last few years, Maharashtra and Gujarat have amended their laws to exempt restaurants and eateries from obtaining and renewing police licences to start or run their units. “Why should we need a license from Delhi Police to sell a sandwich? If and when a law and order situation arises, the police would have the inherent power to intervene in any case.”
When it comes to training employees, the operators said that they tend to lose employees at a high rate to which the DDC said that they will assist in providing short-term courses to build a workforce in partnership with the Delhi Skill and Entrepreneurship University.