When ‘too many cooks’ create successful startups

The Korea Herald/Asia News Network

SEOUL  — This past June, Kim Tae-hyung finally achieved his long-held dream of running his own food business but with minimal risk.

The one-man restaurant, Seoul Poke, specializes in Hawaiian food and runs 100 percent on takeout. There’s no dining area. What’s unusual about this new startup is that Kim saved massively on his initial investment by forgoing not just an eat-in venue but also the purchase of kitchen appliances, which together often account for a huge proportion of a new restaurateur’s outlay. 

Instead, Kim rents kitchen space from a workspace service called Simple Kitchen.

“While I do share the kitchen, I can be the owner of a single store,” Kim said. “I can operate freely. I rent here 10 hours a day. We are operating as a delivery service and are considering the need to expand our delivery area.”

Simple Kitchen is one of numerous commercial shared kitchens sprouting up in South Korea in recent years. 

A commercial shared kitchen is a shared workspace made up of fully equipped independent kitchens. Some shared kitchens also provide back-office services including product feedback, marketing and accounting, which also reduce the costs of starting a business.

In Korea, the concept of a commercial shared kitchen is still very young. It was only last year that WeCook first brought the business model to Seoul. 

Commercial shared kitchens serve two main purposes.

For fledgling restaurateurs, they offer a chance to get a grasp of the market as they prepare to launch their businesses. These pre-entrepreneurs can use rented cooking facilities before making major business decisions. Unlike Simple Kitchen, this type of shared kitchen has a dining area, similar to a food court, where people can enjoy a meal and provide immediate feedback. That way, the business owners can test and evaluate the entire launching process from menu development to marketing. 

WeCook, run by Simple Project & Co., focuses on pre-entrepreneurs with what it calls a “kitchen-incubating system.” Small startups can sell their food online, using a website or an app, and assess customer demand before officially launching a food business. 

Kim Ki-woong, CEO of WeCook, says the company began with the “lean startup” philosophy — one that favors experimentation and short product-development cycles — and applied it to the food-service business. 

“The failure rate is noticeably low,” said Kim. “And even if you fail here, the risk is not that great.” 

For existing restaurant owners or those with food-service backgrounds, a shared kitchen is more of a hardware service, minus the software-related help. Like Kim Tae-hyung of Seoul Poke, they can avoid the costs of renting and furnishing an entire restaurant space.

Bae Min Kitchen and Simple Kitchen follow this second model, offering delivery service only. This is because the market for takeout in Korea is astonishingly large.

And the market for food delivery via app has grown astronomically and now stands somewhere between 12 trillion won and 14 trillion won, according to a report from the Korea Software Policy Institute.

“We can basically provide B2B (business-to-business) service. We currently operate only on delivery, but plan to expand into at least one offline store next year,” Simple Kitchen CEO Lim Tae-yoon said.

Profit models for shared kitchens operate on a monthly-payment basis for most companies. They generate revenue from rent, and from commissions in the case of WeCook. Because they’re so cost-effective, all commercial shared kitchens have a nearly 100 percent occupancy rate and their profits are expected to continue to rise.

“Residents paid 9 million won for deposits and 1.6 million won for monthly rent only,” said Lim of Simple Kitchen, who points out that the average cost of starting a business in Korea is around 90 million won. 

“If you fail, you lose approximately 60 million won. That means lower opportunity costs for residents.” 

The background for the emergence of commercial shared kitchens is the growth of the sharing economy. With the appearance of Airbnb and Uber, the sharing-economy concept has taken off throughout society and in various industries.

In Korea, the concept of the shared office emerged in 2016, starting with WeWork in Gangnam, Seoul. After that, the trend spread to the food industry.

“With the food-related market being fragmented (from those dedicated to food processing to those running restaurants), it has been difficult for the industry to achieve economies of scale. With shared kitchens, we can create a community which can eventually contribute to creating economies of scale as we can share food supplies, equipment and logistics. Demand for shared kitchens continues to rise,” Kim Ki-woong said.

He also voiced a need for a change in thinking when it comes to running a business.

“You have to give up the idea of owning a space. There’s so much you can do by not (owning one). It frees up time and money. We’re trying to create an ecosystem, not just a kitchen,” Kim told The Korea Herald.

The market for shared kitchens in particular is expected to grow rapidly.

In October, Travis Kalanick, Uber’s founder and current CEO of City Storage Systems, announced plans to lauch a new business in Korea called Cloud Kitchen.

“It is too inefficient for self-employed people to operate restaurants at high rents every month in places like Seoul,” said Raj Beri, Uber’s Asia-Pacific regional manager. “With online delivery on the rise, massive investment in space can no longer be an answer.”