Full-service cloud kitchen brand Kitopi raises $60M

Dive Brief:

Dubai- and New York-based Kitopi, which provides delivery-only managed cloud kitchens, announced a $60 million Series B funding round, according to Nation's Restaurant News. This cash infusion tops off a $27.2 million Series A in late 2018. Knollwood and Lumia Capital led the round with participation from existing and new investors.
Kitopi, which currently operates 30 kitchens, is shorthand for Kitchen Operation Innovation. It functions like a franchised location without operators needing to rent kitchen space, like with other shared kitchen operations.
The platform takes care of services like aggregating orders, preparing food according to partner specifications and working with third-party delivery platforms. The new funding will be used to open 50 new delivery-focused kitchens in the U.S. and 100 globally by the end of 2020.

Dive Insight:

Kitopi co-founder Mohamed Ballout described his company as "Franchise 2.0" to the Financial Times, allowing brands to "plug in and scale up globally." The service is powered by its Smart Kitchen Operating System (SKOS), which is designed to reduce expenses and boost efficiency. Some of the current brands that it works with include Operation Falafel, Pizza Express and Under500, with Operation Falafel planning an impending U.S. launch.

Despite Kitopi's appeal, outsourcing food prep could make some chains nervous, particularly given concerns about quality and consistency with food delivery. It's also unclear if the cost of this model is more financially accessible than a tradition ghost kitchen. If a brand offers its food through a third-party delivery service from Kitopi spaces, it will have to factor in that cost, as well.

And although it may sound appealing to some restaurants to have logistical and operational components of the business taken care of, this requires relinquishing some control of the business to Kitopi. Some founders or brand managers may not like the idea of letting Kitopi call some of the shots.

It will also be interesting to see how Kitopi fits in the broader ghost and cloud kitchen space, which has recently gained traction. Without a dine-in portion of the restaurant to worry about, which carries overhead costs associated with waitstaff, operational costs, and more, brands can improve their margins. In 2019, Travis Kalanick, Uber co-founder and former CEO, has quietly gained investors in its CloudKitchens business, which rents out kitchens to restaurants and operates its own delivery-only restaurants. Kitchen United, another shared kitchen operation, secured additional funding last year and plans to expand throughout the U.S. in the coming years.

Delivery operators also have been getting into the space. DoorDash opened its DoorDash Kitchens in Redwood City, California, assisting Chick-fil-A with delivery. Uber Eats also offers 5,000 ghost kitchens around the world, with many of the locations focused in the U.K. market, while Grubhub partnered with BonAppetit to launch a delivery-only ghost restaurant in September 2019.

Now, big names like McDonald's in London are jumping on the ghost kitchen bandwagon. As more players launch into the cloud and ghost kitchen space, Kitopi's extra offerings could help it differentiate from the competition and even inspire similar company models.