Over the last decade, the food industry has welcomed a plethora of trailblazing business models such as on-demand delivery services, online grocery stores, and others. The newest kid on the block is the online meal kit delivery service which has seen a predictable surge in demand during the pandemic.
With stay-at-home orders in place, home cooking became a necessary trend, including fresh ingredients delivered to your door over a take-out. This new service eliminates the burden of meal planning & grocery shopping, making it a well-liked business model.
Headed by giants like Blue Apron and Hello Fresh, this industry has already become an over-a billion-dollar sector. Thus, in 2019, this industry reached $5 billion, and by 2022, the market is projected to double in revenue, accounting for more than $11 billion.
For those who are ready to cash on this growing trend, we provide a viable strategy for starting delivery service. By the end of this article, you will be able to kick off your own meal-kit journey, pinpoint major sales points, and even build a website or mobile application.
Under The Cover of a Meal Kit Subscription Service
In simple words, a meal kit is a box that includes pre-measured ingredients and easy-to-follow recipes. You can either get meal kits through a subscription-based service or pick them up at a grocery store. In the first case, customers can choose their meals and needed portions. The company then delivers meal kits to the customers’ doorsteps with instructions on how to prepare the meal as well as all the ingredients they need to cook.
Meal kits have really clicked with on-the-go consumers who always lack time to come up with a home-made tasty meal. Delivery meal kit services also mean no trip to the store, little to no prep time, and the chance to try new cuisines without forking out a ton of cash. Meal kits are also great for beginner chefs wanting to grow their culinary artistry as well as expert chefs looking to expand their recipe repertoire.
Meal kit delivery owes its concept to Sweden that stood at the gates of this sector in the late 2000-s. Sweden welcomed one of the first meal kit services aimed at achieving delicious home-cooked meals without the hassles of grocery shopping.
Currently, there are multiple meal kit services operating around the world. So, there has never been a better time to jump into this business if you’ve been itching to try.
Now, let’s focus on how this business rakes in money.
Food Service Business Model
The majority of all meal kit delivery services offer flexible subscription plans where customers pay a regular service fee. For example, Hello Fresh, which is America’s most popular meal kit, operates on the same basis.
Hello Fresh allows customers to choose their perfect plan option, including low calorie, family, meat&veggie, and veggie preferences. Then, a user customizes his plan size and places an order. The service includes a shipping fee of $7.99, whereas 3 recipes for 4 people will cost you $7.49 per serving.
One of HelloFresh’s UCPs is the flexibility of its plans. Customers can easily opt-out of the meal kit services at any time and for whatever period they like. The service is available on both the company’s website and Android and iOS apps.
Now that we’ve studied the basics, let’s move on to actionable tips on how to start your meal-kit business.
How To Start A Meal Prep Business: Step-by-step
The best thing about this business opportunity is that it doesn’t require heavy investments. Nevertheless, you cannot start a meal prep service at the snap of your fingers. That is why we have collected the best practices for you to follow.
Step 1. Get to grips with licensing criteria
First and foremost, you must apply for general business licensing along with an employer identification number and food service license that permit you to sell your meal kit.
All in all, you’ll need to pay around $50 for the registration and $30 to $6,000 for the general license. A specified license will cost you around $150 to $1000 depending on the size of your business.
For more exact information, we recommend contacting the municipality where you plan to start your business. Also, the Department of Licenses & Inspections will tell you whether you need a separate license for meal kits.
Now, let’s study the competitive landscape.
Step 2. Do the competitor research
By identifying your major rivals, you can take the best from them and wrap it up into a unique business idea. Thus, HelloFresh and Blue Apron are dominating the American meal kit market, accounting for a lion’s share of all revenue.
HelloFresh delivered its first grocery kit three months after the launch in 2011 and was soon operating in the whole world. When word got out the competitor companies were about to launch subscription services in the US, HelloFresh decided it was time to open an office in New York. And already the next year, HelloFresh kits were being distributed all over the East Coast of the United States.
HelloFresh’s business model is to prepare the ingredients needed for the meal and deliver them to customers, who then have to prepare the meal using recipe cards. The service usually provides about three meals a week for two people at a cost of $60 to $70. Also, the company buys all ingredients right from farmers, hence this meal kit service is significantly cheaper than traditional in-store grocery shopping.
Step 3. Find your strengths and uniqueness
Although the market in question is not as over-saturated as the food delivery service niche, you still need an ultimate selling proposition to stand out. Luckily for you, meal kit companies don’t do a great job at differentiating themselves. For example, almost 40% of all meal kit companies don’t offer a clear USP.
As a USP, you can consider offering sustainable recipes, dinner-party recipes, or special diet meal kits.
Also, consider using biodegradable packaging, which plagues most food delivery businesses today.
Step 4. Collect recipes and liaise with suppliers
After you identify your forte, it’s time to gather a list of recipes for your target audience and find reputable suppliers. The main point is to accumulate a large number of recipes to rotate them throughout the weeks. As for the suppliers, you can reach out to local farmers and vegetable warehouses.
Step 5. Build a meal kit delivery solution
To get your business online, you need to develop a mobile application and a website for your business. For that, find an experienced software development team and ask them for a free quote.
Typically the whole development process includes the following stages:
Once you reach out to the software development company, business analysts get back to you for further project requirements. After that, the development team studies your requirements, takes them apart into smaller pieces, and asks a developer for a rough estimation.
Discovery or Inception phase is aimed at identifying exact requirements and analyzing business goals to make an offer for technical implementation, fix the project scope, and estimate the cost of development. This stage also helps define accurate timelines and development plans.
The timeframe for the Discovery Phase can vary. Usually, it takes from a few weeks to a month depending on the project complexity.
This phase introduces the actual development process. After specifying the project details, a company provides an accurate estimate of all development costs and a list of must-have features. Once the client agrees on the offer, they sign a contract.
After that, the team will break down all functionality into iterations or sprints. Once the specialists implement the main functionality, Q&A developers perform different types of testing. Usually, the testing stage includes unit testing, integration testing, interface testing, and other types depending on the goal. This category of specialists should come to the conclusion that the product has no bugs and is ready for release. After that, the product can be implemented and integrated with third-party software. The development process doesn’t end there – it may continue with further refinements.
Starting A Food Meal Kit Delivery Service: The Bottom Line
Since the launch of HelloFresh, a staggering number of companies have decided to tap into the meal kit industry, offering unique gimmicks and recipes. And although it may seem like this niche is over vent with unique selling propositions of all shapes and forms, aspiring entrepreneurs can still join this field and surface to the top.
However, instead of feeling your way through this business, make sure you study the market and your target audience, as well as build a tailored mobile solution to win over new customers.
Interesting Related Article: “The 3 C’s of Choosing the Best Meal Delivery Service That Drives Your Lifestyle“