Kitopi is one of many food delivery providers to operate dark kitchens offshore, catering to the growing demand for home delivery since the COVID-19 pandemic. Cafes and restaurants, including start-ups and those seeking to increase output, are driving leasing demand for warehouses that can be converted into dark kitchens, a low-cost alternative to traditional venues with dining spaces.
Some of these nondescript buildings service between 20-30 hospitality brands, according to a new research report by CBRE, Australian Online Meal Delivery and Dark Kitchens.
Growth in average household income and changing consumer habits have been driving demand for readymade, delivered meals in Australia, translating to an average annual market growth of 76 per cent over the past five years, with revenue expectations of approximately $872 million this year and over $1 billion in 2021, said Kate Bailey, CBRE head of Logistics and Retail Research, Australia.
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Interest has been accelerated by COVID-19 as hospitality retailers and landlords look at new ways of delivering products and services, Kate Bailey said, adding that dark kitchens were becoming increasingly popular worldwide, as shared spaces used for the preparation and distribution of online food delivery orders from services such as Deliveroo and Uber EATS.
The benefits of dark kitchens include a greater market reach and increased revenue for food providers, as well as more options for consumers, according to the analyst. Another key advantage is the absence of rental fees, or where rental fees apply, running costs are minimized via monthly rental agreements, as opposed to multi-year lease terms, said Ms Bailey.
However, delivery service providers are known to instead take a larger percentage of each sale that comes out of the dark kitchen, which can be a drawback for hospitality retailers.
Other benefits for hospitality retailers include being able to access consumer preferences and information from delivery service providers and market-test locales before signing up for a traditional venue.
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Leif Olson, CBRE’s national Retail Leasing director, added that dark kitchens were either provided and managed by the delivery service provider or internally set up and managed by the restaurateurs themselves. An increasingly popular strategy for dark kitchen providers is to fit out an array of 20-foot containers with commercial kitchen equipment, positioned on a central, inner-city site, to allow for a faster, lower-cost alternative to traditional commercial kitchen setups.
This setup is more scalable, versatile, and easily deployable on vacant land, making it an attractive option for food providers looking to expand their reach.
Global providers include Karma Kitchen, CloudKitchens, and Kitopi, with locations in America, Europe, and Asia, while Deliveroo is the only multinational provider in Australia, with over 250 dark kitchens at approximately 35 locations globally, Mr Olson added.
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A local example of a dark kitchen is the Deliveroo site in Melbourne, which was opened in 2017 and has been used by restaurants such as Kong and Huxtaburger.
The site, which includes two full-scale professional kitchens and a large waiting room with phone chargers and an order display screen for Deliveroo’s riders, was built and fitted out by Deliveroo, then leased free-of-charge to restaurants and other brands, with brands paying nothing upfront but Deliveroo charging a higher commission fee on orders placed through the Deliveroo app.
In 2018, it multiplied by five the amount of space it tenants in the city – renting a Collingwood building able to service about 280,000 people in Melbourne’s inner north east. Last April Deliveroo confirmed it would open a dark kitchen in a location, and a Brunswick property at 2-6 Pitt Street being rented and converted into a dark kitchen occupied by retailers servicing Melbourne’s inner north.
