Tech-enabled cloud kitchens: An interview with iKcon founders, Khalid Baareh and Kareem Abughazaleh

iKcon, a tech-enabled cloud kitchen operator that procures, cooks, and delivers food on behalf of restaurants and brand owners, recently raised a $5M Pre-Series A funding round, led by Arzan VC, AlTouq Group, and Nazer Group among other reputable investors. Following on from their funding announcement, we caught up with iKcon's founders, Khalid Baareh and Kareem Abughazaleh to delve into how the current climate has affected the startup, how important technology is to iKcon and the food industry overall, their growth plans, and much more.

To start, tell us briefly about iKcon. How does it work?

iKcon was established in early 2019 to address the growing demand for food delivery across the GCC and regionally. Ultimately, we serve restaurants and brands (“Partners”) that are looking to extend their customer reach with minimum capital and operational expenditure. We do this by offering our Partners a turnkey service where we cook and deliver their food through iKcon’s growing network of tech-enabled cloud kitchens across the region, allowing them to reach a significantly larger customer base within the same city, country, and across borders in a short time frame. iKcon manages the entire life cycle of delivery-only restaurant operations focusing heavily on quality, consistency, safety, cost efficiency, and customer service.

Similar to traditional franchises, we enter into agreements with our Partners - they license their menu and IP to iKcon to procure ingredients, cook and deliver their brand’s orders in exchange for revenue-based royalty payments. iKcon’s operations follow our Partners’ strict procedures including supply chain requirements, production, cooking, and marketing techniques.

Our Partners are well-established restaurants, chains, and food entrepreneurs; many having an international presence, with unique and popular ideas/concepts that are looking to rapidly extend their reach while maintaining the same level of quality and consistency.

It is quite extraordinary that you managed to raise this round with the current COVID-19 crisis. Was this in the works from much earlier? 

We started raising our Pre-Series A round shortly before the COVID-19 crisis started in March, on the back of rapid growth we achieved in 2019. Our business model proved to be quite resilient during the COVID-19 crises as many investors were doing their due diligence. This reaffirmed the underlying growth in our industry and iKcon’s ability to capitalize on the opportunity. 

How has the current climate affected iKcon's usage? Did you have to make any changes to ensure continuity and has there been more of a demand?

The traditional F&B retail model is experiencing significant disruption as consumers are increasingly pivoting from dining in to constantly having their food delivered on-demand. The COVID-19 pandemic has accelerated the food delivery market growth and proven the resiliency of iKcon’s business model.

As we’ve been faced with unprecedented times, we’ve had to make certain changes to ensure continuity. We focused on workforce protection, enhanced supply chain planning, and improved communication with all our stakeholders. Our team was working around the clock to reinforce the existing and new hygiene and safety standards while maintaining our high-quality standards. Needless to say, the safety of our employees and customers remained our top priority.

As a team, we also continue to focus on growth, technology development, operational excellence, and attracting the best talent in the market. We are fortunate to be operating in a very attractive space; our sector has remained highly robust during this difficult time.

You are focused on developing the use of proprietary technology. How important is technology to iKcon and the food industry overall?

Our model brings about advanced technological insight and value-added service to the F&B landscape. The solutions we are developing provide in-depth analytics and allow us to efficiently manage the full operation of a diversified portfolio of cuisines from procurement, to order management, to delivery with speed and at a minimal cost.   

We are dually focused on technology and operational excellence, which will be essential as consumers benefit from an abundance of brands to choose from and are increasingly relying on technology to save time across multiple facets of their life. This will accelerate the evolution of automation and robotics in the kitchen, similar to how e-commerce fulfillment has evolved over the past decade. Data will play a much bigger role in how brands are created and the ability of those brands to adapt quickly to consumer preferences. Lastly, we also think that successful brands from around the world will be able to cross borders more easily and with limited sunk costs facilitated through iKcon, giving the consumer more choices and the brand a wider global market to target.

What changes have you seen in the food industry over the past few months, if any? And do you think the changes will become the norm?

There is no doubt that COVID-19 has re-emphasized the importance of food delivery and the convenience that it brings to businesses and consumers.

Moreover, existing restaurant groups are seeing decreased dine-in demand because of COVID-19 and higher dependency on delivery sales. The industry margins are now under pressure as restaurants become even more underutilized while increasing competition puts pressure on pricing. This has resulted in existing owners of dine-in restaurants/chains being no longer able to justify the return on invested capital of expanding into new locations or new geographies. The problem is compounded because managing multiple locations becomes more complex as delivery continues to make up a larger portion of future earnings. 

We definitely believe the new market dynamics will become the new norm.

It’s safe to assume that after this round, you're going to have some exciting growth plans. Can you share some of iKcon’s short-term plans for expansion with us?

We are rapidly growing our network of kitchens across multiple emirates and are in the process of launching our presence in Saudi Arabia. We also have plans in motion to be present in other countries in the GCC and the wider region. We’ve ramped up our talent significantly, particularly focusing on a diverse skillset among our chefs to be able to cater to multiple cuisines. In terms of products, we’ve also been focusing on ensuring a diverse mix of cuisine types and maximizing the utilization of our cloud kitchen network throughout the course of a day.

What were you looking for from your investors, beyond capital?

Our business model is evolving quickly and we look to our investors for introductions in geographies we aren’t present in. We also work closely with them on market expertise and our growth strategy, as we’re blessed to be operating in a rapidly growing sector while simultaneously seeing increased demand for our particular business model.

How important is scaling to KSA for you? And What do you foresee as the largest challenges to scaling iKcon in MENA / beyond?

Scaling to KSA is very important. It’s a large market that offers attractive demographics, high online penetration rates, and some of the more attractive food delivery trends globally. This is true for the GCC region, which is one of the fastest-growing food delivery regions globally. 

What is your big-picture vision for the future of iKcon?

The next five years are going to be very exciting and critically transformational years for the F&B market and we intend to become the regional leader in operating cloud kitchens. 

To achieve our vision, we are laser-focused on methodical expansion while delivering operational excellence and developing proprietary technology via the evolution of data analytics and process automation as key differentiators in our fast-growing space. 

Finally, what advice would you give to yourself five years ago? 

Give in to the itch of launching your own startup!

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The Real Estate industry saw sizable investment activity over the last 5 years, with a total of 16 investment deals from 2015 to 2019. Access more trends and data in our 2019 Real Estate Venture Investment Report.