How Virtual Kitchens are Redefining Food Delivery in Africa

In Nigeria’s dynamic startup ecosystem, the journey to profitability is often a long and winding one. This is especially true for the food delivery sector where the business terrain is notoriously unpredictable. It’s a market of paradoxes, with success and struggle frequently coexisting. As a founder navigating this space, I’ve found that thriving here requires more than just innovation. It demands an obsessive focus on product quality and consumer satisfaction, agility, dynamic and efficient cross-functional strategy, strategic partnerships, and the ability to swiftly adapt to shifting consumer behaviours.

Founded in late 2021 with a commitment to redefining on-demand food delivery in Africa, FoodCourt set out to make a real impact by delivering convenience, quality, and consistency to our customers. While we’ve consistently delivered on this, we also recognise the importance of achieving profitability. Going into Y Combinator was instrumental in building a foundation that values both growth and sustainability, reinforcing our belief that being obsessive with customer satisfaction can go hand in hand with establishing a profitable business – a cornerstone of lasting success. FoodCourt, within the last three years of operations, has managed to scale the path to profitability with revenue retention at 121.8%, and we are optimistic that this upward trajectory will continue. This is no small feat in the fast-paced world of food delivery, and we have learned invaluable lessons along the way – lessons that are worth sharing.

Leveraging technology to create a dynamic, efficient cross-functional strategy where resources like labour, equipment, and rent can be shared across key business components, is essential for profitability. This approach lowers overhead and boosts output. Operating in Nigeria is costly, with rising expenses, particularly in infrastructure and operations, that can quickly eat into profit margins if not carefully managed.

Understanding this challenge when we were starting in the food delivery sector, the concept of cloud kitchens was what we embodied – a delivery-only food service through which multiple distinctive restaurants can operate out of one large dark kitchen. Customers can easily order from any of our restaurants through our app, and our unique “multi-brand ordering” model – which traditional aggregators struggle to implement – offers a seamless, personalised dining experience. Our customers can satisfy diverse cravings by ordering dishes like amala, a burger, and jollof rice – all in a single order from our various restaurant concepts. We currently operate over 15 distinct restaurant brands, making us Africa’s fastest-growing internet restaurant company. This model allows us to cater to varied tastes while cross-utilising resources across brands to minimise waste and reduce costs without compromising customer experience or dish quality. Sustainability is core to our DNA, and we approach this through initiatives such as selling food waste to farms and supplying used cooking oil to biofuel companies.

At FoodCourt, we’ve repeatedly launched new restaurant concepts with close-to-zero capital expenditure by cross-utilising resources from existing ones. For instance, we’ve launched a shawarma concept, everyday-Nigerian, and dessert concept, all without incurring significant additional costs. Through technology, each of these virtual kitchens cultivates strong individual brand identities, allowing them to compete effectively with traditional brick-and-mortar restaurants in terms of customer mindshare. This ability to rapidly and cost-effectively expand our culinary offerings allows us to stay agile, responding quickly to emerging food trends and evolving customer preferences while maintaining operational efficiency.

This principle resonates across industries, sparking ongoing discussions about asset-light versus asset-heavy models, and the drive to do more with less. While many businesses can’t fully adopt an asset-light approach, the key question should always be: what processes can be streamlined with technology?

While having a cross-functional approach is important, staying attuned to consumer behaviour is equally crucial. Consumer behaviour in Nigeria, and Africa as a whole, is constantly evolving, driven by increased internet access and the fast pace of urban life. We’re seeing a rapid shift toward online shopping and on-demand services. For startups, this shift presents a unique opportunity to tap into new markets and deliver value where it’s most needed, while staying obsessively responsive to consumers’ changing preferences. As of 2023, 89 percent of internet users in Nigeria had made purchases online, with an additional 24 percent planning to do so soon, according to the National Communication Commission.

By 2025, over 122.5 million Nigerians are expected to shop online, primarily driven by a young, convenience-oriented population with a median age of 18. This age group increasingly relies on digital platforms for their everyday needs and will continue to fuel growth in digital and on-demand services.

The effect of these trends are already evident, with Nigeria’s online food delivery market expected to reach US$2.49 billion in revenue this year, and projected to grow at an annual rate of 14.12% from 2024 to 2029. In running FoodCourt, staying ahead of these trends has been crucial to our growth and path to profitability.

The industry is witnessing an escalating consumer demand for both convenience and variety in food choices – two areas we have made our focal points; fueling our obsession with customer satisfaction. With multiple restaurants on our platform, we continuously introduce new ways for customers to experience and order food, hyper-localise menu options based on demand, and manage the entire process from order to fulfilment. This allows us to cater to diverse cravings and ensure rapid deliveries – often in less than 50 minutes – creating an experience that feels almost instantaneous. We are seeing the results of this strategy: 11,000+ active customers each month over 32,000+ average monthly orders and our average order value is typically 2-3 times that of average food delivery aggregators in the market.

Strategic partnerships are also great catalysts for scaling a business more efficiently. In Nigeria’s competitive landscape, going alone can be tough. Collaborating with the right partners and complimentary platforms or services allow startups to tap into existing customer bases, expand their reach, and deliver greater value without shouldering the entire burden of customer acquisition. When executed correctly, partnerships will create a win-win scenario for all involved. Our business model allows us to collaborate and benefit existing aggregators in our market, creating value even in seemingly competitive situations.

The journey to profitability in Nigeria’s startup ecosystem is undeniably complex, influenced by factors such as inflation and the rising cost of living that affects both consumers and businesses. However, it is also filled with immense potential for those who dare to innovate and collaborate. As we stand at the intersection of technology and consumer demand, it’s imperative for entrepreneurs to not only adapt but also lead the charge in reshaping the landscape. By harnessing the power of technology, understanding the evolving needs of consumers, and forging strategic partnerships, startups can transcend the challenges of today and unlock new pathways to success.

Now is the time for founders in Nigeria, Africa and beyond to embrace this moment of transformation. With thousands of startups paving the way, we must collectively push the boundaries of what’s possible and redefine the narrative of entrepreneurship in Africa. Together, we can create a robust and sustainable future, where profitability is not just a milestone but a shared victory for all.

Henry Nneji – CEO and Co-Founder FoodCourt