Startup Q&A - How Dinner Thyme Offers a Better Way to Buy Meal Kits
The meal kit is arguably one of the better-known startup business models of the 2010s. You (usually) buy a subscription, a company sends ingredients to your house, and you make a high-quality meal without having to do a ton of work on your own. It's a great idea for sure, but it's also a space now populated by companies as far as the eye can see.
Richard Fay, Founder and CEO of Dinner Thyme, knows this all too well. As a pioneer in the meal kit space and a 25-year veteran of the food and beverage industry, Fay is aiming to use his Manhattan-based company's eCommerce marketplace to offer solutions for making home-cooked meals. But compared to other companies, he aims to make his meals more convenient, provide more options to consumers, and run his business in a way where, unlike so many other meal kit companies, profitability is not so elusive.
I spoke with Fay to learn more about the challenging meal kit industry, as well as his unique history in the space.
Alex Culafi (AC): Tell me the story of how Dinner Thyme was founded.
Richard Fay (RF): Dinner Thyme is the third iteration of the meal kit concept that I started in 2010. The origin of the concept was while I was living in Atlanta Georgia. I owned a small chain of cafes and I would have my employees prep ingredients for me to take home at night so that I could cook dinner quickly and easily for my wife and I. I loved the concept and I played around with the idea of starting a company that did that for others. Nothing came of it until my wife and I relocated to Manhattan and I observed how, in NYC, everyone ordered-in food for dinner and their kitchens were very small.
The company started in 2010 in a small retail space on the Upper East Side of Manhattan, I launched Clear Cut Meals, the first eCommerce meal kit company in the country (the founders of Blue Apron were customers of ours before they launched BA). Five years later, we changed our name to Dinner Thyme and expanded our service to shipping the product to most of the east coast. Two years after that (six months ago), we pivoted the company to a new and innovative concept (Dinner Thyme Marketplace) that leverages the convenience of the new technologies in frozen with the quality and hands-on experience of cooking with a traditional meal kit.
AC: What is your ultimate goal with the company?
RF: As from the start, our goal has always been to provide the most convenient solution to a home-cooked weeknight meal without compromising on the quality or the taste. We want to be a brand name that is recognized across the country.
AC: What is the Dinner Thyme Marketplace, and how does it work?
RF: The Dinner Thyme Marketplace is an eCommerce, direct-to-consumer company that feature convenient solutions for cooking home-cooked meals. Our product is shipped directly to customers frozen for the ultimate convenience. Our menu consists, mostly, of fully-prepped meal kits, but we also feature steaks, side dishes, and desserts.
We are an open marketplace, meaning there are no subscriptions or commitments of any kind. Customers come to our website when they are ready to stock up their freezers. After placing items in their shopping cart, they check out. We ship every Tuesday and the customer receives their order either on Wednesday or Thursday depending on how far they are from our NYC prep kitchen. They hold their meal kits (or other) in their freezer for convenience. The customer thaws the ingredients before cooking (either overnight or using our quick-thaw method which takes about 20 minutes) and then follows the easy step-by-step instructions. Because our chefs have prepped all the ingredients, most meal kits can be prepared in less than 20 minutes. However, the "real cooking" experience is kept intact just enough to leave the customer with the self-satisfying feeling that comes with creating a meal using individual quality ingredients and pots and pans. The cooking experience is that of a meal kit, not a frozen dinner.
AC: Who are your clients and partnerships? What is your business model?
RF: Our clients are individuals, couples, and families that are busy with their lives and value a convenient way to cook quality dinners. They understand that having a convenient and consistent solution to quality, nutritious dinners allows them to eat better and avoid poor dinner choices that are harmful to long-term health.
Our B2C business model is direct through eCommerce, avoiding the traditional frozen food business model pitfalls of distribution through grocery stores. Additionally, our business model is unique within the meal kit industry and was born out of the reality that the current meal kit business model is fatally flawed. This is demonstrated by the little-known fact that no meal kit company is profitable. Lately, the elusive profitability is also causing the meal kit companies to pivot from the current business model to one that has them partnering with brick and mortar grocery stores. We believe this is a desperation move on their part that will eventually end with the meal kit companies fading away to nothing as grocery stores realize they can produce their own similar product.
AC: What does the competition look like, and how does Dinner Thyme compare?
RF: The meal kit competition is abundant. Estimates are that there are currently over 150 meal kit companies. This is amazing considering that the industry didn’t even exist 6 years ago. Dinner Thyme differentiates ourselves from the herd by being the only non-subscription service and the only frozen-for-convenience service. We also have the largest menu which gives us the advantage of being able to serve a more dietary-diverse customer base.
Some features that sets us apart and makes us unique:
Dinner is always on hand and ready to go.
No waiting for weekly shipments and no dinners going bad in your refrigerator.
No customer-despised ice packs.
We carry more than just meal kits (steaks, sides, and desserts, with smoothies and juices coming soon).
AC: What kind of success have you had so far?
RF: Dinner Thyme is the country’s original/oldest meal kit and is still going in an industry that has experienced an estimated $1B+ in loses within just a few years. The new Dinner Thyme Marketplace is just fresh out of a beta stage where our goal was to test the business model to prove that it can provide a realistic path to profitability. The beta was successful in that we were able to successfully produce and distribute our product within our business metrics. Additionally, the customer experience proved positive, as evident by our customer Net Promoter Score of 52% (as a comparison, Blue Apron NPS is negative 38%).
AC: How big is the team? Looking to hire any particular position in the upcoming months?
RF: Currently, all the C-suite duties are fulfilled by me (including CTO). Now out of our beta stage and with our push towards expansion, I’ll be actively looking to build that team. Our business model is based on efficiency, and outsourcing is a significant part of that plan. Most recently we have been looking for personnel to help with digital design, marketing, and menu development. Our current prep kitchen staff includes a head chef and a handful of line staff.
AC: Is Dinner Thyme bootstrapped or are you seeking investments?
RF: Yes and yes. Dinner Thyme is self-funded. In the meal kit industry that is infamous for the large amount of private equity funds that companies have raised (and lost), the fact that we, as a self-funded/bootstrapped company, have been able to keep pace and directly compete with these companies, speaks volumes about our product and service. With our impending push to expand our service across the country, we are now actively seeking an investment and/or partnership that will help provide us with industry guidance as well as knowledge, talent, connections and capital.
AC: What’s next?
RF: We are ready to grow. The Dinner Thyme Marketplace groundwork has been laid over the last 6+ months with implementing and testing a responsible and realistic business model. Expansion to the rest of the continental United States (our current delivery area is the east coast as far south as Atlanta and as far west as Chicago) coupled with a brand awareness marketing campaign that is planned to kick off within the next few months.
AC: Any final thoughts?
RF: As far as the business goes:
The problem we are solving is a twofold problem–one on the consumer side and one on the industry side. Consumer: Americans struggle to find a high-quality home-cooked weeknight dinner solution that is convenient and meets their dietary preferences. Industry: All meal kit companies are losing money. Their business model requires very high operational efficiencies to be profitable. To meet these efficiency requirements, meal kits limit customer option and place heavy restrictions on their service. This leads to customer fatigue, and then ultimately, customer abandonment of the service.
As the only frozen meal kit on the market, Dinner Thyme’s revolutionary product allows for a “customer first” user experience including, among other features, the most choices in the industry. These features lead to a lower customer churn rate. Our operational efficiency is achieved through the inherent efficiencies of a frozen product and the numerous advantages that it affords, including lower shipping costs and larger order size.