India: Zomato invests $15m in Loyal Hospitality, shuts cloud kitchen operations

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Restaurant listings and food delivery firm Zomato has invested $15 million in Bengaluru-based Loyal Hospitality, confirmed a Loyal Hospitality executive to DEALSTREETASIA.

The first tranche of $5 million has already been invested in Loyal Hospitality, which provides a platform for restaurants to expand their operations and outlets through a shadow kitchen model. The infusion will help the company expand operations and outlets further in Bengaluru.

When contacted by the portal, Zomato, too, confirmed the investment in Loyal Hospitality but declined to divulge the amount invested and other financial details.

Zomato is also shutting down its own cloud kitchen operations under Zomato Infrastructure Services (ZIS), per an Economic Times report.

“We have made a small investment for a minority stake in Loyal Hospitality. The purpose of ZIS was to bridge the supply and demand gaps in various micro localities across the country. We only had one pilot kitchen in Dwarka, and we are in the process of winding it down. We learnt that experienced people from the industry like Junaiz should be running operations like this. Hence we decided to back his ambitions with some capital and a lot of experience and data from what we do best – generating consumer demand for great restaurant brands,” said Naina Sahni, Head, Public Relations at Zomato.

“At the core, we want the restaurant industry in the country to grow as that directly helps us grow. We will do whatever we can to enable the growth of the restaurant industry and provide better food to more people,” she added.

ZIS was a kitchen infrastructure service which aimed at working with current restaurant business owners to expand their business to more locations without incurring any fixed cost.

The model could not expand its reach beyond a few locations even after a year of operations, and hence the closure.

The firms is now looking to gain a greater foothold in the cloud kitchen segment through strategic investments as it takes on rival Swiggy in the segment. Zomato’s monthly delivery volume is currently over 7 million per month, lagging behind Swiggy’s 10 million monthly orders.

As per the report in The Economic Times, Swiggy and UberEats were too eyeing investment in Loyal Hospitality.

The investment in Loyal Hospitality will give Zomato access to deliveries from 200-220 kitchens across 10 restaurants in Bengaluru, and expansion to seven more cities by the end of the year.