This article is part of a study of popular businesses & their business and revenue models so that people can understand how investors look at startups. Examples of which can be seen in our Grab, Setel and Lazada articles. Most information are facts collected publicly, and some are our own assumptions - which are pointed out as such. In this article, particularly, we will be looking at the Dahmakan business model.
Dahmakan is an innovative start-up that is stirring up the food delivery market in Malaysia. We might think it is another food delivery service. There are plenty of those already. However, Dahmakan differs from its competitors in several significant ways.
Dahmakan, which translated from Malay means “have you eaten?”, offers fresh and healthy meals produced daily in their kitchens by the best chefs.
It is a food delivery service that uses artificial intelligence in logistics and cooking automation. It supplies their customers with daily food requests around Kuala Lumpur, Petaling Jaya and Subang Jaya to Putrajaya and Cyberjaya.
Rather than trying to create another marketplace, Dahmakan’s founders wanted to take control of the entire value chain, including food production and logistics.
The startup combines centralized, large-scale production with collected customer data, machine learning and experienced chefs to offer the best possible experience in food delivery.
It uses artificial intelligence for the delivery to the customer and can, therefore, offer the lowest delivery costs in the industry.
Dahmakan was founded in 2015 and is headquartered in Kuala Lumpur, Malaysia.
It was founded by former executives of Foodpanda and was the first Malaysian start-up company to participate in Y Combinator's start-up accelerator program.
*Note that the statistics used may be slightly dated*
The eServices market segment 'Online Food Delivery' includes two different delivery service solutions for ready meals: restaurant-to-consumer delivery and platform-to-consumer delivery.
Revenue includes the Gross Merchandise Value (GMV), which is defined as the total sales dollar value of goods/food products sold through the online food delivery marketplace. The revenue of online food delivery in 2020 is US$192m which means an increase of 32.4% yoy. The number of active users in 2020 is currently 6.2 m users. This means an increase of 23.8% yoy.
The delivery service solution that has generated more revenue in the years from 2017 to 2020 is the Restaurants-to-Consumer delivery. However, it is expected that in the next few years until 2024, platform-to-consumer delivery and restaurant-to-consumer delivery will roughly balance each other out.
Since Pizza Hut launched the very first online ordering of pizza in 1994, online food delivery has become a billion-dollar business.
Although platform-to-consumer delivery companies such as Deliveroo or Uber Eats operate a more cost-intensive business model, these companies have become more important in recent years, especially in densely populated regions such as cities. However, platform-to-consumer delivery companies take care of the entire delivery logistics, which is not the case with restaurant-to-consumer delivery.
Both models are likely to converge with increased competition between in-house and third-party solutions.
Cloud Kitchen is a new concept in the food delivery industry which is very promising. Dahmakan is also a start-up that has adopted the cloud kitchen concept.
There are 6 different Cloud Kitchen concepts.
This is the original cloud kitchen model. It describes a restaurant without any seating space and any physical storage, so without a storefront. This allows restaurant owners or newcomers to the grocery business to avoid high rents and real estate costs.
The more complex cloud kitchens are based on data intelligence, such as territorial demographics of residents, popular food and hyperlocal demand-supply.
The idea is to satisfy the need for the most ordered kitchen within a radius of 5-6 km with relatively few restaurants serving these dishes. This model is smart because it positions each brand as its own individual business.
And a single shared kitchen keeps operating costs low. This model is very similar to the original cloud kitchen model without a physical shop front. You could think of it as cloud kitchen restaurants with specialized cuisine, owned by the same parent brand and sharing the same kitchen.
This type of cloud kitchen is a kind of mashup between a takeaway restaurant and a cloud kitchen. This business model is similar to a cloud kitchen business model in general but has a storefront. This allows customers to go into the restaurant and see how their food is prepared or pick up their food right away. In essence, this model takes advantage of all the operational efficiencies of the cloud kitchen business model, but also has a "real" storefront with customers.
This cloud kitchen model often referred to in food industry circles as a "shell", is an optimally located empty kitchen space with a minimum of infrastructure.
Established, but also new restaurant businesses can rent kitchen space and then use for example Swiggy's online ordering, delivery fleet and menu intelligence to set up a restaurant.
The restaurant brings the equipment, manpower, raw materials and recipes. Put simply, the restaurant cooks and Swiggy manages the rest.
The Zomato model is based on the idea of rental kitchens, but with built-in kitchen equipment and comprehensive processes. In this model, Zomato shares its expertise in managing the order demand.
Like the Freshmenu model, these cloud kitchens also have a storefront that customers can walk into. This model is a mash-up between a cloud kitchen and a takeaway restaurant, similar to the Freshmenu model, all driven by the insights of Zomato.
This is the last and a relatively new concept in the business model mix of the cloud kitchen. This model provides for complete outsourcing, in which all kitchen and delivery processes are outsourced.
A large part of the kitchen preparation is outsourced and delivered to the start-up kitchen. These chefs can then take care of the final touches, and Kitopi will pick them up again for delivery.
“Dahmakan is well-positioned to serve the growing demand for food delivery services in Southeast Asia with its unique, technology-forward approach of taking control of the entire value chain to provide affordable delivery options to SEA’s rising middle class.”
This statement was made by Eric Martineau-Fortin, managing partner of White Star Capital, during a press release regarding the financing of Dahmakan.
Dahmakan seems to be different from its competitors. The startup pays a lot of attention to customer contact and relationship.
The company's full-stack platform is based on an operating system that controls almost every step of the operation, from recipe development to last-mile delivery, and its cloud kitchens are part of "satellite" hubs located in different cities to be closer to the customer.
Unlike many other delivery services, Dahmakan does create its meals. They offer about 40 options each week from a database of 2,000 dishes, instead of delivering from restaurants.
Other food supply platforms such as UberEats, Deliveroo and Foodpanda act as intermediaries. They collect food from stalls and restaurants and deliver the products to the customers. Dahmakan, on the other hand, delivers food prepared by in-house chefs in a centralised kitchen.
Dahmakan applies AI in logistics and cooking automation to make food delivery affordable for millions of office workers in Southeast Asia. 80% of workflows, including delivery and food production, is automated by AI-supported operating systems and proprietary algorithms.
The company does market research, and analyses customer data (food preferences and spending habits) to create a weekly menu.
This menu is given to the customers and they can determine the appropriate delivery time.
Dahmakan announced in February 2020 that it had completed a USD 18 million Series B.
The investors include Rakuten Capital, White Star Capital, JAFCO Asia and GEC-KIP Fund, as well as the participation of South Korean food manufacturing app Woowa Brothers and returning investors Partech Partners and Y Combinator.
This brings Dahmakan's total financing to around USD 28 million. The last financing round was announced in May last year.
Functioning partnerships are essential for a successful business model. For a food delivery service like Dahmakan, which employs its chefs to produce its food, especially farmers are essential partnerships. They can provide the company with fresh ingredients so that the quality of the food is always optimized and generally very high.
It is also important to look for a collaboration with a company that provides kitchen supplies at a good price-quality ratio.
Since customers can also order drinks with their food, partnerships with large beverage companies are also advisable.
However Dahmakan does all steps of the operation themselves, so there is no need for many partnerships.
The main activity that needs to be done is creating the app with all its functions to get the business started. Apart from that, the main goal should be to create a customer base to ensure the generation of sales. There are many food delivery services in Malaysia, so this activity can be one of the most challenging. Marketing must be very strong, so people can remember Dahmakan. Last but not least, Dahmakan has to build its partnerships to get their business going. Above all, finding chefs is essential for Dahmakan to be successful in the future.
Dahmakan's Business Model conveys many values to its customers.
They offer freshly cooked food from in-house chefs with delivery to the office or your front door at home. The ingredients they use are fresh and sourced from the local area.
Dahmakan promises the highest quality in their food.
It is possible to have your food delivered at any time and save money by placing an order. Especially through a referral program consumers can save money and recommend Dahmakan to their friends and colleagues.
The key resources that should be available for the smooth functioning of the Business are sufficient capital to carry out all the operations, the kitchen supplies and food ingredients. At Dahmakan, the chefs are at the heart of the business. The quality of the food speaks for the image of the company. Also, for the website design and development of the app software engineers are needed.
To be able to run the business smoothly, Dahmakan needs a well-functioning team with employees in all areas such as marketing, logistics, finance etc.
The operating costs of food producers are notoriously high and reduce profitability. However, Dahmakan is one of several start-ups that use "cloud kitchens" closer to the customer to reduce delivery costs.
Cloud kitchens are very cost-effective and operate with low operating costs.
Compared to a traditional restaurant, a "cloud kitchen" eliminates most of the operating costs. These costs include, for example, renting a larger room, labour costs, costs for decoration and conversion and much more.
Take for example the labour costs, which are approximately 50% of the average monthly income of a restaurant.
On the other hand, a 500 ft² cloud kitchen can efficiently serve the same number of customers as a full 1500 ft² restaurant.
However, capital is still required for the employees, business employees, software engineers, chefs & delivery guys.
Also, the equipment for the Cloudkitchens needs to be provided so that the chefs can prepare their food.
The cloud kitchen concept saves a lot of money compared to a traditional restaurant.
Dahmakan generates its revenue through its self-cooked food and delivery. They do not outsource any of their processes, which keeps the money in the company. Dahmakan also sells additional products, such as soft drinks and the like, which are not produced in-house. However, they do not receive commission revenue like some of their food delivery competitors.
One of the disadvantages of the model of Cloud Kitchen is that it is more difficult to establish a customer relationship compared to traditional restaurants.
The entire customer communication takes place online. To overcome this deficit Dahmakan has set up a member club for high priority customers.
Additionally, it is possible for Dahmakan customers to set up a prime account with which they can get discounts and that offers other features. To attract new customers, Dahmakan also offers discounts to first time users.
However, if users have any comments or complaints, they can always contact customer service.
This enables Dahmakan to build a good relationship with its users, despite this business model does not make it easy.
To order food from Dahmakan as a consumer, the consumer can do so either through the Dahmakan App, available in the App Store and Google Play Store or directly on the website Dahmakan.com.
Dahmakan has also uploaded advertisements online, such as on YouTube, to draw attention to their company and its products. The startup also has an Instagram profile with which they communicate with their customers and publish advertisements.
The channels are primarily used to promote the app and the use of the website to increase the demand for the products.
The customer segment of Dahmakan appears to be pretty wide and versatile.
However, Dahmakan is extremely specialized in office workers to deliver their food directly to the workplace.
Also, millennials, who use their smartphones for almost everything these days, are one of the main customer segments Dahmakan is trying to reach. However, all smartphone users are the target group of the company.
Until now, Dahmakan's service is only available in the Kuala Lumpur and Bangkok area. However, their service can be extended even more in South East Asia.
It's easier than ever to have food delivered right to your door, anytime, anywhere. Thanks to all the on-demand delivery applications available today.
All you have to do is download one of the apps for food delivery, make a choice, place an order and pay via your smartphone, pay on delivery or pick up your product on-site and pay for it there.
Consumers and sellers benefit from these apps. However, there is fierce competition worldwide. Which food delivery apps are available in Malaysia but also oversea?
QuickSent is above all a company that focuses on offering halal and pork-free food delivery. The prices depend on the available restaurants. QuickSent offers a variety of Malaysian cuisine. Through the app, you can quickly find vegetarian, pork-free and halal restaurants.
They are serving areas like Taiping in Perak, Sungai Petani in Kedah, Kota Kinabalu in Sabah and more. The team tries to deliver the ordered food in less than an hour.
The company additionally offers a Quick Grocery delivery service. Also, a quick parcel delivery will be available soon.
Honestbee is another food delivery service on the Malaysian market. The popular platform delivers food to customers living in Kuala Lumpur, Petaling Jaya, Subang Jaya, Puchong. The company plans to expand the delivery space even further. Customers can choose to order on the website or through Honestbee's app in a variety of restaurants, whether Western, Fusion or Malaysian cuisine.
Foodpanda is a mobile marketplace for the delivery of food, available in 13 countries worldwide. Foodpanda has mainly focused on the Asia-Pacific region. However, they are also active in Bulgaria and Romania and their headquarters are in Berlin, Germany. The Foodpanda Group is an online food delivery services marketplace with a focus on emerging markets.
The company enables restaurants to be visible in the online and mobile world and provides them with constantly evolving online technologies. For customers, Foodpanda offers the convenience of ordering food online with a wide range of gastronomic choices from which they can choose their favourite meal online or on the app.
Foodpanda is one of the market leaders in the majority of its markets, including India, Russia, Singapore and Hong Kong. The company has developed proprietary software and technology for 38,000 partner restaurants and over six million active users. Also, Foodpanda enables on-time delivery and quality through its proprietary delivery service technology and operational processes - even in complex markets and cities.
Another important player in Europe is the food delivery service 'Just Eat'. The company was founded in 2001 and now covers more than 82,000 restaurants. In 2017 Just Eat empowered around 21.5M customers, of which 11M were active, ordering more than 170M takeaways everywhere around the world.
Deliveroo is a start-up whose delivery service is available in over 200 cities. Their headquarters are in London. Deliveroo is the best-known food delivery service in Europe.
It allows customers to order food in restaurant shops that do not have their facilities and charges the customer and the restaurant a fee for this service. Customers are charged according to their order, while restaurants pay a commission.
Deliveroo also offers a reward system to motivate their customers. App usage is high due to the increased number of customers, superior customer value and wider choice of restaurants around the world, making it one of the best apps for ordering food available anywhere in the world.
Even Amazon, the US American e-commerce giant, has invested $575 in Deliveroo.
Who does not know the ride-hailing giant Grab?
It not only offers fast rides but also implemented a food delivery service in Malaysia since 2018. With this service, customers can order their food easily and conveniently to their homes. Grab delivery works perfectly, and customers are credited with points every time they order so that they can receive discounts at a later date.
There is no separate app for GrabFood, which makes the service more comfortable for partner restaurants and delivery partners. Grab has combined all its services in a single app.
GrabFood uses its transport and logistics network to ensure that your food products reach you in the shortest possible time. As far as the choice of food is concerned, it is growing day by day with a large number of food vendors to choose from.
Similar concept as Dahmakan, GrabFood has developed its brand for cloud kitchens, GrabKitchen. With its latest expansion to Indonesia, Thailand and Vietnam, GrabFood now has 20 live kitchens throughout South East Asia.
Another start-up that tries to make food delivery in South East Asia more efficient through a vertically integrated model & cloud kitchens is called Grain. It is supported by investors like Openspace Ventures, First Gourmet and Singha Ventures.
Grain, based in Singapore, is a food delivery start-up company focused on clean, healthy food. They aim to bring value to customers by improving their lives through meaningful food experiences. Grain's cloud kitchen model is working with their chefs, menu and delivery team to guarantee the best quality and service for the end consumer.
Both Dahmakan and Grain have established "satellite" hubs that allow them to efficiently provide their services to customers in different parts of the city.
Grab and Grain might be the biggest competition right now in the Malaysian market for the start-up Dahmakan.
It is obvious that as a provider of a food delivery service you have a lot of competition that you have to face. In which aspects Dahmakan distinguishes itself will be further analysed in the Startup Fundamentals.
When we talk about the problem with Startup fundamentals, we are talking about the problem that Dahmakan is trying to solve. Dahmakan was introduced to eliminate the pain points of food delivery customers face when ordering meals online to their home or office.
It addresses the problem that it is hard to find healthy meals that are straight delivered to your door for reasonable prices. The customer interaction is completely virtual.
Dahmakan wants to solve this problem with the concept of the ''Cloud Kitchen''. On their website, they offer a variety of dishes that customers can pre-order and have easily delivered to their homes.
A cloud kitchen is a professional kitchen that only produces food for delivery and unlike a traditional restaurant, there is no dedicated dining area where customers can eat.
The customers usually also do not have the possibility to pick up their orders. Usually, the customers do not visit the cloud kitchen either, so it consists of only one area for food preparation, without tables, waiting for areas or service counters.
One could also call this type of business a ghost, virtual, commissary, satellite or dark kitchen.
As the food delivery industry is relatively new and upcoming, there is little to no statistics on the market size of the industry. Therefore, estimations must be made to gauge the market size of the food delivery industry. The assumptions made here are that the food delivery industry will continue growing at its current rate allowing us to predict at least 10% of Malaysia's population uses food delivery apps. This is around 3.15 million.
Assuming those active users order 4 meals a month with an average price of RM 15, that would be RM 60 of transactions per customer per month. This would also mean an average yearly revenue of RM720. Therefore, by multiplying 3.15 million by RM720 we get a market size of RM2.268billion. Once again, these are our own estimations and are by no means the actual market size of Malaysia's food delivery industry. Although, they do give a good representation of the food delivery industry in Malaysia.
Dahmakan uses unwanted or unused retail space to prepare meals via digital orders. It can still be difficult to offer niche food to the mass population, especially when the price of the food is an important factor.
Dahmakans' co-founder Jessica Li makes it clear that the company has found a way to scale food production for thousands of deliveries while maintaining a high level of quality.
According to the co-founder of the startup, the costs are even 30 per cent below comparable restaurant prices. This means that Dahmakan not only offers healthier food than most of its competitors but is also competitive through its prices.
The most scalable Business Models are those that are considered as a Software as a Service (SaaS).
Dahmakan is an Application as a Marketplace model. Costs are mainly to maintain tech, gain new customers and pay for the chefs and business employees.
Cloud kitchen, in general, are very cost-effective and operate with low operating costs.
Compared to a traditional restaurant, a "cloud kitchen" eliminates most of the operating costs.
Additionally, the company offers premium accounts and a member club. The member club works as a subscription-based model. For a monthly membership fee of RM29, the customer can order all the Promo meals for RM 9.90, Combos for RM15.90 and the remaining meals for Rm 19.90. The client can save up to 50% on every ordered meal. Additionally, there is no service and delivery charge.
Dahmakan can't be considered as a highly scalable model because the cost of selling the software is zero. However, the cost of selling meals and delivering it is significantly higher. Therefore, Dahmakan can be considered scalable but not highly scalable.
When determining the team in relation to the Startup Fundamentals, the background experience of the team members is of primary importance. It is also important how many employees a start-up has that are available full-time for the company.
We usually evaluate through interviews to find out about their GRIT, if they have the right attitude, if they work well together and if we believe they can take the company all the way becoming a unicorn. However, in this article, it is not possible as we did not interview the team so we could not evaluate those aspects.
According to the career site LinkedIn, at the moment around 131 employees are working for Dahmakan. Many of them have prior experience in FinTech companies and/or delivery service companies.
The three founders all have considerable background knowledge, which will help running the company.
Jonathan Weins, a German entrepreneur, is co-founder and CEO of Dahmakan.
After studying at Maastricht University in the Netherlands, LSE and Hong Kong University, he started his career in investment banking in Germany (Deutsche Bank, Leonardo & Co). He then worked for a while in management consulting (McKinsey). He then moved to Hong Kong, where he helped found Foodpanda. He was even named Forbes 30 under 30.
Jessica Li is co-founder and COO of Dahmakan. After graduating from University College London and completing her Masters at New South Wales University, Jessica started her career as a strategy consultant with PWC and was subsequently part of the founding of Foodpanda in Hong Kong.
Christian Edelmann is co-founder and CTO. He graduated from the Technical University of Munich and also studied at the Hong Kong University of Science & Technology. Christian started his career at Capgemini as a project manager in software development. He co-founded two different startups before becoming a software engineer and product manager for Allianz X.
Without having more detailed data about the team, it can be assumed from the information collected that it is a well-functioning startup and the team is committed to its success. This is because, from the data given above, it can be seen that all three founders come from extremely successful academic backgrounds who then developed their careers to an impressive degree.
In terms of revenue traction, doesn't provide any public figures. However, with the user data found online, one can make some assumptions. According to an article of KrAsia in July 2019, Dahmakan has a total of 500,000 monthly active users in the two cities where it operates.
Assuming those active users order 4 meals a month with an average price of RM 15, that would be RM 60 of transactions per customer per month.
Since Dahmakan does not have to hand over any of the money to third parties as they do not outsource any of their processes, their revenue should be about RM 60 per person per month x 500,000 customers= RM 30,000,000 Sales Revenue/month
As for a full year, we estimate that the sales revenue could be around RM 360 million as of now for Malaysia alone. Of course, these estimated figures will not correspond exactly to reality. However, they will help to draw a big picture, which will help to understand the startup better.
As there are no concrete numbers to be found online, these figures are only simple assumptions to help us understand the business model.
When talking about monetisation in Startup Fundamentals, it means how the business model can be turned profitable when needed and on how high the margins are in a long-term view.
The Cloud Kitchen model is based on the principle that there is no physical restaurant in which guests can sit down and eat. This saves many costs such as for rent, labour costs, furniture, etc.
Since Dahmakan also takes care of the delivery itself, the company reduces delivery costs by not having a third party deliver the food. Cloud Kitchen are very cost-effective and operate with low operating costs.
A restaurant has an average profit margin of 3% while the concept of a cloud kitchen provides a profit margin close to 10%.
Within the different business models for Cloud Kitchen that were already explained in the article, Dahmakan is considered as an independent Cloud Kitchen model.
Dahmakan is Malaysia's first food delivery app that consists of a single brand, a single kitchen and not a fully integrated business model. Customers place orders online, the in-house chef cooks, and the delivery service delivers the food directly to the customers.
Dahmakan also speaks of a fully integrated model. This model manages the complete food cycle and offers all 3 services without outsourcing - ordering, cooking and delivering.
As the company has been in existence for five years by now, it is safe to assume that it is growing rapidly and Dahmakan is investing in its employees. Employees are in the company's case the kitchen chefs, delivery guys and business employees.
There is no information available online about how much an employee earns at Dahmakan. Through research on various startups in Malaysia, however, it can be estimated that the average salary is around RM 4,500. The average salary for a delivery driver in Malaysia is RM2457 and the average kitchen helper salary is RM1553. A business employee working in a startup earns around RM5000. All those numbers are again assumptions made by NEXEA to draw the bigger picture.
It is also unclear whether all employees of Dahmakan are registered on LinkedIn. However, we now assume a number of 130 employees that are registered on LinkedIn, who earn an average salary of RM 4,500. With these figures, it is now possible to calculate the costs that Dahmakan pays to its employees every year. 130 employees x RM 4,500 x 12 months result in RM 7,020,000.
The above excludes other costs like office expenses, marketing costs, sales costs, and so on. Let's say, these add up to 30% of the estimated revenues above, which is typical of high growth companies which are RM 120m (360m/3). So we can calculate their rough profitability: RM360m - RM120m - RM7,02m = RM232,98m. Therefore, we can assume that Dahmakan may be already making money.
These numbers do not correspond to reality and are assumptions that Nexea has made through online research and own experiences. Online there are no exact figures to be found about Dahmakan.
Cloud kitchen, a new concept has entered the food industry from the back door. The number of investors supporting start-ups of cloud kitchens has increased considerably in recent years.
Cloud kitchens are a growing phenomenon in Malaysia but also around the world as consumers are increasingly deciding to eat in rather than out in restaurants. The Cloud Kitchen model has evolved to take advantage of this demand without the extra cost of traditional take-out or meal-in services.
Reports indicate that the cloud kitchen concept is gaining ground with the highest CAGR among other segments of the hospitality industry.
There is a huge potential for the cloud kitchen business, even if this does not mean the end of restaurants or retail. The biggest winners will be start-ups that want to enter the restaurant business with lower overhead costs.
There are several advantages to the usage of a cloud kitchen. The biggest benefit is that it can dramatically reduce costs for businesses as cloud kitchens eliminate the need for dining rooms and service personnel.
As the restaurant sector is considered a very risky sector, cloud kitchens are a major advantage in this industry. Many companies fail within the first year in this sector. But cloud kitchens are not bound to the same risk, because aspects such as location, investment in real estate or even the purchase of special equipment, e.g chairs, desks for a restaurant, are not necessary. Cloud kitchen can be operated from anywhere.
Also, greater efficiency can be generated because the sales process and service remain in the background and the quality of the food in the foreground.
However, this sector not only provides an advantage. For example, low costs and flexibility can also be a challenge for a start-up.
Companies using this model may face a degree of mistrust or prejudice because some people see them as a threat to traditional businesses. There may also be concerns about how well these kitchens are regulated.
Creating a reliable brand is essential when your customers are unable to visit your premises. Building good customer relationships through social media can sometimes be a challenge. Establishing a customer-friendly system for complaints and reviews can make all the difference.
With the right technology to manage sales and communications, the cloud kitchen model can be a huge success for you while providing your customers with a service they love.
There is a huge opportunity for the cloud kitchen business, even if this does not automatically mean the end of restaurants or retail as we know it. The biggest winners will be start-ups that want to enter the restaurant business with lower overhead costs.