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October 24, 2022

The FoodTech company helps restaurant owners maximise operations by transforming them into cloud kitchens

George Karam, sitting center, and his team at The Cloud, a food technology startup based in Hub71 Abu Dhabi. Photo: Cloud

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In the cutthroat world of the food service industry, where competition is fierce and profits can be slim, a less expensive strategy can be a means of survival: companies rely on discounts and special offers to devour as much as possible. order as much as possible to increase their profit.

However, George Karam, co-founder and chief executive of The Cloud, a food technology startup based in Hub71 Abu Dhabi, doesn’t necessarily believe in that philosophy.

Instead, he believes in the power of brands: if you think you’re good enough, then serve your food with confidence knowing it’s worth the hungry consumer’s money.

“Unfortunately, some markets have more of a discount culture than others. This is driven by many factors,” Karam told The National.

“We operate in many markets where discounts are very rare. We support many high-quality brands, which don’t require massive discounts to sell.”

The cloud strategy is simple: food businesses are integrated into a robust ecosystem where companies and consumers connect with each other, opening up “instant” access to a new pool of customers — no upfront investment.

The company is one of only four FoodTech-focused startups in Hub71, the UAE capital’s global technology ecosystem.

Traditionally, investors in Mena are only willing to take execution risks, while in other regions they are also willing to take innovation risks. This means that any start-up looking to get funding in Mena will have to build on an existing business model already operating elsewhere.

George Karam, co-founder and chief executive of The Cloud

Like many entrepreneurs, experience led Mr Karam to put together The Cloud so that others wouldn’t have the same predicament.

“I had a passion for food and opened a brick and mortar restaurant together with two partners. We struggled a lot because of the high initial investment required and high capital expenditures,” said Karam, who co-founded The Cloud with Kamil Rogalinski.

“This made me realize that there had to be a better way and, in 2018, I launched my first virtual brand.”

Cloud helps restaurant owners maximize their operations by turning them into cloud kitchens, as the name implies.

The cloud is “empowering underutilized kitchens across the UAE … increasing the number of orders through the latest technology, online marketing and creative approaches,” Karam said.

More importantly, it helps save work — and, in the process, keeps paychecks steady — by making the best use of resources.

A cloud or virtual kitchen — also known as a ghost kitchen or dark kitchen — is a commercial space built to prepare food for delivery only, with a number of brands able to operate from that centralized place.

These “non-existent restaurants” have significantly benefited from the shift to online services during the Covid-19 pandemic, which has forced people to rely on apps and delivery services for food.

Brands can take advantage of offering flexible menus, more efficient operations and experimenting with new ideas that can be easily scrapped if they don’t work, according to US software company Oracle. More importantly, brand owners don’t need materials traditionally found in physical stores such as signage, furniture and decor.

The global cloud kitchen market is worth $63 billion in 2021 and is expected to reach about $374 billion by 2030 at a compound annual rate of about 22 percent, according to Acumen Research and Consulting.

Food companies take orders through a mobile app that are then delivered by Zomato, Deliveroo, Talabat, Careem and Uber Eats — partners who have helped kitchen partner The Cloud, which is close to reaching 1,000, Karam said.

“We want to add more partners in our existing markets and start operations in new markets,” he added.

The cloud kitchen trend is expected to grow as consumers enjoy its convenience, variety and discounts.

“I don’t see this trend changing much going forward. Otherwise, the shipping business will continue to grow,” Karam said.

Discounts, however, can send the wrong message: it could mean that a brand isn’t good enough, so it needs to offer a rebate to attract custom, or maybe its marketing department lacks creativity, said Marvin Alballi, head of operations at the US-based Global Brand Franchise.

Restaurant staff could bear the burden of lost revenue because, in theory, the company could hand out less pay just to make up for it. It is a “vicious cycle”, says Aleix Garcia, Managing Partner at Dubai-based Infini Concepts.

Food delivery companies such as Zomato, Deliveroo, Talabat, Careem, and Uber Eats have helped kitchen partner The Cloud, which is nearly 1,000. AP

The pandemic created two large new user groups “that have stuck with us” Karam said. These are: business-to-consumer users who download delivery apps and order more food online, and business-to-business users, such as restaurants, who want to increase online orders and delivery.

Cloud went through a number of iterations before finding the right “recipe” for his success today, Karam said. He admits that they drew inspiration from Airbnb, a pioneering home rental platform.

Airbnb, similar to The Cloud, connects property hosts and travelers, simplifying the rental process. It was through this business model that the San Francisco-based company was able to foster and popularize the home-sharing economy.

“While the traditional cloud kitchen model was struggling and the space was very crowded, our Airbnb-like model succeeded,” he said.

“This is because we work with brick-and-mortar restaurants and allow them to expand their customer base or quickly expand into new markets – all without any upfront investment.”

Last month The Cloud raised $10 million in Series A funding that will help it expand its footprint in the GCC and Europe. Currently, it operates in eight countries – UAE, Saudi Arabia, Belgium, Lithuania, Netherlands, Romania, UK and US.

The Series A funding round is significant enough to attract the attention of other investors who see potential in the start-up, having opened its regional headquarters in Riyadh recently, and considering expanding into Kuwait, France and Italy.

“After our last round we received a lot of interest and we are currently stepping up a new chapter to accelerate growth in our existing markets and expand into new markets,” he said.

The start-up ecosystem, particularly in the UAE, has matured “fairly” in the last five years, Karam said.

In addition to more investors funding startups, “good government support, especially in Abu Dhabi” helps nurture startup businesses.

However, start-ups need to provide a viable business model and proof of concept to be noticed by potential investors who may be looking elsewhere.

“Typically, investors in Mena are only willing to take execution risks, whereas in other regions, such as the US, they are also willing to take innovation risks,” he said.

“This means that any start-up looking to get funding in Mena will have to build on an existing business model that is already operating elsewhere.”

Mr Karam sees the cloud kitchen industry growing further, fueled by the creativity of sustainable food brands and the integration of new age technologies. These factors are expected to increase customer interest, especially in the UAE where consumers want to try new experiences.

“I believe that consumer demand will remain high and increasingly driven by new technologies such as drone delivery,” he said.

“UAE is one of the most advanced markets in terms of cloud kitchens and the market as a whole is quite mature. Many interesting and innovative models have come out of the region and are now being imitated in other parts of the world.”

Cloud founders Kamil Rogalinski, left, and George Karam, who is also the chief executive of the Abu Dhabi-based startup. Photo: Cloud

Q&A with George Karam, co-founder of The Cloud

Do you think the metaverse can work with cloud kitchens?

I believe it is true and we will test it by launching an NFT powered brand in UAE. We’re also working on a number of other metaverse strategies.

Do you have any other ventures, or are you planning another one?

I currently have no other business or plans to launch it. If I don’t like The Cloud, I’ll start a FinTech or cryptocurrency startup.

What is the most extraordinary experience you’ve had in your career as an entrepreneur?

After I started The Cloud, I discovered that in the US, there is a similar company and the name of the founder is also George.

What is your advice to those who aspire to make their mark in the competitive start-up industry?

Always stick around, don’t take ‘no’s personally and use every opportunity to network. Also, fail fast, fail forward.

What do you do during your downtime (if you have any)?

My rest time is currently minimal and when the opportunity arises, I like to swim, relax on the beach, or hang out with friends over a good meal.

Updated: October 24, 2022, 4:00 am