Adoption of Central Kitchen to Drive Productivity in F&B

What is a Central Kitchen?

Central Kitchen (CK) is a facility that centralises procurement and common food production processes across the outlets within an F&B group. It is usually an internal service provider, but some central kitchens produce for external customers as well. The majority of food preparation and processing is done at the CK and delivered to the outlet where minimal preparation is required before serving to the customer. Depending on the size of the establishment, CK can be a standalone facility or located within an outlet.

Who uses Central Kitchen?

1. Larger establishments are more likely to adopt CK

In a survey of 50 large food service companies in Singapore, the majority (70%) have set up standalone CK. Smaller establishments are less likely to have standalone CKs as compared to larger establishments, unless the establishments also have catering as their core businesses.

Establishments with 2-5 outlets are more likely to adopt a CK at one of their outlets as an alternative of having a standalone CK.

2. CK is more commonly used by formats with limited retail space

A CK is more critical for companies with limited retail space, such as catering business and snack bars chains. CK is good-to-have for full service and quick casual restaurants, which can reduce their kitchen space.

How does CK improve productivity?

A CK helps to:

Improve bottom line by reducing costs through economies of scale
Control and ensure consistency food quality
Reduce food preparation time and manpower at the outlets
Provide additional revenue streams by expanding to catering or supplying to other companies
Support expansion plans by providing the capacity to supply to multiple outlets
Figure 2 summarises CK’s impact on different aspects along the value chain of a typical Food Services enterprise that adopts CK in Singapore

However, a downside of CK is that it results in a perceived loss of quality due to automation. Some customers may still prefer the “authentic taste?of dishes that are hand-made. Furthermore, with centralised food system, the impact of equipment malfunctions could be more significant; thus preventive maintenance is important

Why aren’t more companies adopting CK?

Lack of sufficient scale

Most commonly cited reason for not adopting CK for SMEs
Operating a CK requires high investments in capital expenditure, and monthly overhead costs for rental, utility, labour, and maintenance etc. The costs would outweigh the benefits if the establishment has not obtained sufficient scale.

Manpower would be tied up with CK operations and logistics
High capital requirement

Investing in a CK requires a large amount of sunk costs upfront in purchasing the machines, renovations, and designing of workflow and layouts.
On average, an establishment with 4 outlets requires an investment of over S$1 million for a CK.
SMEs face a lack of sufficient financial resources to cover the high capital requirements
For further information and assistance on central kitchens and food production options, please contact us at 6745 5833 or customerservice@sgpc.sg

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This article is based on a research carried out by SPC with research assistance provided by Wu Minfei, Terence Ng and Jasmine Tan. SPC would like to extend our appreciation to the companies for their participation in the research.