From high-street QSR to cloud kitchen unicorn: The Rebel Foods story

Inside Faasos' parent Rebel Foods' kitchens we see chefs understand automation, machines remember recipes

In 2011, Rebel Foods, born Faasos, wasn’t the cloud kitchen startup it is today. In fact, cofounders Kallol Banerjee and Jaydeep Barman set off with the idea to incorporate a high-street quick-service restaurant (QSR) chain selling wraps.

“We thought we’d be the next McDonald’s,” Rebel Foods cofounder Kallol Banerjee told Business Standard. However, the vagaries of the restaurant industry, from the lack of high-street locations to high rents to the growing competition, meant that even before the company could fully grasp the market, it had to think about cutting costs. 

“We went dark around 2014 before the Zomato-Swiggy disruption happened,” said Banerjee. When asked about what Rebel Foods has done differently to become the first unicorn in a cluttered cloud kitchen market, Banerjee said the company “problem-solved its way to a business”. 

“We started with making food and still do that. But because today we have the advantages of growing revenue, a scalable business model and venture capital money, we are deploying technology to streamline our food-making processes and reduce the inefficiencies,” he said.

The logic is simple. Banerjee explained that because of the presence of internet food courts such as Zomato and Swiggy, a single cloud kitchen with just one brand is unlikely to be a lasting bet. Instead, cloud kitchen businesses should be built at scale, with multiple brands across cuisines and taste palettes serving different cities. 

Automation > Hiring more people for kitchens

However, as it expands, the business has to balance hiring more people for its kitchens and keeping costs down. That is where automation comes in. So, the company’s team of product experts, engineers and industrial designers has automated repetitive processes, hitherto requiring constant supervision from “chefs”. 

Rebel Foods is developing machines that understand recipes. For instance, the company uses a wok — like a rotating tumbler — which simulates the chef’s stir-frying motion. The wok controls the temperature and the amount of oil dispensed. Rebel has taken it one step further with automation and attached a video screen and an app to the wok. Now, at different stages of cooking, the machine instructs the chef when to add the different ingredients as per the recipe. While chefs will come and go at Rebel Foods, intelligent robots are passing down recipes. 

These intelligent machines allow Rebel to run multiple brands from the same kitchen. The company has over 20 brands in India, such as Faasos, Behrouz Biryani, Oven Story, Mandarin Oak, Firangi Bake, Lunch Box, The Good Bowl, Sweet Truth and The Biryani Life. According to Banerjee, the multiplicity of brands is an advantage unlike any other for cloud kitchens. 

“A business like ours can solve for different customer missions. So lunch on a weekday is a very different ‘mission’ from ordering food on Sunday while watching the India-Pakistan match. We crave different meals, cuisines at different times of the week. At Rebel, all of those needs of a single customer are fulfilled from one kitchen,” he added. 

How does the kitchen manage that?

Different brands, one stove

The rice for Faasos and the rice for Mandarin Oak are cooked at the same station or stove. But as the meal moves along the assembly line, key differences in ingredients and hence taste would come about since the machines remember the recipes! The packaging adds the final layer of distinction. 

Rebel has leveraged this ‘cloud kitchen’ advantage to become a household name in the Biryani segment. While Behrouz is its premium brand that sticks to its prices, Rebel fights the discount war with ‘The Biryani Life’, its other brand in the segment. 

“Once you know how to cook a Biryani, you can call it 10 different names and introduce slight variations in the quantity of rice, the spices, the preparation of meat, etc. The same happens with FMCG companies,” said Banerjee.

Besides competition, Banerjee’s fellow restaurateurs are also fighting aggregators Zomato/Swiggy, flagging their commissions of around 30%-40% as a pain point. Banerjee conceded that Rebel Foods — which receives over 50% of its orders from Zomato and Swiggy — would be happier if the aggregators could reduce their commissions.

“As customers in any industry become mature, the personalisation trend takes hold. We have our app EatSure, which was launched recently. But we also have dedicated direct ordering apps for most of our brands. The hook for these apps cannot be variety but personalisation,” Banerjee said. 

“Innovations such as the customer being able to see their food being cooked, through the mobile app, maybe even talk to the chef, are waiting to happen. Zomato/Swiggy would never do that because they don’t make the food. Such personalisation, along with other tested features such as loyalty points leading to better prices for the customer, can help create an additional revenue stream for food businesses,” he added. 

While Rebel Foods entered the unicorn club this month, its financial results for the fiscal year 2020-21 aren’t known yet. But in FY20, the company had seen a 229% increase in losses to over Rs 431 crore due to aggressive expansion in the Middle East and Southeast Asia markets. During the same period, its revenue also increased 84% to Rs 572 crore.

Today, Rebel Foods runs 350 cloud kitchens in 45 cities across six countries. Talking about the increase in the company’s losses, Banerjee asserted that Rebel Foods is profitable at the level of its cloud kitchens. However, the company invests that money in deploying more technology to make the cooking processes more efficient.

“We want to end the year with 400 cloud kitchens and reach 500 by next year. In the long term, we are looking at 1,500 to 2,000 cloud kitchens. That’s a little more than the number of stores Dominos has,” Banerjee said. 

In many ways, a cloud kitchen is the typical Indian jugaad. With space at a premium in the big cities and growing competition among dine-in restaurants, these delivery-only “ghost kitchens” were the early disruptors. They are mostly running out of places with low rentals, which keeps the entry costs low. The cloud kitchen trend is even more crucial for the industry now saddled with a lasting change in consumer behaviour, with dine-in yet to recover to pre-Covid levels. A report by the National Restaurants Association of India says the industry shrank 53% in the fiscal year 2020-21. 

Today, India’s food services industry is massively under-penetrated compared to the US and China, according to a report by RedSeer, a management consultancy firm. But the industry will double in size by 2025 — clocking a gross merchandise value of $13 Bn. The trends that will lead to this growth will be an increased preference among consumers to order online and a consequent rise in the share of online orders as a percentage of the total revenue of a restaurant. 

For Banerjee’s delivery only Rebel Foods, this is no time to slow down. 

In terms of the gross merchandise value (GMV), the cloud kitchen sector is expected to become a USD 3 billion industry by 2024, up from about USD 400 million in 2019, according to RedSeer Consulting.