The Evolution of Outsourcing From Global Factories to Cloud Kitchens

How Kitopi and Cloud Kitchens Are Redefining the Culinary Landscape

By the turn of the century,“Made in China” was found on everything from clothing tags and electronic devices to children's toys. China's accession to the World Trade Organization in 2001 solidified its status as the world’s factory. Following this milestone, the cream of the USA’s corporate crop -  Nike, Apple, and even the all-American brand Levi Strauss - offshored production to China. Such brands were responsible for an eightfold increase in China's manufacturing investment over the course of the aughts. Savings in cost, efficiency, speed and scale spurred the surge in dollars flowing east. Outsourcing enabled brands to optimize scale and supply chain for the benefit of their bottom line.

A similar inflection event is happening in food. Major restaurant brands are outsourcing their menus to manufacturing operations as Apple outsourced iPhone designs to Foxconn (the famous electronics mega-factory). For the likes of Papa Johns and Nathan’s Famous Hotdogs, delivery bags wear the tag not of “Made in China” but “Made in Kitopi”. They could just as easily read “Made in a Ghost Kitchen”, for Kitopi is one of many restaurant companies using cloud kitchens to service orders for app pickup. In five years since its founding, Kitopi has become the leading brand in the Middle Eastern market by providing rapid global distribution with serviceable quality.  

The differences between Kitopi and Foxconn are their operational time horizons and modes of contracting. Unlike Foxconn and other Chinese factories which have the latency of shipping products back to distribution centers,  Kitopi liscenses out a menu and services delivery directly to drivers picking up from its facilities. Production is based on demand and can be rapidly shut off so the risk for restaurants and Kitopi is exceedingly low. Kitpoi receives an order from delivery apps for Papa Johns, cooks the pizza, and hands off the order to a driver. Ghost kitchens maximize just-in-time production. Papa Johns receives a ten-percent kickback for providing Kitopi the menu and cooking intelligence to sling their pies. Apple and Papa Johns both get irreplicablly efficient assembly of their product, albeit with disparate incentive models.

Kitopi stays ahead of the curve to launch new brands quickly. When a restaurant approaches Kitopi to explore a partnership, the “Supply Chain Growth” team has already produced an outline of how to port over the restaurants’ menu. By day five of conversations the menu is approved. How does Kitopi do it? The answer lies in streamlining a restaurant’s offerings for 80% coverage of existing SKUs (read: ingredients) from the company’s supply chain. This not only allows a drastic reduction in order complexity but also superior pricing. Just by getting onto Kitopi’s supply chain, a restaurant’s costs are reduced by 10% on ingredients. The more hamburger buns Kitopi orders the cheaper. “Secret Sauces” and the like that are irreplaceable constitute the marginal 20% that are special ordered. Kitchen workers receive less than a week of training before a brand is available to consumers. That’s a two week turnaround from first conversation to being able to order “Bondi Sushi” (the Miami based Sushi bar) on Suadi Arabian delivery apps. 

It’s reasonable to expect that the sushi served in Dubai will not taste exactly like its counterpart along the coast of South Florida. Say the Sushi is 90% of the taste, or even 75%. At the end of the day, however, consumers still taste the core essence of a restaurant sitting eight thousand miles away. That’s the power, and is standard for global brands. Lulu Lemons’ first batch of product runs used higher quality fabrics than those since moving to China. Reducing quality standardizes the product for tens of millions of consumers who want to experience the “essence of the brand”. Just as leggings can be good enough, so can food. Especially, when that food is being produced at an error rate of 0.2% for delivery compared to the restaurant standard of 5%. Kitopi presents reliability and “good-enough” quality for a lower cost.

Streamlining to unlock speed for restaurants extends past the startup-phase to cooking and assembly. Take the example of a Salmon dish requiring six steps, three kitchen appliances, and twelve minutes to prepare at an American restaurant. Kitopi reduces down to three steps, a single smart oven, and seven minutes. That’s a forty percent reduction in prep-time with fewer appliance choke points. As a rule, food is cooked and ready for pick up in under nine minutes. Kitopi’s reached the heights of software-enabled operational efficiency. The company has a team of over a hundred engineers in Krakow, Poland whose job is to analyze and optimize the process. Everything is tracked and managed - down to each employee washing their hands for twenty seconds. The Kitchen Operating System (KOS) consolidates orders from delivery apps, splits them on an item-by-item basis and deploys them to stations throughout a kitchen. Cooks then work on these items in parallel at different workflow stations. Items are given barcodes and placed on a central conveyor inching them to their assembly location. Drivers are integrated into this system by prioritizing - or delaying - orders based on arrival time. Parallel processing combined with drivers-in-loop ensures hot-and-ready food for pick up. What’s compromised on taste authenticity is made up for by food that’s sanitary, temperate, and expedient; no cold soggy fries that’ve been sitting while the steak in the steak frites is cooked.

Scale is the linchpin to the ghost kitchen model and manufacturing generally. It doesn’t matter how cheaply a Chinese factory can produce Nike products if they can’t scale up to service millions of customers losslessly. Machinery and processes get ironed out as production ramps up. A single 2000 square foot Kitopi facility churns out 3,000 daily orders over sixteen operational hours. That’s almost 200 per hour. The kitchen is live to deliver them food whenever a customer is awake and hungry. Restaurants that handle their own delivery keep regular kitchen hours and negotiate online orders with in-person diners to their mutual detriment. Outsourcing delivery gives restaurants “always-on” availability and capacity to service their consumer bases’ needs. Restaurants on Kitopi’s network experience a 150% increase in delivery revenue. A brand isn’t just able to scale via one facility through Kitopi, but rather can deploy their menu to every kitchen in the distributed network. Kitopi has a presence in the UAE, Saudia Arabia, Bahrain, Kuwait, Qatar - the bulk of the Middle East. This means that within two weeks, the entire urban Middle Eastern population can get South Beach’s finest sushi to their door in half-an-hour. 

The transition to cloud kitchens, exemplified by Kitopi, marks a pivotal shift in the food industry, mirroring outsourcing trends observed in manufacturing. Kitopi’s model demonstrates how technological innovation and operational optimization can redefine traditional business models, making quality food more accessible across vast distances with minimal compromise on taste. While the nuances of taste and local authenticity may vary, the ability to deliver the essence of a brand’s culinary experience to a global audience underscores the power of this shift. As cloud kitchens continue to grow, they pave the way for a future where the geographical boundaries of culinary experiences are further blurred, making global cuisines more accessible than ever before. This not only signifies a leap for the food industry but also poses intriguing questions about the future of dining and culinary traditions in an increasingly interconnected world.