Cloud Kitchens and Uber’s Future of Food Delivery

I think that one of the most exciting developments in the tech ecosystem right now is the evolution of the food industry. While the “business of serving food to people” has been historically unattractive to most entrepreneurs, I believe we are reaching an interesting inflection point of opportunity. 

Disclaimer: I worked at Uber two years ago but have no special insight whatsoever as to their game-plan in this space. 

I believe that Cloud Kitchens will (and are already starting to) massively disrupt the food industry. 

Cloud Kitchens are effectively commercial kitchens designed specifically for on-demand food preparation. They have no “dine-in” facility. This is a feature, not a bug…serving customers in-house is very expensive and greatly increases overhead costing. While traditional restaurants drown in variable costs (cleaning, ambiance, etc.), Cloud Kitchens are able to focus on the food! They can specialize on the assembly line, much like a McDonalds or Dominos, and maximize yield. 

Cloud Kitchens distribute their food on platforms like Uber Eats and Postmates. Inside of their “digital storefronts,” cloud restaurants can quickly A/B test menu items and adapt to user tastes and preferences. This makes a huge difference…imagine, as a restaurant, being able to innovate and “trim the fat” from your menu. Imagine knowing what people want to order. Digital storefronts make total sense.

Uber is building a network of these cloud kitchens to service the supply-side of Uber Eats. 

Cloud Kitchens is building a set of infrastructure and software that enables food operators to open delivery-only locations with minimal capital expenditure and time. By eliminating non-food labor costs, this model changes the game. Imagine Chefs being able to “become members” of various Cloud Kitchens and work from anywhere! It is also great for consumers…the world’s best, freshest foods available at the click of a button. 

I think we will begin to see Uber Eats vertically integrate more and more and start cooking food themselves. This is a classic implementation of Ben Thompson’s Aggregation Theory. The idea is that, at first, Uber Eats is begging restaurants to sign up for their marketplace. This occurred over the past few years as Uber spent resources building a funnel to get players onboarded. Now, with significant consumer demand waiting in their pipeline, restaurants are fighting for real estate on the application. Everyone wants new customer demand. 

But slowly…and perhaps without realizing…Uber is stripping power away from these restaurants. Uber is removing the “power of a particular restaurant brand” and enabling “the best food to win out.”

Good for consumers? Yes. 

Bad for brands. The best food will win. And Uber will…one day…be making the best food. 

Uber will be investing in Kitchens (they have the data! they know what to cook). Uber will be investing in Chefs (they know who makes the best of what foods). Imagine an Uber accelerator for Chefs! 

I think all of this is really exciting and just one vertical Uber is exploring. Long Uber!