The way we order food has been disrupted and it is doubtful we will ever go back to way things were. However, it hasn’t been smooth sailing with issues arising from increasing fees, price hikes and a general lack of infrastructure to support a rapid move online for restaurants.
This is where the gap in the industry is most noticeable, but there are solutions. One of them is the virtual or ghost kitchen concept, where users would rent a kitchen space alongside several others in a strategically placed commercial kitchen. This allows you to scale up production without the costs associated with opening a restaurant or kiosk.
In Malaysia, the food delivery business is bustling with local and international player jostling for position. This has created a lot of opportunity for cloud kitchens to step in and provide the much-needed solution for businesses. One recent entry is KitchenConnect, a startup that provides an integrated tech-based Kitchen-as-a-Service (KaaS) model where F&B entrepreneurs and commercial brands are able to streamline their business processes from handling of production to delivery to data tracking and analysis.
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Some of their customers include Pasta Ohsem, Purple Monkey, Fowlboys, LiHO Tea and Sugar Bun to name a few. They have over 110 kitchens and are currently in 4 strategic locations. To find out how they plan to grow their business, we spoke to Arin Aghazarian, General Manager of KitchenConnect in Malaysia.
How has utilisation grown around the first three outlets since you started in Malaysia?
We opened our first facility in Malaysia at the end of 2020 in Plaza Mont Kiara and it has been at ~90% since the beginning. In Q2 2022, we added over 100 new kitchens in Malaysia in three different locations: Damansara Jaya, Bangsar and Ampang. We are seeing strong momentum in all locations with over 70% of kitchens reserved already.
Why Malaysia? What was the reason for entering and scaling up in this market?
We have been eyeing Malaysia for a while now, with the rise of the gig economy since 2019 and tech companies such as GoGet, LalaMove and Grab entering the marketplace. Not to mention, food delivery apps such as GrabFood and Foodpanda.
During the pandemic, we saw a demand in food delivery, resulting in the launch of AirAsiaFood and ShopeeFood, so we decided to take that opportunity to open our first branch in Mont Kiara.
We saw a huge increase in delivery volumes during COVID. What we were expecting to happen in delivery volumes in 2025 was accelerated and brought forward from 2020. We saw every single person download and use delivery apps out of necessity but that necessity created a habit and got people used to the convenience.
Given that Malaysia is a melting pot of food and culture with a population of approximately 33.8mil across West and East Malaysia, we are definitely keen on scaling across the market, starting with expansion in Klang Valley for 2022 and looking at Penang and Johor for early 2023.
What factors do you consider before entering a new market or even local territory?
Our motto is “We Serve Those Who Serve Others” so for us, the two most important factors are: 1) is there a demand for this product and 2) can we make a difference in the F&B/ delivery industry.
To answer those questions, it’s important to look at the overall delivery and F&B industry and understand the landscape, i.e. are there developed delivery platforms, is delivery demand big and growing and understand the real estate side of the F&B industry, i.e what options do restaurants and entrepreneurs have to open locations, what does CAPEX look like for them, would they benefit from a product like this.
With lockdowns gone, how do you see the growth of food delivery and by extension the cloud kitchen industry?
When restrictions were eased, we observed some people “revenge dine-out” as a trend and we did see a slight drop in volumes but now that norm is back, people are returning to their newly established habits – mainly ordering in – instead of worrying about buying groceries, preparing a meal and cleaning up after themselves.
With that, given virtual kitchens serve the delivery market and Malaysians keenness on convenience, we feel that Malaysia is the right market to be in at this point of time.
However, all of KitchenConnect’s outlets also have a small dine-in component as well to give consumers the option to enjoy their meals on the premises as well.
What’s next for KitchenConnect?
We are looking at more locations for 2 more outlets in Subang Jaya and Cheras for further expansion in Klang Valley. As for 2023, we are exploring expansion throughout Malaysia in Johor and Penang.