Food delivery service has become an integral part of our everyday lives. There are only a few people who have not used this service at least once. Among them Zomato is a name we are really familiar with.
Zomato was born as Foodiebay in 2008 and got renamed as Zomato in 2010. Since then they have been expanding their operations in India and internationally to countries such as UAE, Sri Lanka, Qatar, and UK to name a few.
In their ever expanding endeavours they introduced the concept of cloud kitchen under the name of Zomato Kitchen in 2017. Zomato Kitchen operates in all cities where they provide their food delivery services. Zomato is one of the biggest food delivery services in India.
How it works and the business models under Zomato Kitchen
Zomato Kitchen works in two business models
Kitchen Partner
In this model you are providing the infrastructure and essentially the kitchens for restaurants to operate. What you need is a commercial or rented space for the same.
Restaurant Partner
In this model a restaurant who wishes to acquire the service of a cloud kitchen will be allotted 300 sq. ft of space to operate their kitchen.
We are going to be talking more about being a Zomato Kitchen Partner.
Unique Selling Proposition
What makes Zomato an attractive franchise for a person to invest in is discussed below-
- It is an easy way to make money out of your unused property. If you have a space that’s unused, with an investment you can turn it into a kitchen space that rents out to restaurants for them to operate their cloud kitchen
- There is steady pay- out every month. You will be given a fee for making the space available.
- Zomato supports you with their operational know-how. It makes it easy for you to operate your business especially if you are a new entrepreneur.
- It is an entry into the food industry and you can also get knowledge of how the industry operates.
Benefits of owning a Zomato Kitchen
- A way to earn extra income – If you have property that’s lying unutilised then it’s a really good way to make money out of it. You are guaranteed a steady income every month just by providing the space.
- Zomato provides you with design and build assistance – They will provide you with the specifications of the property, the kind of equipment required and they will also assist you through the process. They will recommend their own contractors for building the space as per the requirement. This will ensure that the space confirms to the requirements.
- Zomato will assist with their operational know-how and platform support – Zomato will share their operational know-how and enable you to utilise their expertise thereby making it easy to manage your own business. You are better equipped to assess the risk and opportunities. There is greater control over the risks and better utilisation of the available opportunities.
- Zomato will bring in better brand collaborations – The space will be rented out to restaurants keeping in mind the demographic of the city you want to operate in and the demand felt in that particular area.
- They will also assist you with your other requirements that ensure a smooth functioning of the business.
Requirements of starting a Zomato Franchise
- Area- A commercial property of 2000 – 3000 square feet. It can also be a rented space.
- Location of the property – The ideal location is places that are off high streets, vacant properties and unoccupied malls.
- Other facilities that are required – parking space for up to 50 two wheelers.
- Infrastructure requirements – Power backup, drainage shaft, power extinguishing system, a commercial electric connection, water for consumption which can go up to 20,000 litres per day, provision for gas bank, RO plant.
- Provision for lease or sub lease to restaurants- The space is sub let or leased to restaurant partners therefore legal permission or provision allowing the same is required.
- All the legal compliances that allow you to operate a cloud kitchen have to be met.
- Region of operation – Zomato Kitchens operate in every city where Zomato delivery service is also available, so this makes it possible for anyone in any part of India to enter into a franchise.
- Requirements – The specifications of the space and the design will be made available by Zomato and the space has to meet the criteria they set. Moreover Zomato recommends engineers who can ensure that the construction is as per the specifications.
How much does it cost to start a Zomato Kitchen Franchise in India?
The initial investment in infrastructure can be anywhere between 35- 40 Lakhs. This is to make the space viable as per their requirements. Then Zomato charges a one time fee of Rs. 10,000 plus applicable taxes to assess whether the property is feasible. In addition to this you have to also place a security deposit of Rs. 5 Lakhs with Zomato.
Therefore the investment amount will be utilised for construction of commercial space with all the requirements as stated earlier.
Apart from this assuming that you might also have to meet operational expenses like water, electricity, fuel expenses for back up electricity, interest if a loan has been availed for the same, rent if the kitchen has been constructed on a rented property and other miscellaneous expenses that might be incurred for maintaining the space.
Profitability of operating a franchise
To assess whether operating a Zomato Kitchen is feasible we need to take a look at the profitability.
Now that we have looked at the initial investment which can be anywhere between 40-45 lakhs including the non refundable deposit with Zomato we need to understand how this turns into a steady pay out.
If you are in a tier –two city say Kochi, then the expected rent you receive in operating a Zomato Kitchen can be let’s say Rs. 2 Lakhs.
Now we need to consider what could be the expenses of providing the facility.
Water charge for 20,000 litres per day would amount to a charge of Rs. 20,000 per month
Electricity charges would also amount to approximately Rs.20,000 per month
Fuel charges or back up electricity charges might cost Rs.10,000
If a commercial loan has been availed then assuming that there the interest rate is 6.5% it will cost up to Rs, Rs. 22,000 per month. This is assuming that the space is yours and not rented.
Also we can assume miscellaneous expenses of up to Rs. 10,000 (this amount is variable and subject to change)
So assuming a rent you receive of Rs. 2,00,000 and
The expenses amounting to Rs. 82,000 (20,000+20,000+10,000+22,000+10,000)
Profit per month is = 2,00,000 – 82,000 = Rs. 1,18,000*
*The expenses may vary from city to city and the expenses such as water, electricity, interest, fuel and other miscellaneous expenses can vary every month too
Conclusion
Cloud Kitchen service is the new innovation in the food industry that is revolutionising the way the restaurants and the industry operates. In the current scenario and the industry as such is one where there is guaranteed growth in business, the franchise of Zomato is an attractive business opportunity. While accepting that there are positives we also need to look at the negatives.
The initial investment for construction and the non refundable deposit is quiet high. You should either have the capital that is required or be able to procure the capital needed for the initial investment. A portion of the rent that you receive from letting out the Kitchen will go towards payment as interest. If you are renting a space for construction of Kitchen then there is an additional rent that you need to pay from your monthly income.
The positive is that there is a guaranteed steady pay out. You are only providing the space and you need to look after the maintenance of it. Zomato looks after aspects such as bringing in restaurants that will avail the space. So even though the initial investment is quite high, it paves way for a guaranteed monthly income. Moreover there is relative ease in meeting the expectations and terms as the specifications and requirements of the space are laid out and all you need is to comply with them.
If you are a big time investor who can afford to lock in a capital of up to Rs. 45 Lakhs then Zomato Kitchen Franchise is an attractive franchise, but if you are a small time investor, I would say that this might not prove to be an attractive venture.