OYO Looks To Acquire Cloud Kitchen Startup FreshMenu.

Budget hospitality startup Oyo Rooms is in advanced talks with FreshMenu to buy a significant stake in the cloud-kitchen startup, as per sources. This deal would mark the entry of India's third most valued startup in the online food delivery business.

These discussions come months after Oyo raised nearly $1 billion, which pushed up its valuation to $5 billion. "Oyo is building a food team, which will help FreshMenu expand to more cities under the Oyo brand name. The idea could be more about adding the element of food to further build the hospitality business rather than getting into the food delivery entirely," as per a source.

While F&B operations have always been a critical function for hospitality chains, over the last few years, hotels are increasingly focusing on food and beverages operations to boost revenue and drive profits. For instance, for Marriott, F&B contributes 40-45% to its overall revenue.

Lightspeed Venture Partners is the common investor between the two companies. It owns about 11% in Oyo and 30% in FreshMenu.FreshMenu was founded in 2014 by Rashmi Daga. The startup provides a meal kit delivery service from its 35 cloud kitchens across Bengaluru, Mumbai, and Delhi NCR. It claims to receive 13K orders every day with an average order value of $5 (INR 325) as of January 2019.

FreshMenu was earlier in talks with many companies such as Swiggy, Ola, Eat.fit, Zomato and Faasos for acquisition. However, according to the sources, the talks did not finalise due to a mismatch in pricing expectations.