No one talks about this in the cloud kitchen space yet it is super scary because your business
can easily be taken away from you.
Today, we're going to be talking about the four shocking reasons of what you should look
out for when starting your cloud kitchen.
And I'm going to share with you a personal story that has happened to one of my subscribers,
so then that way you can avoid it at all cost.
So make sure you guys keep watching until the end.
Hello, friends, my name is Wilson, your friend and helping you build a thriving small business
and a profitable food business.
Are you starting a cloud kitchen business?
If you are, let me know in the comment section below.
Cloud kitchen has been all the rage.
In the recent years, we're talking about big companies jumping onto this trend like Applebee's,
Walmart, Starbucks, McDonald's, all these big brands are jumping on.
And I've talked about a ton about this business model.
We talked about the pros and cons, we talked about the different business models we talked
about, how do you set it up.
But all of this is not just all rainbows and sunshine, anything that has a low barrier
to enter with a lot less labor required and heavy in operations is actually very difficult
to get right and a lot of people fail.
But before I dive into the four shocking reasons of why cloud kitchen operations fail, and
this shocking, scary story that you must avoid, please go ahead and smash like button because
it's gonna help the YouTube algorithm to show it to more cloud kitchen operators so that
everyone can avoid the mistakes that my subscriber has made.
smashing the like button will really show this video to more people.
And as a way to Thank you Here is a picture of a kitten just to brighten up your day.
The first reason why cloud kitchens fail is because owners new time owners, they fail
to leverage the characteristics of a cloud kitchen, they only create one brand out of
the kitchen.
The beauty about cloud kitchen is that you're not bound to one concept because not like
a restaurant where you're creating the whole atmosphere environment just to serve one clientele
and one cuisine.
With a cloud kitchen concept.
You can actually operate and sell multiple different brands out of this one location.
So if you put all your eggs into one basket, and if it does not work, then chances are
you're most likely going to go out of business.
Rubble foods, one of the largest internet food restaurants out there, they actually
started as a kebab restaurant called Five zoos.
And now they're only one out of eight different restaurant concepts, a Chinese concept called
Mandarin oak, a pizza brand called oven story and a brand called barrows, which sells slow
cooked rice dishes.
So what do they do?
They use geographic data and software to analyze what is in high demand in different areas.
And then they create brands to actually launch the market.
They're selling what the market is demanding.
And that's the reason why they're super successful.
Now, if you do not have access to these software's, what can you do?
There's a simple way for you to hack the system, what do you do open up your third party delivery
app, look for the most highly reviewed restaurants and then look at their most popular item,
then you're going to find the most in demand products within that area.
And that is the item you should be looking for to create a new brand out of create this
item using a new brand with your own twists.
The second reason why a lot of first time cloud kitchen operators fail is that they
sign on a long lease.
Now typical restaurant leases we're talking about three to five years, and in Asia, where
competition is even more furious.
Those are one year leases.
But the beauty about cloud kitchen is that you can sign on small and short term leases
without much obligations.
Anything longer than six months, you run the risk of heading into sunk costs fallacy, which
means individual commit the sunk cost fallacy when they continue a behavior or an endeavor
as a result of previously invested resources such as time, money, and effort.
So what does this mean?
That means that you've already invested a ton of money into a 20,000 $30,000 into the
pot.
And now it is so hard for you to let this go of the sunk cost you already invested into
it.
You know what, let's do it for another two months.
Let's do it for another three months, another five, six months.
That's reason why a lot of people head into personal bankruptcy because they're stuck
in this sunk costs fallacy.
You should always revisit your business every three to six months to see whether your product
is in demand or not whether you need to pivot whether you need to call quits.
If you're doing well.
If your product is really, really in demand, then you can easily renew.
But if not, it is time to review to see if you should either pivot or just close up shop
completely, you do not want to fall into the fallacy of what my subscriber has followed
the scary story, which I'll share with you in just a second.
Not reason why I highly recommend you guys to look for cloud kitchens, an operation space,
that gives you the flexibility in the least terms.
The third reason why majority of the cloud kitchen operators out there fail is because
they're terrible with their numbers, you must understand your numbers, especially if you're
operating out of a cloud kitchen.
Because the 20 to 30% new commission fee from these third party delivery apps like Uber
Eats doordash, they can easily kill your business if you're not careful with your cost of goods
sold and your labor.
But what won't kill you is smashing the like button.
So then that way it helps with the YouTube algorithm.
So then that way, we can show it to more people to avoid this big pitfall.
Now, part of understanding your costs does take some trial and error, knowing your cost
of goods sold, which includes your packaging, which includes all your cost of goods sold,
and your production and prep time would allow you so to set the right margins, and to set
the right prices.
So then that way you can have enough buffer in order for you to account for the 20 30%
Commission, knowing how much your labor cost is.
So then that way you can account for the output that they create.
So then that way you can account for how many people you need during rush hours.
And how many people you need for your prep times allows you to stagger shift.
So then that way, you're not going to have this influx of labor cost that is hanging
over your head.
And at the same time, knowing how to cross train your staff and your labor.
So then that way, they can help you out with either finance, Operation marketing, to really
grow your business and to minimize your cost.
The lack of clarity in your numbers is like you driving in the dark at night, you're bound
to head into trouble.
So make sure you guys know your numbers.
The fourth reason why cloud kitchen operators fail is because they rely too heavily on third
party apps like Uber Eats doordash, grubhub and the likes.
If and when these apps decide to pay you a little bit later or a few months later, you
might easily go out of business because of the lack of cash flow.
And at the same time, you have no customer information and data that you can actually
serve to later on or you can bring it to another platform, you have none of those, you are
at the mercy of the third party apps.
Imagine for a second guys, imagine these third party apps a few years down the road, they
create the same exact same brand, offering the exact same food that you're doing.
Now, when people search for Bob's pizza, you're nowhere to be found.
Because now they have Ubers pizza right on top of yours.
That's a very scary scenario.
Case in point, guys, look at Amazon, Amazon created Amazon basics, because they saw how
popular some of the different brands are selling on their platform.
They were seeing their sales analytics, they were seeing everything that is happening.
And as a result, they realize that hey, you know what, I can sell the same thing.
Now I can push you down.
So when people are searching for supplements, when people are searching for iPhone cables,
I can push them down, and I can have my own brand above theirs.
And that's reason why they have pushed a lot of people out of business, the businesses
that were not careful the people that did not have the insight that these big giants
could easily pull the rug from out under them.
This is exactly what could happen to you, my friends, if you're making some amazing
wings, Wilson's wings, and all of a sudden Uber Eats, they can create Ubers wings and
push me onto the very bottom.
And now my restaurant, I don't have any anymore, I would not be selling any wings because I'm
relying on these third party apps to sell my wings purely.
For me to combat this, I need to be able to create my brand.
Outside of these cloud kitchens, I need to own my customers, I need to have my customers
on Instagram, on my email list them knowing my brand for what it is and having the ability
to order directly from me from Wilson's wings.
And this is exactly what has happened to one of my subscribers called delusion.
He actually reached out to me to tell me to share this story.
So then that way other people can see this, learn from it and to avoid from it at all
costs.
He was running a really busy concept and all of a sudden, the third party app, they decided
to stop his business to stop everything he was doing because well, they didn't have enough
drivers.
And he was losing 1000s of dollars.
People were not able to order from him all because of the difficulties that the third
party apps were having.
As a result of that he was losing a ton of money through his business.
And at the same time, another big big flaw is that whenever customers cancel, or the
delivery driver cancels, no one else eats the cost except for the brand owner.
Because third party apps, they don't care, customers, they don't care, drivers don't
care, they put all the costs back on to the cloud kitchen operators.
Just imagine for a second guys that you have not figured out your numbers, you have not
have enough margins baked into the price that you're selling.
To account for these cancellations to account for these crazy happenings that are caused
by either customers or to third party apps, you can easily be losing money every month
that you're selling.
And that's the reason why I highly recommend you guys to take back control and not rely
on strictly these third party apps, I would recommend you guys to set up your own delivery
systems to set up your own website.
So then that way you can take orders from other areas of your business, use square online,
because they allow you to set your own pricing on delivery, they allow you to take orders
online, all of this for free.
Now, as a disclaimer, they're not the sponsor of this video, I'm just recommending them
because they're that great.
If you guys want to check it out, definitely check it out in the link below.
Square online is a platform that I personally use.
And this is something that I'm recommending it to you, they do not have monthly fees.
And that's reason why they are so great.
Truth is friends from all the talks that I have with restaurant owners and cloud kitchen
operators.
We all feel that these third party apps, they don't care about you at all.
And I care about you, which is the reason why I created this video to share with you
the pitfalls that you should avoid ways to maneuver around them ways so then that way
other people that are aspiring to create their own concept, they can create something successful.
And if you care about me as well as much as I care about you, can you please make sure
you smash the like button so then that way helps with the YouTube algorithm to show it
to even more people.
I really hope that you guys enjoyed this video.
If you guys do make sure you guys smash the like button.
Otherwise, I'll see you guys in the next video.