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The rise of cloud kitchens in the UAE

Kitchen AI Technology
Currently, cloud kitchens are a booming trend in the UAE. What real estate opportunity does this present for the retail market?

Online food delivery company Deliveroo recently launched its third cloud kitchen in Dubai, the Deliveroo Editions hub. Located on Hessa Street, the property is one of Deliveroo’s largest cloud kitchens in the world, the company said.

The kitchen will undertake menu preparations for over a dozen restaurants on Deliveroo’s platform, catering to customers in Al Quoz, Arabian Ranches, Al Barsha South, Jumeirah Village Circle, Studio City, Sports City, IMPZ, Motor City, and Madinat Jumeirah.

“Editions kitchens have proven to be a great way to help our restaurant partners expand without the up-front investment,” Anis Harb, general manager for the Middle East at Deliveroo, said about the launch.

Cloud kitchens are a rising trend in the global F&B market, with the pandemic upending traditional business models in this industry, while online order volumes continue to grow (Deliveroo saw orders grow by 114% globally in Q1 2020).

HOW DO CLOUD KITCHENS OPERATE?

Cloud kitchens operate across three broad models in the UAE. These are virtual restaurants, which are online-only B2C or B2B restaurants selling via third party delivery apps, kitchen-as-a-service operators, offering cloud kitchen space to food brands, and full stack F&B service providers, who undertake everything from order to delivery.

The industry is gaining popularity as a real estate investment play, since much of the operational success in this space depends on rents, cost of delivery, and accessibility of delivery routes.

THE UAE OPPORTUNITY 

A report by POSist and Dubai Restaurants Group found that 75% of UAE-based restaurant operators expect to see revenues reach pre-Covid levels. Meanwhile, 70% confirmed that they were looking to set up cloud kitchens or delivery-only brands, while a third expected over 60% of their revenue to come from food delivery this year. 

Investments in this space could help F&B outlets increase unit growth, making up for lost revenues while preparing for pandemic-related uncertainties, the report said.

The UAE has over 400 cloud kitchens, mostly based out of Dubai. Seeing the opportunity in this space, several restaurant operators have repurposed existing facilities into cloud kitchens, or have switched to third-party cloud kitchen operators.

At the same time however, the boom in cloud kitchens in the UAE is pointing towards a risk of overcrowding. The sector can eventually expect to see some consolidation in the future, along with a few closures.

 

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