Decoding the Digital Menu and the Transformation of Dining in the Cloud Kitchen Era

Exploring the Shift from Traditional Restaurants to Virtual Food Halls and the New Culinary Landscape

The rise of cloud kitchens and virtual food halls signifies a move away from traditional dining experiences toward a model that prioritizes digital presence and global accessibility. Restaurants are increasingly licensing their menus to digital platforms, allowing them to reach customers far beyond their physical locations. This evolution not only offers greater variety and customization options for consumers but also challenges conventional notions of what a restaurant can be. Cloud kitchens detach menus from storefronts and ultimately will detach food from those menus. When a restaurant licenses their brand to a restaurant, they make their menu digital. It no longer lives in brick and mortar locations but instead in the cloud, accessible for orders nationally or even globally. The restaurant becomes a logo on an app.

A hypothetical restaurant registers a fifteen item menu for distribution via Kitopi. There’s value on both sides of the transaction. The restaurant provides the following: brand, menu, and cooking intelligence. Brand experiences the least augmentation. A customer orders from that restaurant on the delivery app just as if they were ordering from the physical storefront. The restaurant’s logo is stamped onto every item leaving the kitchen and is intrinsically linked to the production of the final product. A restaurant on Kitopi tailors the menu for core delivery items; compressing a forty item menu to fifteen. Products that aren’t differentiated, are distracting, or act as fillers are jettisoned. A restaurant with ten burgers may choose five or even one.

Taking this to a greater extent provides clarity on a broader shift in the digital restaurant space, particularly in the case of virtual food halls. At these halls, customers can order from any of sixty or so brands in a single order. The sixty number isn’t pulled out of a hat, that’s how many brands operate out of a single 2,000 square foot Kitopi - the Dubai based cloud kitchen company - hub. You can get your burgers from one place and your fries from another. This breaks down the friction that previously protected menus. Much of restaurant menus are filler to cater optionality. and subjective preference. Basically, a customer might order guacamole because they prefer guac even if the Ceviche is “better”. Consumers aren’t always ordering specialties so to speak. Even at a great restaurant only some fraction, a small fraction, is objectively superior.

In the case of a virtual food hall, however, consumers don’t have to settle for subpar starters. Instead, the best starters from each restaurant are delivered in one order from the food hall. A customer in the mood for both sushi and brusell sprouts is able to get the rolls from one spot and the sprout appetizer from another. Reduced switching costs act as a forcing function to hone in on core offerings. There are drawbacks to this optionality, however. Selecting items from different restaurants is uncertain.

Are consumers going to have enough effort to track a Brussels sprout brand? Will a starter from one spot match the flavor profile of a different restaurant’s entrée? Envision a complete disaggregation - items from sixty brands are listed in one menu. Starters are lumped. Mains and desserts too. Bondi Sushi’s 'Shrimp Avocado Rolls' is sitting alongside a 'Kick My Boss - Spicy Burger' from Rock House Sliders. This is basically a micro-branded Cheesecake Factory - home of what seems like America’s and, most certainly the World’s, longest menu running 250 items. The menu has a small number of branded items of the type you’d see in this virtual food hall such as the Oreo Dream Extreme Cheesecake. So too, it spans cuisines from French to Korean to Mexican and carries breakfast, lunch, and dinner options. Flipping its pages inspires the thought that its ten different restaurants lumped together.

Assume, however, that the average delivery consumer is overwhelmed by this optionality leading to suboptimal ordering. One solution is bundled menus. Delivery apps or Kitopi itself could coordinate their offerings into a number of select menus. Some of Kitopi’s kitchens produce for one hundred distinct restaurants. Spotting each restaurant at twenty items opens up over one thousand unique options for groupings of ten items into boutique menus that pick and choose the best combinations. These menus could be A/B tested across audiences to optimize satisfaction. Taking this further, the quality of 'best' can be analyzed from two angles for middle and low priced restaurants. One is what’s most popular, the other is what any individual’s subjective opinion is. For the latter, Kitopi would be able to deploy recommendation algorithm style strategies to consumer tailored menus. Customer preference for starter combinations and the like would be taken into account. Kitopi would merely be doing what every other content-based platform does - Netflix, YouTube, Amazon - by tailoring content to preference. 

There’s potential for the creator economy angle as well. The “Travis Scott Meal” at McDonald's gave fans of the music artist the ability to order as he does. The meal led to the strongest revenue month in a decade for the Golden Arches and caused a shortage in chopped lettuce. Scott’s offering didn’t consist of unique items, but rather just branded an order: Quarter Pounder with Cheese, Fries, Sprite. If Kitopi can create their own menus, creators could just as easily do the same. Any branded individual could create their 'branded' menu in the same vein as Scott by selecting from the two thousand possible items. 

From the restaurant side, food itemization is akin to licensing out their content library individually rather than as a whole. Kitopi may only want to serve Samosas and Butter Chicken from an Indian restaurant because those are deemed the highest traction items. Other spots do Dosas better. Maybe it won’t be this narrow and restaurants will do ten dishes with enough uniqueness and taste value to get picked up. Restaurants doing one thing well is an indicator of the quality of everything else, but how strong an indicator is the question? Will that Samosa restaurant start focusing on only Samosas to make them their key offering? After all, they could license out these Samosas to hundreds of kitchens to serve a broad customer base. Restaurants get high leverage on selling one item well out of the distributed, scaled kitchen network. Without delivery, there aren’t enough local customers to support a Samosa only shop. In the global network, however, there are millions in the Samosa market. If that restaurant gets a ten percent kickback on each item sold, they have the potential to stand up a streamlined, scaled business on the back of their 'best' offering. The outcome will likely be analogous to grocery store aisles carrying a few different types of Samosas. 

Once a restaurant comes up with a promising item, develops the recipe, and deploys it to the Kitopi base, there are a few options. One is to sit back and collect licensing fees riding that Samosa money until a better one comes onto the market. Inevitably, however, one will come onto the market. This requires restaurants to operate like software companies, the Samosa needs to be versioned, iterated upon, and customized to stay ahead of the curve. This is part of the reason why restaurants will become narrow. Massive distribution means one offering is enough of a business. Those who hone in will make that item at a level far greater than competitors. That’s all to say there may very well be an exclusively brussel sprout brand in Kitopi’s kitchens soon.