Why Restaurants Are Trading Brick & Mortar for The Cloud

With all the rising and falling trends, it’s become quite clear that most people prefer to order in and eat in the comfort of their own homes. Which is leading to restaurants shutting down because the footfall on a daily basis isn’t worth it. Setting up a restaurant is now becoming more about giving the food lovers a reason to come to the restaurant as opposed to being a restaurant or eatery that provides the same kind of food as everyone else and can be found via a home delivery service.

The concept of “brick & mortar” is being traded in for “cloud restaurants”. In a recent article in the Economic Times, Riyaaz Amlani, president of the National Restaurant Association of India (NRAI), said, “According to my estimates, about 50% of the restaurants that have opened in recent years have closed down. In Mumbai alone, seven of the top ten restaurants that opened since 2012 have shut, because they were no longer profitable.”

Food delivery services popping up everywhere might have a lot to do with this sudden surge in cloud restaurants. Recently, it was reported that restaurants were pulling out of partnerships with delivery services like Swiggy and Runnr because of various reasons, one of them being the commission that they were charging. But another reason was the fact that due to restaurants signing up with these services, the number of people coming to the restaurant was much less.

What do we mean by “brick & mortar”?

Setting up a restaurant meant renting or buying property, setting up a restaurant filled with furniture, light fittings and quirky art to appeal to people. You use brick and mortar to build something and that’s where the term comes from. For years, opening a restaurant was a process because you not only needed to find the space to setup, it was about finding the right kitchen elements, the staff, and everyone that is part of the brand. Brick and mortar has also come to mean so much more than the infrastructure of the brand, but also means the people that are part of building the brand itself.

What is a “cloud restaurant”?

The restaurant runs out of a smaller space where they have a kitchen and staff to cook and pack the food. Think of it as a restaurant that only has take away or delivery, but no place to sit. This is obviously an easier method to follow because at the end of the day people want to eat your food and so often they don’t want to leave their homes. But they can still get the great food and they can still enjoy the delicious flavours while still hot. The restaurant will function primarily through their website and they will have a menu online, that might or might not change daily/weekly. Customers can order the food right through the website or mobile app and the food will be delivered to your home. It’s an easier method, but it’s also taking away from the great idea of ‘going out to eat’.

In the same article in the Economic Times, Amlani said, “Margins are becoming thinner as rentals have shot up, costs of labour and produce have increased and propensity to spend is coming down. Overall, the food service industry has grown at a rate of 7.7% in the past three years while we had expected at least 10% growth.” Which doesn’t sound promising for restaurnnteers around the country. Hotels are doing just fine because they don’t fall into the same bracket. Even with their restaurants being part of the larger scale, it’s not an issue they’re going to face because they target a much higher group of people. The very same people who would make the effort to go out to a restaurant and eat some good food as opposed to those who would prefer to sit at home and spend less money.

How much longer do you think it will take before the restaurant industry crumbles completely? Because the way things are going, it doesn’t look promising for anybody.