1. Startups

The Reason Behind DishServe Pivot of Cloud Kitchen Business

Operates five healthy food brands that are sold through a network of cloud kitchens spread across 10 cities in Indonesia

Business model changes (pivots) is the most logical step for startups who want to be sustainable when they fail to maximize their monetization. In fact, it would be a good step if it was carried out by an early-stage startup, because in the end it could benefit all parties. DishServe is one of them that was recently announced pivot-officially to the public.

Now DishServe focuses on providing operational automation solutions for restaurants, cafes and kitchens specifically for delivery services (delivery only). Since its establishment in December 2020, this startup helps F&B businessmen of the MSME scale to develop by leveraging the network cloud kitchen who come from home.

In a joint interview DailySocial.id, DishServe Co-founder & CEO Rishabh Singhi said that there were three findings found in the field and encouraged the company to explore new strategic approaches, namely:

  • Small margins as profits are absorbed by food delivery applications;
  • Small-scale culinary businesses do not have the capacity to scale up products (R&D) because of minimal resources;
  • Inconsistent in maintaining the quality of food due to the manual cooking process, as a result, they are often at a loss when receiving large orders.

Singhi emphasized that the three reasons above are the strongest reasons for pivot, not from the core of the business cloud kitchen That itself is considered not to make a profit. According to him, business implementation is basically not affected by cultural or other differences whether it is implemented in Indonesia or not.

“We don't see any decline in orders within DishServe [another reason behind pivot]. In fact, looking from the perspective of an F&B businessman, they can't scale up because of production limits, not having products that consumers like, and too many middleman, "He explained.

DishServe CEO & Co-Founder Rishabh Singhi / DishServe

This new business transformation first occurred in July 2022, then was completed three months later, to be precise, September 2022. With the new business model, the company structure is now much lighter. The path to profitability becomes much faster, instead of chasing the break-even point anymore. This printed profit can later be used by the company to be turned back for expansion needs, so that it is less dependent on external funding from investors.

The company targets to make a profit in the third quarter of 2023. This target is much faster if you completely rely on the old business model, which is predicted to occur only in 2026, aka it will take six years since DishServe was founded.

“So our first plan is to make a profit, so that we don't depend on external funding to maintain our business. However we will opportunistically look at fundraising depending on the market situation and future expansion plans.”

The company last announced funding obtained from pre-series A in November 2021. Some of the investors involved include Genting Group, Insignia Venture Partners, Stonewater Ventures, Ratio Ventures, Rutland Ventures, 300x Ventures, MyAsiaVC, and several angel investors.

New business model

Now DishServe is developing a series of innovations to help kitchen partners optimize sales by providing a one-stop solution. Starting from:

  • High-quality F&B brands, training, operational systems/SOPs, equipment and support for kitchen partners;
  • Integrated application that provides kitchen partners access to manage menus, prices, promotions, inventory, customer support and integration of all food delivery applications;
  • Comprehensive payment solutions, including QR code-based dine-in solutions that enhance customer experience, point of sale (POS), and automated financial reconciliation systems and facilitate reconciliation from multiple channels.

The target users are also broad, not limited to home culinary businesses, but also businesses on a higher scale. Not to mention businesses that already have a shop presence offline is also not immune from being targeted, so DishServe is not completely dependent on the food delivery business alone.

To serve segments delivery only, the company has built a series of F&B brands focused on producing high-quality food with increased access, affordable prices and great taste. The DishServe brand is claimed to be able to increase consumer reach with a mass manufacturing scheme in centralized kitchens (central kitchen), thus reducing production costs while maintaining consistent quality.

Central Kitchen DishServe / DishServe

The entire food process is made and packaged in DishServe's centralized kitchen located in Gambir, Central Jakarta. Then distributed to more than 200 networks cloud kitchen Those who joined were spread across 10 cities, such as Jakarta, Surabaya, Semarang, Yogyakarta and Medan. The average radius of these kitchen partners is around 2 km from consumer residences.

The DishServe brand is all about healthy food. The names are KitFit, LIT, Uncle Tam, Bing Bing, and Chickass. This last brand in particular will be officially released to the public in the near future. KitFit is the first brand the company has released and claims to be its biggest revenue contributor so far.

Singhi explained that the reason his party was interested in entering a healthy menu was because it was still difficult for people to access healthy food at affordable prices. Moreover, the number of players is not large.

Therefore, efforts are needed to democratize healthy food that is easy to find at affordable prices, just like the current situation where it is very easy to find fast food. Because, consuming healthy food must be done regularly, not just occasionally when visiting the mall, but wherever consumers are.

According to FAO data, the average Indonesian consumes 122 grams of vegetables and 92 grams of fruit every day. This consumption level is lower than the recommended daily intake level, namely 300-400 grams of vegetables and 100-150 grams of fruit.

"From our perspective, we want to solve the problem above by creating a healthy food menu that is delicious, affordable, and easily accessible from their home. Think of us as McD [McDonald's], it tastes like McD, and it's as easy to find as McD.”

The company will also add one healthy brand which is being prepared for this year. Later, DishServe will operate six brands that consumers are ready to choose from.

One of the menus at KitFit / DishServe

Food delivery industry

According to him, the potential for the kitchen business delivery only very large with more than 300.000 SME cafes and restaurants in Indonesia. Internal data shows DishServe kitchen partners are able to generate additional revenue of $2 thousand per month. The company plans to add 4 thousand kitchen partner networks by 2026 to reach annual revenue of $100 million.

Even though the delivery industry is haunted by a slowing trend due to activities outside the home which have returned to high levels after the pandemic, this shows a decline in cases. As explained by Momentum Works, the food delivery industry in Southeast Asia (by GMV) is growing single digits by 5% (year-on-year) or reach $16,3 billion in 2022.

In the previous two years, this industry recorded growth double digits, respectively 11,9% (2020) and 15,5% (2021). The factor is none other than restrictions on activities outside the home which encourage people to order food from home.

“Food delivery growth normalized to pre-pandemic levels after two years of significant growth. Post-covid reopening (return of eating out, reduced subsidies for delivery costs), and continued market rationalization, resulted in low growth,” the report said.

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Apart from that, the culinary business basically requires a physical presence so that it is more easily recognized by the public. This hypothesis underlies a number of startup players cloud kitchen Those who were originally online are now entering this segment, especially if they want to enter second and third tier cities where people are still loved by the culture of hanging out while having culinary delights. Some who have implemented it are Hangry and DailyBox. Many of them have even launched various food brands in their kitchens.

Regarding this condition, Singhi said, "As mentioned, we help all types of kitchens, such as cafe restaurants and kitchens delivery only. About 10% of our kitchen partners are cafe businesses. Our focus is to help all types of kitchens.”

One of the most significant advantages of cloud kitchen multi-branding allows a company to offer several different cuisines from the same place. Because there aren't any front-of-house altogether, multi-brand cloud kitchens have evolved to cater to different customer tastes, each functioning under separate brands.

For example, one company cloud kitchen can operate three brands, each specializing in Indian, Italian and Chinese cuisine, from one unit. But to customers, it appears to be an independent brand with independent operations serving different cuisines. Since it is a delivery-only format, the low start-up and marketing costs are often cited as the biggest game changers.

With minimum barriers to entry and low capital costs,cloud kitchen multi-brand more profitable when compared to traditional restaurants or even independent cloud kitchens. Cloudkitchen multi-brands cater to a wider customer base and have the capacity to increase the growth rate of a single kitchen unit. Efficient resource utilization, adequate inventory levels and controlled food costs provide better predictability in business.

This DishServe concept is more or less similar and has also been implemented by Wahyoo, through the unit Wahyoo Kitchen Partners. Wahyoo taking advantage of partnerships with culinary MSMEs that have been part of the company, and attracting those who want to utilize their "free" kitchens. In the sense that they are not busy and can still serve consumers via other platforms. Wahyoo So there is no need to invest in property because you already have an SME network.

Wahyoo markets its products through GrabFood, GoFood, and ShopeeFood. Not only that, the company also invites its partners to sell offline for dine-in and takeaways. Thus, they do not need to rely entirely on online platforms for their sales.

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