The Next Wave: Why it rained at your favourite cloud kitchen

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First published on July 19, 2026

I used to be a FoodCourt customer. At one point, every week, I would order the same Korean chicken burger as a treat from the consumer app of Y Combinator-backed CoKitchen. I always had reservations about the delivery times, but the food was good enough to make me stick around—at least until I moved outside the app’s delivery area.

In March, one of my favourite apps went offline after the kitchen staff behind the juicy burger went on strike over months of unpaid salaries. By April 19, all of FoodCourt had paused operations entirely. TechCabal reported the full sequence of events.

When the story was published, many readers reacted much as I did when I was reporting on it. FoodCourt’s food was undeniably good, and that quality helped it build a loyal customer base. In 2024, the company delivered more than one million meals and reached $4.3 million in annual recurring revenue. By most outward measures, business was thriving. Seeing it unravel within two years came as a surprise.

It is tempting to look at FoodCourt’s $1.7 million funding round, completed that same year, alongside its recurring revenue and conclude that none of this should have happened. It is equally tempting to frame the company’s pause as a failed funding story because a financial facility expected to close in April never materialised. 

But I think there is a more useful way to read what happened. FoodCourt is, at its core, a kitchen story. And a kitchen, in many ways, is a factory. Factories succeed or fail on two things: what they pay for their inputs, and how many outputs they can produce from those inputs.

The price of inputs

The premise of a cloud kitchen sounds straightforward. A kitchen that cooks and delivers its own food, with no dining room for walk-in customers. FoodCourt took that model a step further. It operated several virtual restaurant brands and (initially) ran its own logistics, marketing, and customer support itself.

Now consider where the money from a food order actually goes. 

Osarumen Osamuyi, who has conducted more than 200 interviews with riders, restaurant owners, and platform operators for his FoodPod research series, broke down the economics on TechCabal’s Headlines podcast. For every ₦100 ($0.073) a customer spends, roughly ₦30 ($0.022) goes to ingredients, ₦5 ($0.0036) to packaging, and ₦25 to ₦30 ($0.018–$0.022) to customer acquisition or aggregator fees. The remaining ₦40 ($0.029) or so must cover staff salaries, energy, rent, delivery, marketing, and a profit margin that typically sits between 5% and 10%.

Ingredients are the highest controllable cost, which makes the most important question in this business a boring one: how much are you paying for chicken, flour, pepper, and cooking oil? Does that price fall as your business grows?

For Food Concepts Plc, Chicken Republic’s parent company, the answer is yes.

Its financial statements show how. In the year ended December 2025, group revenue grew 12.9%, from ₦95.3 billion ($65.7 million) to ₦107.5 billion ($74.1 million). Yet the cost of raw materials and consumables rose by just 4.6%, from ₦50.2 billion ($34.6 million) to ₦52.5 billion ($36.2 million). During one of Nigeria’s worst inflationary periods in a generation, the company’s input costs grew far more slowly than its sales.

That discipline flowed directly to the bottom line. Net income rose 114.3%, from ₦3.31 billion ($2.4 million) to ₦7.10 billion ($5.2 million), while operating profit increased 58.9%, from ₦7.69 billion ($5.6 million) to ₦12.22 billion ($8.9 million). Operating margin expanded from 8.1% to 11.4%.

How does Food Concepts buy so efficiently? Scale (at least for the Nigerian context). The company operates 271 outlets across 25 states. It also runs pie production factories across the country and a centralised kitchen that processes spices and vegetables for its restaurants. 

For suppliers, Food Concepts is the kind of customer worth fighting for. Large, predictable orders justify lower margins because they guarantee steady business. When you buy chicken for 271 outlets instead of three, you can get the best possible price every time. Every additional Chicken Republic outlet strengthens the company’s bargaining power and lowers the average cost of future purchases.

CoKitchen, by contrast, was buying ingredients for three locations. Its purchasing volumes simply did not give it enough leverage to negotiate favourable prices. If it paid prices close to retail, its production costs remained high, and its margins stayed thin.

One internal email illustrates the difference. A supplier demanded ₦3 million ($2,171) and threatened legal action if the balance remained unpaid. At Food Concepts’ scale, suppliers compete for your business. At CoKitchen’s scale, you compete to keep your suppliers.

The second problem was inside the kitchen itself.

FoodCourt prepared food for several virtual brands from the same kitchens. On paper, the model promises almost unlimited upside. The same kitchen can make a Korean chicken burger (I really miss this burger) for one customer and a bowl of native soup for another, allowing the business to spread fixed costs across multiple brands.

But every additional brand multiplies your ingredient list, your prep stations, and your staff. It also means that you do not get ingredients at scale because you are buying so many different things. Also, a sophisticated kitchen making many different things is a slow kitchen, and slow is fatal in a business where the maths only works at volume. As Osamuyi put it, if you do not sell enough packs of food, the cost of your inputs never starts to fall. (You should really watch the episode.)

Chicken Republic went the opposite direction. Its menu is deliberately narrow, engineered for repetition at speed, which allows its menu to be priced for the mass market. Watch what happens during every economic downturn: the quick-service restaurants respond with a new bundle at ₦1,000 ($0.73) or ₦2,000 ($1.45). They are protecting their margin by ensuring volume.

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A narrower menu would have given FoodCourt the same power. A shorter ingredient list means cheaper bulk purchasing. Fewer prep lines mean more meals per hour from fewer staff. Cloud kitchens live and die by their margins. They need a constantly rising demand for their food, and complexity works against the supply.

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By the end of 2024, FoodCourt was funding a second Lagos branch and a new Abuja operation, its third kitchen across two cities within 18 months. The growth from those branches did not keep pace with the new costs (which also included flights and hotel fees of staff from Lagos to Abuja to help kickstart operations). 

In this business, more locations do not necessarily mean more scale (confusing, I know). With a cloud kitchen still growing, scale comes from density in one city with deep purchasing power and demand that keeps riders busy. A branch in another city, hundreds of kilometres away, means starting from zero and adds new costs.

For FoodCourt, this meant that when one funding facility failed to close, there was nothing left to run the business. 

This is not to say that pursuing growth was the wrong call. Startups are, by design, high-reward, high-risk ventures. Building a successful one takes years of experimentation and, more often than anyone likes to admit, luck. FoodCourt’s executives believed they were making the right move when they opened the new branches. It is only in hindsight that we know the business was not ready.

What operators should take from this

None of this is unique to Lagos. Kitchen United raised $175 million in the US and had sold or closed every location by 2023. There are still survivors, from Rebel Foods in India to Kitopi in the Gulf, who either spent years building brands people recognise or added physical stores, which means they stopped being pure cloud kitchens at all.

For anyone still building in this space, the lessons sit in Food Concepts’ accounts, published every year for anyone to read. Build density before geography. Engineer the menu for repetition, then let a short ingredient list turn into purchasing power. Buy like a manufacturer, because that is what you are.

FoodCourt’s CEO, Henry Nneji, says the company intends to return stronger, and the demand for good food in Lagos is real enough that it might. But whatever comes back should be built on a different foundation.

Muktar Oladunmade

Muktar Oladunmade is a senior reporter at TechCabal. He leads the Startups Desk.

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