Zomato bets big on cloud kitchens, to invest Rs 100 cr in Loyal Hospitality

The first tranche of about $5 million has already been invested in the Bengaluru-based firm.
Zomato bets big on cloud kitchens, to invest Rs 100 cr in Loyal Hospitality
Zomato bets big on cloud kitchens, to invest Rs 100 cr in Loyal Hospitality
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Food delivery startups such as Zomato and Swiggy are setting up cloud kitchens that can augment the sourcing of food for deliveries in all parts of expanding metropolitan cities. While all of them are keen to get into the cloud kitchen setting up race, Zomato appears to have just pulled ahead as it is set to invest Rs 100 crore in tranches in Bengaluru-based Loyal Hospitality exclusively for the cloud kitchen project and a third of this amount, around Rs 30 crore has already been invested.

Loyal Hospitality has plans of setting up around 10,000 kitchens across the country. This decision of Zomato to make an investment in the operations of a third party also means its in-house project Zomato Infrastructure Services, floated to set up kitchens is being given a burial. The only kitchen setup in Dwarka, a Delhi suburb is being closed down. The progress in the setting up of cloud kitchens is not, however, to the satisfaction of the company; its rather slow.

As per the agreement, the kitchens dedicated within this agreement will serve only Zomato’s orders exclusively. To start with, there will be around 200 kitchens spread across Bengaluru and over time other cities could be opened in stages. Restaurants that Zomato has tied up for this phase in Bengaluru, include Empire Restaurants, Adigas, Hyderabadi Biryani House and Al Bake and so on.

The cloud kitchen model is expected to result in the expansion of their overall customer base and the food delivery companies are offering incentives to make exclusive tie-ups with the restaurants.

Market sources have indicated that the other players in the same business, Swiggy and Uber Eats were also eyeing a tie-up with Loyal Hospitality, but Zomato appears to have pipped them to it.

Swiggy has issued a denial that it was involved in any kind of talks of this nature. There are many other contenders to the cloud kitchen cake with players like Faasos, Freshmenu, Holachef and Box8. It is understood that almost all of them are being wooed by the online food order and delivery companies, whether it is Swiggy, Uber Eats or Ola’s Foodpanda.

Swiggy’s project for setting up cloud kitchens is called Access and it may start with the Northern part of the country before moving out to the other zones. The numbers so far indicate Swiggy and Zomato are the major rivals in the space with 10 million and 7 million orders being processed and delivered on a monthly basis respectively. The other two companies also in the fray are Foodpanda and Uber Eats, with figures of 40,000 and 25,000 monthly orders.

From the restaurants’ view point also, they are seeing a rapid increase in the proportion of orders being received through the online route as compared to the dine-ins and takeaway from their facilities.

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