Kitchen-based model helps food-tech start-ups grow business
Twigly, FreshMenu, InnerChef and Faasos are the likely survivors of a meltdown in the food-tech space in India. These firms adopted a model where they control the experience – cooking to packaging to delivery – through their own teams and not depend on restaurants to run their business. FreshMenu says it is profitable in its hometown Bengaluru, while it’s on track to earning profits by March in Mumbai and Delhi. Twigly, the kitchen-based model start-up based out of Delhi, says each and every order of theirs is unit economic positive and they will be expanding to Bengaluru in the next six months. Similar is the case with Faasos and InnerChef.
The kitchen-based model gives startups complete control over the process and quality of food, something which is absent in the aggregator model, and helps reach profitability faster. These firms collectively deliver around 130,000 meals a day.
“Scalability for these start-ups will not come with opening more kitchens. It is about making a customer come back and order more. This can be achieved only by maintaining quality and a delivery experience. The more a customer order and the more frequently the customer order is the process for the start-ups being more profitable,” says Vidhya Shankar, executive director, Grant Thornton India.
At its peak, India had 179 foodordering and delivery start-ups, according to Tracxn. Many of these firms were aggregators allowing consumers to book food from restaurants on their app. Unlike traditional businesses, where they charge a fee, these firms offered discounts to order food on their platform burning money for each transaction. The slowdown in funding helps bust these unviable businesses. Several of these firms have shut shop. These include EazyMeal, Zeppery, Spoon Joy and Dazo. Taxi aggregator Ola, too, has discontinued its food delivery wing Ola Cafe.
Founder and chief executive of Fresh Menu, Rash mi D ag a, says the idea was to make sure the food from beginning to the end is under their control .“This is unique as we felt ag greg at ors would not be able to offer control on quality of food. If we were to bean ag greg at or, we can not change anything on a consumer’ s experience on food, which is very important in this category .”
The company says it has a recipe bank of 1,200 food items.
Sonal Minhas, co-founder of Twigly, which is backed by Tracxn, says that most Indian and international food chains have been working on the similar principle that has helped them scale up fast.
“Food is non-standardised product. Therefore, one has to deliver quality which in this case is taste and freshness. One has to control the underlying product. Take, for example, KFC, which rolls out around 500 outlets a year in China. This is a gigantic scale. But, it works because there is a ready template. In food, it is important that the business is completely backward-integrated,” adds Minhas.
In July, Twigly raised $600,000 from Tracxn Labs, Hyderabad Angels and Freecharge founder Kunal Shah.
Minhas says while the model puts barriers in terms of scalability initially, in the long run, it is much more scalable as the additional cost would be limited to setting up more kitchens.