The Food Lab, an Egyptian cloud kitchen provider that provides restaurant owners with services like sourcing, cooking, delivery, data-driven insights and recommendations, and marketing, after two years of bootstrapping has raised $4.5 million in a pre-seed round to help it expand across Egypt and into other markets.
According to statistics, Egyptians spend about 30% of their income on food in a $17 billion restaurant industry, one of Africa’s and the Middle East’s largest. Despite this, restaurants in this North African region run on razor-thin margins due to various variables, including significant initial investments and expensive leasing costs, as well as rising operational costs and aggregator commissions.
Bridging The Gap Between Restaurants and Customers With Cloud Kitchen
Kareem El Daly, the co-founder of The Food Lab, ran into these challenges while trying to open a restaurant with his wife. Being a food tech enthusiast, El Daly started looking at market gaps and recognised an opportunity to use technology to help restaurants and food businesses earn a profit while maintaining their quality of service.
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“Many things have changed within the ecosystem over the past decade in the space. We wanted to bridge the gap between the restaurants and the customers, help them expand, grow and operate seamlessly through technology and a shared economy model,” says El Daly.
El Daly and his co-founders Ahmed Osman and Wesam Masoud came up with the Food Lab as a solution.
“If a restaurant is finding it difficult to expand, maybe due to money issues and low margins, they can come into one of our cloud kitchens all around Cairo. We will operate everything end-to-end from procurement to delivery for them,” co-founder and CEO Osman says.
“Also, one of the biggest problems that we see in the F&B space, especially with the supply chain changes, is the prices of the ingredients are extremely volatile. So another thing we do for them is procuring items in bulk from our supplier list and provide to them.”
The Egyptian cloud kitchen provider claims that its platform allows existing restaurant owners to grow exponentially and new brands to go from concept to launch within just 10 days.
“What we want to do is to be that connector; we want to connect that closest cuisine or closest kitchen to the farthest appetites. Cloud kitchens may be the one thing we’re starting with and doing some procurement, but we’re an infrastructure play,” said Osman.
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“We try to embed ourselves in a way that we help them [restaurants] grow. If they have issues, we’re using our technology platform and our knowledge to help them do that and remove all those barriers. That’s really what we’re trying to do.”
What You Should Know About The Food Lab
Founded in October 2020, The Food Lab is a cloud kitchen platform, but it also describes itself as an infrastructure company for Egypt’s food and beverage (F&B) restaurants, which number around 400,000. The company offers a comprehensive range of end-to-end services, including procurement and cloud kitchen (kitchen as a service).
The Food Lab’s virtual brand consultant democratises data and gives specific information to these brands about their operations and finances. It’s essentially a data-centric dashboard powered by machine learning. Menu reengineering, marketing, profit margins, customer segmentation, and buyer persona classification are among its other data points.
According to the founders, launched with one kitchen, The Food Lab, having opened another kitchen last year, saw 10X orders growth and a 60X revenue increase.
According to the startup, the Food Lab is used by more than 50 restaurants and food brands, and 175,000 end customers have placed orders through its facilities. Aggregation, marketing, and procurement expenses are all charged in proportion to the client’s revenue. As a result, the Food Lab’s revenues have increased by 25-35% month-on-month.
Taking Over Egyptian Market with $45M Seed
Because of the apparent cost advantages of operating out of a shared kitchen, cloud kitchens are becoming increasingly popular in emerging economies, especially as food delivery services are in higher demand.
The companies active in Sub-Saharan Africa, such as Kune and Ando, are pretty modest. On the other hand, the Middle East is dominated by big players like Kitopi and REEF. The Food Lab claims to be the first of its kind in Egypt, which sits at the crossroads of both markets.
With this pre-seed, the startup plans to expand further in the country and lay the groundwork for entry into the Middle East and Sub-Saharan Africa.
“First thing is to completely take over the Egyptian market, especially in Cairo or some key governorates that we want to have a strong footprint. So this is the geographical expansion part,” said El Daly, who is the company’s founder and president.
“Other than that, we have hiring plans for some community roles and operational positions. And the third thing is for us to develop further our technology solutions for our customers, partners and customers.”
The pre-seed round was led by Africa-focused fund 4DX Ventures and UAE-based venture capital firms Nuwa Capital and Shorooq Partners, one of the largest in Egypt after Rabbit, Telda and Milezmore. Other participating investors include Al Faisaliah Group and Samurai Incubate.