Munchery – Delicious, delivered
Munchery – Bringing fresh, chef-prepared meals to your door on demand.
Not your typical delivery meal
Munchery has transformed meal delivery into an innovative, gourmet experience. CEO Tri Tran cofounded Munchery in 2010 with Conrad Chu when looking for answer to the question “What’s for dinner?” for their families – how could delivery go beyond pizza or Chinese takeout at an affordable price?
Five years later, Munchery has experienced explosive growth, and now serves SF, NY, LA, and Seattle (~5,000 meals a day as of April 2015 [3]). I am a fan of Munchery myself, having ordered frequently while in SF. Having a $12 steak dinner delivered to your door is incredible.
Transforming the food delivery business model
Munchery’s business model works by leveraging technology to create a best-in-class food delivery service.
First, customers log on to the Munchery app/website to review menu offerings. Munchery has an extensive product mix. On any given day, there are close to 50 restaurant-quality offerings, ranging from $9-15 per entree to $2-5 per dessert. The menu changes daily, as each item has been crafted by one of Munchery’s resident chefs (many are celebrity chefs). After reviewing their options, customers can pick a delivery date and time (either same day or a few days ahead), and pay online.
Contracted part-time employees then deliver the order. All food is freshly prepped earlier in the delivery day of choice, and served cold (to ensure freshness and control cooking temperatures). Families and individuals get to enjoy restaurant-quality meals at the click of a button in the comfort of their own home. Munchery focuses on dense, urban markets that have high proportions of their target market (families, couples, health-conscious mothers) and allow for ease of delivery.
Reinventing the food delivery model
The secret to Munchery’s success lies in their unique operating model:
- People:
- Munchery’s model utilizes its core labor (chefs) in a unique way. The Munchery team hires celebrity chefs and offers them great salaries, revenue share (% of sales of particular dish), personal recognition on the website, and regular, 9-5 hours. The restaurant world is notorious for overworking and underpaying chefs, and the Munchery provides chefs an attractive venue for their talents.
- High quality-contracted delivery drivers – these drivers are carefully vetted, trained, and paid higher wages than industry averages, resulting in better delivery times and lower turnover rates.
- Food prep process:
- Munchery operates purely through a delivery model, so they don’t own any expensive storefronts. Thus, capital expenditures are minimized (labor, rent, and utilizes costs are reduced). As an example, Munchery spends around 1% of revenue on rent, compared to the 5-6% industry average. Many kitchen spaces are leased, rather than owned.
- Food preparation is optimized for volume and high quality. All cooking is done in large, centralized industrial kitchens instead of traditional restaurant spaces. This space premium allows for more product variety (it’s impossible to have 50+ dishes in a traditional restaurant), and allows for better margins through economies of scale (higher product throughout volume, increased buying power for raw materials).
- There is also considerable investment in cooking technology within these large kitchens. Technology like Wifi-enabled high-capacity ovens allow more automation of the rote parts of cooking, which reduces cycle time and allows Munchery chefs to maximize their time on creative production. [2]
- Delivery process:
- By focusing solely on dinner, Munchery is able to aggregate online orders during the day and optimize delivery routes from their regional kitchens, much like FedEx or UPS. Their drivers work to ensure on-time delivery and customer satisfaction.
Munchery’s focus on people, food process, and delivery process undergirds its unique business model and sets them apart. While there are several competitors (Sprig, SpoonRocket), Munchery is maintaining its competitive advantage through its focus on high-quality chef partnerships and overall food quality. Munchery must make continuous investments in talent and innovation during this period of rapid growth to maintain its market lead.
Implications moving forward
Munchery’s success at reinforcing a business model with an excellent operational model has propelled them to the forefront of food retail. They just raised $85M in their fifth funding round (5-year total of $117M), and their ambitious growth plans relies on its ability to scale quickly and overtake food prep services such as Blue Apron. [1]
The implications on performance are clear. Some investors predict that at their current rate of growth, Munchery will eclipse Chipotle in the Bay Area in 2016. It is growing 9x faster than Shake Shack, a $2.7 billion public company. [2]
Munchery has been making some high-profile hires such as Pascal Rigo, the founder of upscale bakery La Boulange [4] to stay ahead in a competitive market. If they can continue to achieve excellence with their operations, I believe that the Munchery team can become a true food juggernaut.
Sources
[1] http://www.inc.com/christine-lagorio/munchery-branches-out.html
[2] https://medium.com/@shervin/how-munchery-is-literally-eating-the-world-218c6520dc99#.2c9kplm93
[3] http://nextjuggernaut.com/blog/how-munchery-works-business-model-revenue-make-money/
[5] https://www.crunchbase.com/organization/munchery#/entity
[6] http://www.forbes.com/sites/ellenhuet/2014/10/15/munchery/
This is neat, Kathy! Thanks for sharing. I wish they were in Boston. 🙂
I wonder, though – are they profitable yet / what do their profit margins look like? Everything you’ve listed (except for lack of CAPX and leased properties) seems to drive quality (and therefore cost) up, e.g., celebrity chefs, well-paid drivers, a huge product mix (big inventory required). How sustainable do you believe their model to be? I know they’re growing very quickly, but I wonder how much of that is just driven by the fact they’re new.
Thanks Tara!
I am actually not sure if they’re profitable just yet (you know how these Silicon Valley startups go), but their current growth is explosive, and I wouldn’t be surprised if they were profitable very soon. I can’t remember where I read it but their per-meal costs (at least for the food) is actually quite low, particularly in comparison to restaurants, but I don’t know how much their labor costs factor in.
I truly believe they can be sustainable long term if they focus on a) scaling well and b) establish themselves as the dominant food delivery player in each region they enter. Competition is driving down prices of some of their other competitors, but their price point has been pretty steady as they’re trying to be the “gourmet” brand.
Munchery is a great company — I’ve been using them in San Francisco since they launched in 2010. In the old days of Munchery they just had a bunch of different chefs posting their own menus and cooking meals independently, listing them for sale on Munchery’s website… so obviously they have come a long way 🙂
I would love to know what you think about this on-demand meal market in terms of 1) saturation and 2) whether or not Munchery can move fast enough to capture new customers in other big cities, or if they will be blocked by an UberEats-type competitor that already has the infrastructure and service in-place to expand quickly. There are a few other Bay Area competitors like Sprig and it seems like Plated and Blue Apron are also indirect competition through they provide meals in different stages of “readiness”.
What features of Munchery’s model do you think set them apart from other direct and indirect competitors — and, importantly, what is the top risk in your mind associated with correctly scaling this business?
Hi Libby,
Thanks for commenting. I think you’re totally on point in terms of the key questions of saturation and growth. I don’t know their stats on saturation (definitely not public info at this stage), but anecdotally I feel like the number of mentions of Munchery I heard in my SF group exponentially grew these past two years. I personally believe that they can move fast, particularly in comparison with their most direct competitors, and they already have zoomed into LA, Seattle, and NY (as a comparison point Sprig and SpoonRocket are only in the Bay Area at the moment). They’ve been moving into the “ready to cook” market, so I think Blue Apron and Plated will definitely be on their radar more frequently in coming months.
Of all of their challenges, I think the quality of their food and customer experience will set them apart – and will ultimately be their downfall if they can’t keep it up. Their reason for hiring Pascal Rigo was precisely to make the customer experience portion a centerpiece of their service, whether it is the branding of their plastic ware, the messaging on the website, the featured chef stories, all of it is done in a cohesive way to codify an identify for the brand in a way that you don’t get with their competitors. I think they are enormously good at this and have a creative eye to boot, and I’m excited to see how their scaling experiments evolve.
Love the sounds of this idea, and you just made me hungry. It’s an interesting concept, and super smart for them to create a process that leverages economies of scale. I wonder, though, how large you think they can get. With so many food delivery apps that seem to feed off of people’s desire for speed, convenience and a wide variety of options, do you think the fact that Munchery has limited offerings and only serves dinner will hold it back?
Kathy, thanks so much for sharing! This seems like a great business idea and also a fantastic example of smart business practices leading to success. I’m always excited to learn about businesses that put employees’ welfare at the forefront of their strategy. It sounds like Munchery is successful not despite, but BECAUSE of the fact that they pay their chefs well, provide reasonable schedules, and maintain an overall quality workplace. Like you said, the low capital- and real estate expenditures help too. Looking forward to seeing more businesses like this succeed!
I have never used Munchery, but your post definitely makes me want to! I am used to services like Seamless that offer delivery from existing restaurants, and this business model sounds more scalable and efficient in every way, especially due to the fact that they own the entire process and focus on dinner so that that they can accurately predict demand and handle the resulting routing and logistics. What are the biggest challenges — if there are any — to expanding to other cities, especially ones that already have many large players who offer a greater variety of food?