Things To Consider When Starting A Meal Prep Business- A Step-by-Step Guide

Things To Consider When Starting A Meal Prep Business- A Step-by-Step Guide

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Last Updated: 7th October, 2021

The past decade witnessed the emergence of unique eCommerce businesses. A few of them are meal prep websites, led by incumbents like Hello Fresh, Blue Apron and Plated. There are various reasons behind the success of meal prep businesses, some of which are still relevant in 2021.

Firstly, the Millennials and Gen X population are the top demographic profiles amongst meal prep consumers, comprising around 63.7% of all buyers. They also constitute the population with maximum control over their monetary decisions. Secondly, the general consumers of meal prep businesses belong to high-income families with an average annual income up to $80,000, making the business highly lucrative.

Why are Consumers Attracted to Meal Prep Websites?

According to Numerator, a leading market intelligence organization, the three primary reasons why people like to order food from meal prep businesses are:

Such a business has three primary models as explained below:

  • ordering from meal prep sites saves time in meal planning
  • reduces time in grocery shopping
  • introduces food from diverse cuisines

Apart from these, the Ikea effect (stating that people add value to things that they help create themselves) also justifies the consumer psychology and desire behind ordering ready-to-cook meals.

All aforementioned stats and factors indicate the immense business potential in the meal prep industry. Considering the favorable market scenario and lack of meal prep businesses in several towns and cities, it is safe to conclude that 2021 is a right time to set foot in the meal prep industry.

Table of Contents

Viable Business Models for a Meal Prep Website

Entrepreneurs interested in starting a meal prep business require to understand its viable business models. The existing meal prep businesses are relying heavily on the following models and as per our expertise in the eCommerce industry, we also suggest you to assess them for your business.

Note: Though the actual business model varies from organization to organization, its workflow remains similar. Business owners need to scrutinize and replace some processes in the model to align it with their organization. They also need to ensure that their meal prep software supports the selected business model.

1. The Meal-Kit Delivery Model (Followed by Freshly and Hello Fresh)

Freshly & Hello Fresh
Brand Name Year of Foundation CEO Revenue
Freshly 2012 Michael Wystrach $430 million
Hello Fresh 2011 Dominik Richter $1.17 billion

Under this business model, consumers demand meal-kits on an on-demand and subscription basis. In subscriptions, they can select how many kits they want to be delivered per week and the business delivers those kits accordingly.

Business Flow:

  • Consumers browse recipes/meals on meal prep websites
  • They add a recipe/meal to their cart or select how many meals they would like to be delivered along with the frequency of delivery
  • Consumers make the payment and the business owner delivers the meal(s)

How does this Model Work with Multiple Vendors?

  1. Various vendors/chefs register on the eCommerce platform and enlist their recipes/meals
  2. Consumers browse the enlisted recipes/meals 
  3. They add a recipe/meal to their cart or select how many meals they would like to be delivered per week
  4. Consumers make the payment and the business owner deducts a commission before transferring the rest to the vendor
  5. The respective vendor/chef delivers the meal(s)

Why the Meal-Kit Delivery Model Holds Value for Consumers?

  • It saves their time on meal planning
  • Meal-kit delivery saves time shopping
  • Makes it easy to cook festive meals such as on Easter and Christmas Eve
  • Teaches exciting recipes
  • Pre-cut veggies/meat, accurate proportions and disposable packing reduce clutter and shorten clean-up time

2. Goal-Oriented Meal Delivery Model (Followed by Magic Kitchen and Fresh N Lean)

Magic Kitchen & Fresh N Learn
Brand Name Year of Foundation CEO Revenue
Magic Kitchen 2005 Greg Miller $1 million
Fresh n Lean 2010 Laureen Asseo $40 million

Consumers with special diets and health goals require cautiously prepared meals made with handpicked ingredients. Not only these meals have long prep times but are also expensive for daily consumption. Goal-oriented meal delivery model assists the consumers requiring special diets by subscribing them to week or month-long meal deliveries.

Meals subscriptions also tend to be more affordable in comparison to placing one-time orders on food delivery platforms. Some examples of goal-oriented meals for consumers with health issues are:

  • Diabetic-friendly meals
  • Gluten-free meals
  • Low sodium meals
  • Low fiber meals
  • Low uric acid meals
  • Vegan meals

Similarly, gym and fitness enthusiasts can subscribe to lean-protein, high carbs and keto diet meals as per their fitness requirements.

Business Flow:

  1. Consumers browse goal-oriented meals on the meal prep marketplace
  2. They subscribe to a meal
  3. Consumers make payment and the business owner delivers the selected meal(s) routinely

How does this Model Work with Multiple Vendors?

  1. Various dieticians/nutritionists/chefs register on the platform and enlist goal-oriented meals
  2. Consumers browse the enlisted meals
  3. They subscribe to a meal and make the payment
  4. The business owner deducts a commission from the payment and transfers the rest to the respective vendor
  5. The business owner or the respective dietician/nutritionist/chef ensures the routinely delivery of meals

Why the Goal-Oriented Meal Delivery Model Holds Value for Consumers?

  • Does not require consumers to be health-conscious while eating meals
  • Goal-oriented meal delivery saves time shopping and reduces the meal prep time
  • Pre-cut veggies/meat, accurate proportions and disposable packing reduce clutter and shorten clean-up time
  • Assist consumers in achieving their health goals

3. Pre-Cooked Storable Meal Delivery Model (Followed by Healthy Choice and Smart Ones)

Freshly & Hello Fresh
Brand Name Year of Foundation OWNER COUNTRY
Healthy Choice 1985 Mark Harper United States
Smart Ones 1992 The Kraft Heinz Company United States

Despite the ease and flexibility meal-kit delivery and goal-oriented meal delivery models provide, they are not preferred by extensively occupied consumers. Working professionals and students living alone cannot always be available at their residential address to accept routine delivery of meal-kits containing various raw ingredients. Thus, they are more inclined towards pre-cooked frozen meals like:

  • Instant noodles and rice
  • Lentils and beans
  • Porridge
  • Steak
  • Mashed potatoes
  • Condensed soup
  • Frozen burritos
  • Frozen pizzas

Pre-cooked storable meal delivery websites differ from grocery delivery websites as the products sold on them require the bare minimum efforts to prepare for eating (like reheating or adding seasonings).

Business Flow:

  1. Consumers browse pre-cooked meals on the website
  2. They add meal(s) to their cart and select the order quantity
  3. Consumers make payment and the business owner delivers all the meals at once

How does this Model Work with Multiple Vendors?

  1. Multiple restaurants, food services, and eateries register on the platform and enlist pre-cooked meals
  2. Consumers browse the enlisted meals and add them to their cart
  3. Consumers select the quantity and make payment 
  4. The business owner deducts a commission and transfers the rest to the vendor
  5. The selected restaurant or food services deliver the meal(s)

Why the Pre-Cooked Storable Meal Delivery Model Holds Value for Consumers?

  • Easy to preserve and requires bare minimum efforts to prepare for eating
  • Pre-cooked storable meals save time shopping
  • Properly packed containers ensure the least possible clean-up time
  • Assist consumers in achieving their health goals
  • Suitable for consumers with busy life schedules
  • All meals are delivered at one-time delivery

Checkout the following figure to view the revenue streams compatible with the aforementioned business models.

Revenue Streams for Online Meal Prep Business

Things to Consider Before Starting an Online Meal Prep Business

In an ever-changing world, it gets difficult for business owners to select the correct options to launch a new business. The presence of so many variables, like supply chain setup, delivery process selection and funding options, make it difficult to validate the pre-launch actions. Thus, to speed up the business launch and refine the startup process for entrepreneurs, we have shed light on the constants that are nearly applicable on all eCommerce businesses. 

1. Financial Planning

Financial planning assists business owners in estimating and meeting the business’ financial requirements. To begin, you need to calculate the gross margin of your meal prep business, which is the total sales forecast minus the cost of delivering meal prep orders (cost of ingredients and preparation also in case of single-vendor meal prep businesses).Formula_Financial _PlanningBased on the gross margin, you can create a budget of all expenses (such as software cost, licensing cost, delivery cost, building maintenance, utility bills and salaries) and maintain a balance sheet. Doing so will allow you to track your expenditure on various assets and liabilities.

2. Licenses and Permits

The official registration of a meal prep business will ensure legal protection. It will validate the business obligations towards the government and vice versa. Once a business owner obtains the license, he/she can avail tax benefits and government schemes to acquire leverage over non-registered businesses.

Several private investors also offer funding to registered businesses only, which is a massive advantage of obtaining a license. Business registration and licensing details can be acquired from state or industry-specific statutory bodies.

Some important licenses and permits that are required to launch a meal prep business are:

  • Business license
  • Employee Identification Number (EIN)
  • Liquor license (in case if an entrepreneur wants to deliver liquor through his meal prep business)
  • Food establishment permit
  • Seller’s permit
  • Employee health permit 
  • Building health permit

Visit this page to view the complete list of business licenses and permits.

3. Competitive Analysis

In-depth competitive analysis is required to analyse the strengths and weaknesses of other businesses in the same industry. The analysis will allow entrepreneurs in the meal prep industry to identify key competitors, understand competitor pricing, analyze the existing customer experiences and evaluate the competitors’ unique selling points. Based on these details, a startup can devise a marketing strategy and revise prices to take over the existing businesses in  targeted market(s).

4. Software Technology

eCommerce websites developed using page builders have a captivating front end. They are decent for creating eye-catching websites but lack the dedicated features to conduct smooth online business operations. For a meal prep business, back-end features are required for order management, catalogue management, user management, and handling deliveries. Websites developed by page builders often don’t have the required backend support and the website owner has to rely on third-party meal prep software.

Another issue that arrives when selecting the software technology is budget restrictions. Scratch development of software to support a meal prep business involves programming and testing of too many features. These features vary in prices. Thus via the scratch development method, startups and SMBs can only afford a few essential features, not all. A simple solution to this problem is to opt for readymade meal prep software that require minimum customizations to get started.

5. Server and Hosting

There are different ways by which a business can host its website. Information technology firms describe them as hosted and self-hosted. When a business owner opts for an eCommerce software with a hosted server, the software provider firm is responsible for managing the server and hosting. The firm ensures the uptime of the website and maintenance and upgradation of the server.

However, a downside of hosted eCommerce solutions is that the website can go down when the server crashes. The solution for this problem is self-hosted services. Solutions that are labelled as self-hosted, leave the choice of hosting with the customer. He/She can opt for any type of hosting he wants.

The most popular types of self-hosting services for which entrepreneurs opt for are SaaS hosting, cloud hosting, dedicated server hosting and on-premise hosting.

Check out the following table to understand the benefits of these hosting types.

SaaS Hosting Cloud Hosting Dedicated Server Hosting On-Premise Hosting
In SaaS hosting, a hosting service provider (other than the eCommerce solution provider) hosts the website on a shared server and charges for it on a recurrent basis. In cloud hosting, the website is hosted on a network of several virtual and physical servers. In dedicated server hosting, the website owner gets a dedicated server to host his/her website. The website owner purchases and allocates the server at his/her own physical address.
The hosting service provider is responsible for the maintenance of server and software/hardware upgrades. The hosting service provider is responsible for the maintenance of server and software/hardware upgrades. The hosting service provider is responsible for the maintenance of server and software/hardware upgrades. The website owner is responsible for the maintenance of server and software/hardware upgrades.
If the server crashes, all websites hosted on the server go down. A single server crash does not affect the uptime of the website Server crash can affect the uptime of the website. Server crash can affect the uptime of the website.
Due to multiple websites, the chances of server problems and inadequate resource allocation are high. Resource allocation is managed easily due to the interconnectedness of various physical and virtual servers. The chances of server crashes are comparatively lower than SaaS hosting and all storage and memory resources are allocated to a single website. The chances of server crashes are comparatively lower than SaaS hosting and all storage and memory resources are allocated to a single website.
High security issues High security issues Low security issues Low security issues
Suitable for entrepreneurs testing MVPs of their eCommerce websites or still in the initial years of startup. Suitable for solopreneurs, startups, SMBs and mid-size businesses. Suitable for entrepreneurs requiring large-resources and reliable security for their website. Suitable for entrepreneurs requiring large-resources and reliable security for their website.


6. Managing Human Resources

Depending on the marketing strategy and estimated sales of a meal prep business, the owner will need to hire various employees. A big challenge that the business owner may face is to make business professionals trust his startup. Without the trust, it can get difficult to acquire talented individuals, which will be followed by the problem of low employee retention.

The following options can assist startup meal prep businesses overcome the aforementioned staffing problem:

  • Recruit managers who have experience working in startup firms
  • Hire a virtual assistant for daily administrative work such as scheduling appointments, making phone calls, allocating tasks, accounting, handling payroll and managing social media handles 
  • Tie up with a human resources firm to assist fill positions for non-managerial roles such as delivery personnels, office boys, warehouse assistants, etc.
  • Hire remote dedicated teams or professionals for digital marketing, graphic designing, customer support and IT. Dedicated teams will reduce expenditure on providing hardware resources and daily utilities like water, restroom and electricity.  
  • Hire freelancers on websites like Fiverr for one-time designing, marketing and programming. (If you are hiring a virtual assistant, you can let him/her find and manage freelancers for your business.)
  • Use an employee referral program to encourage existing employees refer their friends and previous colleagues to become your employees

7. Business Insurance

Business insurance is extremely valuable for startup businesses. It has various advantages for a meal prep business, like cover against major losses and damage to important business assets.

Several business insurances also provide coverage for third-party liability, i.e., if your business causes unintentional damage or loss to a person, business or property. Other than benefits, coverage for filing lawsuits, unintentional violation of third-party copyrights and damages and losses due to natural disasters is also included in business insurance.

Note that all insurance policies are not equal and may not carry the same benefits for a meal prep business. For this reason, a 10-days or longer free-look period is provided with the insurance to policyholders. Within this period, policyholders can review the terms of the insurance and make any amends they want. They can also cancel the policy without facing any penalty in the free-look period.

8. Go-to-Market (GTM) Strategy

The Go-To-Market Strategy involves the identification of the value proposition that a business wants to provide to its consumers and a deep understanding of buyer personas. GTM strategy involves how you want to roll your meal prep business in the market and the impression you want to create on your buyers. The GTM strategy is inclusive of several factors such as the development of MVP, pricing, selecting value proposition, marketing, etc.

The 7Ps of Go-to-Market Strategy will help you understand it better:

  • Product

To launch an online meal prep business, entrepreneurs require a website, which is the firstmost requirement in GTM strategy of an eCommerce business. The website will both validate the business idea and attract the first few customers. The easiest way to get a website for idea validation is either MVP development or using a readymade software.

  • Price

The next step in the strategy is to set the pricing of the product in order to maximize profit margin. In case of a multi vendor business, the website owner should select the amount of his/her sales commission.

  • Place

In the eCommerce sector, place refers to the channels through which a business distributes its services and products. In 2021, selecting an omni-channel approach is the most relevant. Omni-channel approach includes distribution via social media websites, third party advertisement, IVR system and several other online and offline channels.

  • Promotion

This step refers to the identification value proposition and formulation of marketing strategy. For startup businesses (both multi-vendor and single vendor) in the meal prep industry, we have outlined the following approach for business promotion.

How to attract consumers on a meal prep website?
  1. For startup businesses, the first marketing objective is to make the consumers aware of the existence of business. For this, publishing ads in newspapers, magazines, billboards and social media profiles can help. Publishing press releases and paid promotions via Instagram and Facebook influencers is also a tested strategy for introducing newly launched businesses.
  2. Once the business is introduced, it should convey the value proposition, i.e., the offerings of your meal prep business to the consumers. Successful meal prep businesses are providing the following propositions: 
    1. First time discounts
    2. Free first meals
    3. Reward points for successful friend referrals
    4. Insulated food packaging
    5. Video directions for meal cooking
    6. Gift cards
    7. Student discounts
  3. Once the sales begin, the meal prep business can retain customers by dropping offers in their inbox. It can also create a VIP subscription or offer corporate discounts.
  4. Quality of photos used to describe the food will play a quintessential role in attracting consumers. Media plays an important role to build temptation and anticipation by providing customers with the necessary visual feedback. Steller photo-editing service providers such as fixthephoto.com that specialize in food photography can give your meal photos the requisite professional edge.
How to attract vendors on a multi-vendor meal prep business?
  1. After introducing the business via advertisements and press releases, the next challenge is to convince vendors to register on the marketplace. This can be done by offering them assistance in uploading listings on the platform as vendors already selling on other websites would be reluctant to do double efforts in uploading their product catalogues.
  2. As the marketplace owner, you can deduct smaller commissions from vendors or charge no commission for the first few orders.
  3. Use email marketing to attract chefs, dietitians and nutritionists on the platform. When approached properly, they will take pride in selling their meals through your meal prep business. If these people are not business owners, you can also promote your meal prep website as a lucrative side hustle to them.
  • People

A business must identify the minimum skills and experience its employees should have to make the business viable. By outlining the key requirements for employees in both major and minor roles beforehand, a meal prep business can hire the employees required to speed up the market launch.

  • Processes

Processes refers to the steps and measures taken to deliver the services and products to the end customer. It involves the finalization of the business model with all changes and personalization, preparation of a sales funnel, selection of payment methods and delivery procedures.

  • Physical Evidence

Physical evidence is the proof of successfully conducted business operations. The proof is required for various reasons such as research and analytics, funding and for statutory reasons. The physical evidence for a meal prep business can be receipts, invoices, packaging order tracking information, etc.

Conclusion

According to a survey conducted by the global business consulting giant McKinsey, Millennials are 6 times more likely to find new brands more innovative. They are also 400% more likely to avoid purchasing from big brands than their parents. Ensuring continuity to disruptive patterns, the above-mentioned statistics highlight the scope for new businesses to enter in the meal prep industry and compete with the incumbents.

To match the customer experience of existing businesses, newly established meal prep businesses require to focus on the value proposition, customer support and scalability of their eCommerce site.

Readymade Solution to Launch a Meal-Kit Delivery Website

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Comments (4)
s shah

This is the best article I’ve read this year. Serious gold
Highly appreciated content STRONGLY RECOMMENDED…!!!

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