How to Start a Meals To Go Business

Part 1 - How to start a Meals To Go business - Background

Meals-to-go businesses prepare and deliver home-cooked meals to busy customers who prefer to save time on cooking and grocery shopping. They can afford to bring home or have delivered great meals for their family. What they do not have is the time it takes to find and select quality ingredients, spend the time cooking the meal, and then prepare a meal that is hot and fresh for their families.

The most successful meals-to-go organizations provide delicious and nutritious food according to diet planning that moderates the unhealthy choices and leans towards healthier choices. This is where the big successes in this business are now coming from. Companies that provide these great meals are making records profits.

Our guide is in 3 parts:

• Part 1 - How to start a Meals To Go business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a meals to go business?

It is possible to start a business like this from home as long as you can get the health department to approve the kitchen for operations. However; most businesses in this sector start as a commercial operation. This requires leasing an appropriate space and having the equipment necessary to cook the food. You will also need delivery vehicles if you offer home delivery services.

A typical startup will incur these costs:

• Formation of the Limited Liability Company and Getting a Business Permit – About $1,000 depending on the jurisdiction. You will need to have an inspection by the health department to approve your operations as well.

• Lease Payment and Security Deposit. This amount will depend on the square footage of the facility, with typical rates being $3 to $5 per square foot.

• Equipment Leasing – You will need ovens, stoves, refrigerators, food preparation stands, dishwashers, dishes for serving and utensils. This equipment can easily cost over $100,000 but it can be leased as part of a master equipment lease if you have a decent credit history.

The total budget (some of which can be financed) for opening a new food-to-go place is about $125,000.

What are the ongoing expenses for a meals to go business?

The ongoing expenses include marketing costs, rent, utilities, staff costs, materials, and insurance.

Who is the target market?

The preferred customers are those with disposable income who like good food and do not have the time required to prepare it for their families. They do not want to go to the trouble to visit a restaurant and they find fast-food less than satisfying. They are willing to pay more for the quality of food that is made using better types of ingredients.

How does a meals to go business make money?

Meals-to-go businesses prepare home-cooked food for customers, and sell these meals (often with a delivery service). In any food preparation business, there is a markup on ingredient costs and labor costs with some allowance for waste. For example, if the ingredients for a meal cost $10 and the labor to prepare it costs $4, and then we add in a contribution to overhead and allowance for waste the meal should sell for about $24 to include some profit for the business owner. This is a great price for a quality gourmet meal for two people. Delivery charges are usually factored into the price of the meal. Selling wine to make extra revenues and deserts as an up-sell item, makes the profits go up.

How much can you charge customers?

The successful businesses in this sector spend 32% for the materials, 33% for the labor and about 5% for overhead. Typical prices for two people are in the range of $24 to $28 dollars, depending on the area. Naturally, an operation in New York City will charge more because the cost of overhead is higher than in other parts of the country.

How much profit can a meals to go business make?

Investopedia says the average profit margin for a food and beverage business is 5.5%. If the business is selling about $50,000 per month, the owner can expect to take home profits of 5.5% of that amount or $2,750 per month. You have to sell a lot of food per month to make good profits. This business is low margin/high volume in order to be successful.

How can you make your business more profitable?

This business model lends itself well to offering catering services. Providing food for large groups such as office parties, convention attendees, events, or large private dinner parties is an added revenue stream for these businesses.

Day-to-Day and Growth

What happens during a typical day at a meals to go business?

The most successful business owners in this sector take to time to hand-select the best ingredients. They get up early to go to the wholesale markets and pick out the very best things that they can find in order to prepare delicious meals.

One of the greatest challenges in this business is to buy enough materials to make the food that is ordered and at the same time control waste. Since many items are perishable the balancing act is to get enough supplies and sell out the food, without having to throw much of it away. Controlling waste is a big issue because it can be as much as 20% of the raw materials cost.

Another big part of your day is to make sure there is sufficient staff given that your business employs multiple people, and if that is the case, owners must make sure that employees show up on time. Food preparation is very time dependent and being late is not acceptable. There is a tremendous rush to prepare orders at certain times of day and being short-staffed during those periods of heavy daily activity can cause a disaster.

What are some skills and experiences that will help you build a successful meals to go business?

The most critical skill is the ability to make food that is very tasty and to keep materials and labor costs under control. Great tasting food that is prepared in such a way that costs too much to make it will drive a food-to-go operation out of business. Being a good chef, understanding cost controls, and knowing how to promote your business effectively are the main things that will make you successful.

What is the growth potential for a meals to go business?

Each meals-to-go operation will serve a local area that has a limit of its geography because the food cannot be taken further away and still remain hot and fresh. Because of this need for localization, it is possible to expand the operations to other nearby areas to grow the business. There are plenty of national franchise chains that started out with a single location and expanded in this way to serve other communities.

How and when to build a team

Once the number of clients that your business serves becomes too large for you to handle on your own, it is time to start building a team of employees. Since you will be bringing food to your customers, your team will mostly consist of chefs and delivery drivers. Your delivery drivers can deliver food, accept payment on your company’s behalf, and take down future orders from your client. It is important that you hire chefs that create a quality products and delivery drivers that are trustworthy and practice great customer service.

Part 2 - Is a Meals To Go business the right fit for you?

Part 3 - Action plan to launch your Meals To Go business in 90 days