Delivering the Virtual Restaurant of Tomorrow

No waiters, no diners: the food delivery boom is opening new doors for restaurants.

When the clock strikes noon and stomachs are rumbling, many office workers in Hong Kong start discussing where to go for lunch – but today, many more are choosing to order their meal online. The food delivery industry is now worth US$53b in Asia, representing more than 50% of global demand . Here in Hong Kong, where consumers are renowned for demanding speed and convenience in everything from shopping to entertainment to dining, it’s no surprise that the online food delivery segment is on its way to reaching US$615m for 2019, up 9.9% from last year .

The boom in food delivery has led to exciting new opportunities for restaurants, including the rise of low-cost virtual restaurants, known as ‘super kitchens’. These delivery-only establishments don’t have the traditional restaurant premises. Diners can’t walk in and sit at a table to enjoy their meal; instead, they order the super kitchen’s menu online or through an app on their phone and enjoy a fresh meal delivered straight to their door.

Hong Kong’s food and beverage sector is notoriously cutthroat, so it’s no surprise that restaurateurs and entrepreneur chefs are looking to super kitchens to generate their next wave of growth.

The Cost of Doing Business of Running a restaurant
The process of opening a restaurant is time-consuming and costly; and once it’s up and running, there’s no guarantee of success. In fact, the majority of restaurants close in their first year of operations, according to Perry Group International. What’s more, around 70% of restaurants which do make it through their first year are forced to close in the next three-to-five years . It’s similar in Hong Kong, where a fiercely competitive F&B industry continues to face a number of challenges. In August 2019 the Eating Establishment Employees General Union of Hong Kong surveyed 500 restaurant employees and found that 47% saw falling revenue over the past two months with 51% planning to downsize.

What’s making restaurant owners lose sleep at night? Key factors include rising labour costs, a manpower crunch, skyrocketing rents and increased cost of food. On top of this, the competition just keeps growing. In the past four years, restaurant numbers have grown by 10%, making the prospect of setting up a new restaurant daunting.

A New Opportunity: Super Kitchens to the Rescue
Super kitchens are an exciting new opportunity for restaurants. The concept lowers overheads, reduces the need for manpower and increases output. How? Through a combination of advanced food preparation, underused real estate and algorithm-driven optimisation.
Our Editions is one example of a super kitchen where different restaurant brands come together at the same site, which is specially designed for chefs to prepare certain cuisines for delivery. The super kitchen model helps avoid the incredible expense and risk of opening a new restaurant. The Editions space comes fully equipped so that restaurants can move in quickly and get to work serving customers, without the high investment of a brick-and-mortar establishment.

Many restaurants are also looking to super kitchens to supply local knowledge and data about unfamiliar areas and potentially unforeseen gaps in the market. Restaurants can leverage millions of data points from food delivery platform to determine where any given cuisine or time-specific offerings will have the best chance of success. And because the super kitchen model is tailored to offer its full support on taking orders and delivery, restaurant brands are freed up to devote their focus on food preparation.

Delivered a Food Delivery Revolution
It’s now impossible to imagine the world of restaurants without food delivery, as consumer demand for meals on-demand has skyrocketed in the past few years. A 2017 Euromonitor report predicts that Hong Kong’s food delivery services market will expand by 43% by 2021, and local operators report consistent growth including double-digit percentage rises in orders month-on-month.

Delivery also has much to offer to people in Hong Kong who work long hours - some of the longest in the world, in fact - and are increasingly seeking more options to dodge the restaurant queue and enjoy a tasty, relaxing meal at home.

Consumers want food delivery, but with fierce competition and costs, restaurants are understandably cautious about making any new investments. At the same time, adding delivery capabilities can have a major impact on restaurants’ bottom line. We estimate that delivery can generate up to 30% of a restaurant’s revenue.

Virtual Restaurants Brands
Without a traditional storefront, restaurants operating via super kitchens can roll out new menus quickly and experiment with innovative offerings, lending their business more versatility. A restaurant operating from a super kitchen might introduce a new menu item for delivery consumers, at a fraction of what it would cost to do this in a traditional restaurant – and if the concept works well, they might bring it to in-restaurant diners as well.

In Hong Kong for example, PizzaExpress recently launched The Pasta Project – a new virtual brand focused on pasta and salad. Responding to a gap in the market for lunchtime options in certain neighbourhoods, The Pasta Project has already supported PizzaExpress to triple its lunch turnover without having to invest in additional staffing, overhead cost and kitchen space.
Super kitchens mean more cost-effective innovation for restaurants, and more exciting and delicious options for eaters. Whilst the sector for super kitchens is still in its infancy, the future looks bright, as the next phase of food delivery continues to change how people eat in Hong Kong.