Having a successful business in the F&B industry is notoriously difficult. Before the pandemic, half of the restaurants closed within the first year and 80 per cent within five years.
The COVID-19 pandemic made the food and beverage industry even more competitive, forcing consumers and restaurateurs to adopt online food delivery services as the norm. During and after the pandemic, restaurants that digitised rapidly thrived, whereas many that did not were unable to do so.
With online food delivery reaching 50 per cent of restaurant orders at the peak of the pandemic and stabilising at 25-30 per cent post-pandemic, consumer behaviour has shifted permanently driven by the convenience and choice that online food delivery offers.
Two new F&B business models are expected to reach US$1 trillion by 2030, according to a Euromonitor report, as a result of this shift in consumer behaviour: food delivery, cloud kitchens and virtual restaurants.
Cloud kitchens vs virtual restaurants
Cloud kitchens are delivery-only kitchens that can operate multiple restaurant brands from a single location. They can operate their own proprietary brands or licence third-party brands from companies like TiffinLabs.
The cloud kitchen business model aims to disrupt the traditional retail real estate industry, similar to WeWork disrupting commercial real estate, by offering F&B entrepreneurs an option to expand with lower cost and easily accessible kitchens.
Virtual restaurants are very different. These restaurant brands exist primarily online and are ordered through channels such as GrabFood, Foodpanda and Deliveroo.
Multiple virtual restaurant brands can be operated by a single kitchen (both cloud kitchens and traditional brick-and-mortar restaurants can operate virtual restaurant brands) as the menus are designed to be easy to cook and compatible with existing equipment available in the majority of restaurants.
This enables traditional brick-and-mortar restaurants to diversify their digital revenue streams from their own physical brand to two-five additional virtual brands online.
For example, one of our kitchen partners, an Indian restaurant in Singapore, operates three TiffinLabs virtual brands online to reach more customers: Phat Fingers Korean Fried Chicken, Southern Soul Nashville Fried Chicken, and Pasta Table Italian Pasta.
How does virtual restaurant brand licensing work?
The set-up for virtual restaurant brands is truly plug and play to existing restaurant operations. It is fast, low cost and low effort. When our kitchen partners sign up with us, they can start generating sales in just two weeks.
Our team assists them in training and ordering inventory. Orders are generated by our digital sales and marketing initiatives to amplify brand presence with zero effort by the restaurants.
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Restaurants can typically expect their total revenue to increase by 30-50 per cent through a three-four times delivery revenue uplift from TiffinLabs virtual restaurant brands within four-eight weeks.
Tribeca, one of our traditional brick-and-mortar restaurant partners, which started operations two months before the pandemic, was able to generate enough profits from our virtual restaurant brands to cover their fixed labour and rental costs despite no dine-in revenues.
Role of virtual restaurant brands in the Southeast Asia F&B ecosystem
With one out of four dollars spent for food service in Southeast Asia coming from off-premise online food delivery, we believe that virtual restaurant brands will play a critical role in the diversity and sustainability of the F&B industry.
While traditional brick-and-mortar restaurants take time to grow their customer base, they can rapidly tap into proven virtual restaurant brands from companies like TiffinLabs to generate a steady income and profit stream.
We envision a future where every brick-and-mortar restaurant incorporates multiple proven virtual restaurant brands into its operations as part of its omnichannel strategy to capture online delivery consumers seeking convenience and choice in their catchment area.
On another part of the ecosystem, we are working closely with food ingredient companies like Barilla, Nestle, Unilever and TiNDLE to bring to restaurants and consumers food innovations that are tastier, healthier and more sustainable.
For example, we are working with Nestle, Unliever and TiNDLE to bring to market new plant-based meat alternatives and working with Barilla to create a delivery-focused pasta experience.
With the evolution of the F&B ecosystem, we see TiffinLabs playing a role in bridging the needs of restaurants, consumers and food ingredient companies via its virtual restaurant brands. As we scale in Singapore, Malaysia and Thailand, we aim to drive the digitisation of the F&B industry across the markets.
In these three countries alone, there are over two million restaurants operating with only 10-15 per cent of these establishments serving online food delivery compared to a 30 per cent share of F&B spend driven through online food delivery.
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