Cloud kitchen and virtual brands operator kaykroo has launched today with 15 locations in the UAE following a $4 million pre-Series A funding round.
Spearheaded by Jihad El-Eit, kaykroo is an evolution of El-Eit’s Man’oushe Street chain of restaurants, which have all been converted to delivery-only kitchens, housing several virtual restaurant brands including Bak Bak Chicken, Wrapped and Hummus Brothers. The funding round was led primarily by family offices in the region and will be used to fuel kaykroo’s expansion into Saudi Arabia.
The restaurant and hospitality sector has suffered dramatically over the past few months, initially with lockdown, now with the slowdown in tourism. Empty tables are a common sight and data from Eat App suggests that dine-in numbers are 55 per cent below pre-Covid levels in the UAE.
Delivery became a lifeline for restaurants during lockdown, spurring a growth in delivery apps and cloud kitchens, which offered restaurants the ability to expand their delivery reach and provided a cheaper alternative to hefty brick and mortar rent. The region’s appetite for food delivery remains unsatiated, with the sector set to be worth $4 billion by the end of this year according to Statista. kaykroo alone has fulfilled one million orders since the start of 2020 and the company is not alone in its transition to the virtual brand space.
Dubai-based Food to Go, which initially launched as a cloud kitchen has moved into developing its own virtual restaurants, while Sweetheart Kitchen, which recently announced a $17.7 million Series C funding round has been aggressive in its expansion plans. Even Majid Al Futtaim, developer of the Mall of Emirates is looking into establishing its own cloud kitchens.
El-Eit’s foray into the food sector began with Man’oushe Street, a brick and mortar restaurant launched in 2010 that grew to 30 locations at its height and expanded to Saudi Arabia, Bahrain, Oman and Jordan. As online food delivery began to take off in the Middle East, Man’oushe Street’s focus also began to shift to delivery which grew to account for 80 per cent of its business. Even before the pandemic, El-Eit was moving towards the delivery only model.
“I started seeing the direction globally going to cloud kitchens and last year I decided to really master the delivery operation,” he says.
And so El-Eit decided to maximise the output of Man’oushe Street’s kitchens and use them to cook foods for virtual restaurant brands that he created. The same chef could produce items from several menus, in the same location, all sold on food ordering platforms like Deliveroo and Talabat. He launched several brands, experimenting with menus that specialise in a single cuisine and analysed customer feedback to determine their preferences. Today, the company has 10 virtual brands and a workforce of 400, including 100 delivery drivers.
On average, it takes just one month from idea to launch for a virtual restaurant, whereas a brick and mortar restaurant can take at least four to five months to open.
“The requirement is to build a brand that builds appetite. You don’t want to create a master brand and then create sub brands and compromise on quality. Our essence is quality, value proposition and level of service. We always make sure when we talk about the brand, we talk about the full experience,” he says.
So much of this brand building for virtual restaurants happens online, particularly on social media and they require vast marketing budgets to gain visibility on the food ordering platforms. As such, they behave more like data-driven e-commerce companies than restaurants and cloud kitchens today all highlight the importance of technology in their operations. Many of them use technology for quality control and monitoring supplies, but mostly it is in data collation and analysis where it plays the biggest role.
“You’re seeing a lot of people coming to the delivery cloud kitchen space, but our model is different. We have our own tech which helps us be ahead of the game. Algorithms gives us a head’s up in terms of customer preference and community preference. We track the behaviour of the consumer and the market trends and customise trends to adjust to the consumer’s needs. This is the beauty of virtual brands, we understand the market is changing and we can adapt, technology helps you to accelerate the process.”
In fact, data is so crucial to the virtual brands, that “without it, you would become blind”, says El-Eit.
“With AI and machine learning, it allows us to really understand every single step of the process from the pre-ordering to the ordering. Knowing what you want, at what time, understanding your moods, behaviour, your order history, we can predict what you want, your diet. It gives us visibility,” says El-Eit. “Every single tech between your hands today is all about psychology and understanding your behaviour whether it is Instagram or Facebook, but as much as we are a tech company, we are a food company and we want to make sure we are marrying these two.”
But kaykroo is not giving up on the brick and mortar presence entirely. The company is looking to launch a “digital food hall”, a physical location where customers can dine in and order any dish from their roster of virtual brands, something it defines as a brick and click model.
“It is part of our strategy of building experiences. It helps to create awareness and is a bridge between the consumer and brand for longevity. The offline element is very important, look at all the trends happening worldwide with the big tech companies like Amazon, Apple, Microsoft, they’re building a very big portfolio of brands and to make sure you get the experience, they’re creating a physical location for you to get closer to the product and brand,” says El-Eit.
The digital food hall, the first of which will be launched in Dubai Silicon Oasis in December this year, will have minimum staff and instead customers will be able to order using a digital interface.
“You can survive and interact with a brand virtually, but it is important to give life in front of you in an economic way,” he says. “Dine in customers spend more, but the delivery customer is more valuable if you succeed in retaining them, you will make more money in the long term.”