How does meal prep fare?

The first month of the New Year has come to a close and without casting aspersions on everything I see and having you think I just see the negative side, I did want to point out a few things that I’ve noted over the month. And no, it’s not a happy forecast.

The number of stores for sale this month is just shy of 70. If you remember back in August of last year I did roughly the same thing of counting the number of store listing I found as I did research on meal assembly. At that time the number I came up with was 60 stores for sale during the month. So we are slightly above that number. However, this doesn’t count the stores that simply close (something that is probably happening more frequently now). Some owners aren’t putting their stores up for sale anymore and are simply closing their doors and moving ahead with the legalities that involves. How many stores does that account for? I have no way to really answer that, but I think it would be realistic to say that 10 stores shut their doors rather than sell.

So what does that mean? We still have an increase in the number of stores going out of business even if it’s only slight (if you call a 20 store per month increase slight). Basically the market is still decreasing. The number of stores for sale may also start to decline very shortly, but I won’t take this as a sign that the industry is actually getting better. Instead that will mean that owners are just closing their doors and are skipping the sale process. I think it’s nearly impossible to sell a store in the current climate. When you list a store for $25k knowing it cost you around $250k (or more) to get it started that should be an indicator that it’s not a sellers market.

In conjunction with the fickle nature of customers and showing the worth of meal assembly we now have the added burden of rapidly rising food costs. Prices are jumping by leaps and bounds and there is no indication this will be short lived. A recession looms on the horizon which will certainly spell disaster for this industry. Customers already feel meal assembly is a too highly priced luxury they can do without, and these two factors could solidify their opinion once and for all. With most families turning to Hamburger Helper, pasta, Mac and Cheese, tacos and other easy and affordable options it’s hard to say that meal assembly will fit in with a majority of these families new budgets. This new chain of events may very well push meal assembly further outside the mainstream and make it an option most families won’t consider. If things progress along this path we have the makings of a very slow lead in to the New Year which will push us right into the normally slow months of summer. If the summer of 2008 is anything like the summer of 2007 it could be crippling for a majority of owners. This would basically make barely a trickle of business for the first 6-8 months of the year.

Another turn of events has been the news of a new CEO taking the helm of Dream Dinners. It would be hard to dispute that this is an indication that one of the major players in meal assembly is in trouble and is looking for help. To bring in a CEO when your business is expanding faster than you can manage is one thing, but to bring in outside help when your business has shrunk by nearly half is another matter entirely. Owners aren’t paying their royalties, downsizing has taken place and cost cutting measures must certainly be in place. From the outside this looks to be a company in trouble. The market is shrinking, owners aren’t happy, the revenue stream is drying up and this looks to be a scramble to keep the ship afloat as long as possible. Whether you call the new CEO and changing of staff the best hope or creating a scapegoat it certainly gives the appearance that the corporate office is starting to feel the same effects that store owners have been feeling for awhile. Is this the start of a corporate decline into bankruptcy? Does Dream Dinners have enough reserves and market savvy to prevent closing their own business? Time will certainly tell, but this could be interpreted as a very rocky start for Dream Dinners. And considering the change in CEO wasn’t brought up in a press release or touted by the company as great and exciting news it does makes you wonder.

Dinner by Design continues to flaunt massive expansion plans across the Midwest. They have staked out a huge area of the country as their stomping ground and where they will build their meal assembly empire. This contradicts what owners are saying about those same locations where stores are closing and business is very slow. They have announced big expansions before but as yet very few of their new stores have actually opened (pre-buyout). It’s an audacious plan and quite frankly seems to fly in the face of reason, but keep in mind there is a big difference between saying you will do something and actually doing it. You can say a city will support 40 more stores and you can say this huge tract of land across the country is a prime location for more meal assembly stores, but that doesn’t mean it will come to fruition.

Merger and buyout rumors had us talking but considering what could be instability at the head of Dream Dinners, any talk of mergers is even more fanciful than it was previously. Talk of My Girlfriends Kitchen being acquired was also bantered about, but there is still no official documentation to support that. But even if it is true, what’s to be gained? Why takeover a company that really has no market share, no household branding and very little market penetration. Where is the return on investment and how do you plan on using those assets? Again, if it is true, it doesn’t seem to make too much fiscal sense.

Super Suppers kicks off the year by offering pizza as a new menu item. Is this giving in or a bold market strategy? Pizza can be had in every shopping venue you can think of, does MA really need to play this card? Considering burgers and pizza are the staple diets of the American consumer maybe they do. This might keep meal assembly on the minds of families, it may entice them to come in, it may be an offering that strikes a chord. In truth, it seems like a last ditch effort to try and keep from being shut out of homes completely. Hopefully it will work, but pizza has been on the menu for many independent stores for some time. For many it has worked well, but is it enough to keep a store and even an industry afloat? Empires have been built on pizza so it certainly generates revenue, but can MA use it to their advantage?

We have also seen a pretty big shift in “sessions” versus “pick-up”. In order to compete and to bring in customers you need to make the meals for them. Having customers come in to make the meals is fading away. They don’t want to do it and they’re not going to pay extra for you to make them. How do you keep this part of your business under control? Do you hire employees to help make the meals or do you handle it all alone? Can you sustain a 60 hour work week? And even though customers want you to make the meals now, in a month from now will they still go for it? Even owners who make meals for customers at no charge are having a hard time getting them in. Plus customers seem to want you to take the extra step and deliver the meals
.
There have been some great ideas presented on things to try to keep things moving. Business drop off, smaller portions, the “Seniors” market and even marketing interns. So there are still things to try to bring in some business and depending on the area opportunities left to explore.

But to be honest I have to say that this year is starting off on much shakier ground than I had expected. The store closing are about where I thought they would be, in fact they’re a little lower than I would have guessed. Customers are hard to figure out but that’s nothing new. The rising foods costs, shaky economy and now the changes within Dream Dinners lead to me think things are much worse than they were a few months ago. Unfortunately I think things will slow down even faster than expected. Consumers will budget their money even more so than before and the trouble we saw last summer will probably start happening next month (March). People may splurge for Valentine’s Day but I don’t expect it will go beyond that. Every part of the food industry is seeing the effects of a slumping economy and growth is slow all over.

You can call me pessimistic or negative or a naysayer, but I’m just bringing to light some of the points we’ve already made. There were a lot of them and taken together it paints an interesting picture.

If you want to hear rosy stories about how everything’s going to be fine and there’s nothing to worry about go read Bert’s newsletter. Quite frankly, I see an iceberg ahead…

Other Articles of Interest:

    None Found

11 Responses to “How does meal prep fare?”

  • Voice of Reason:

    The Sky Is Falling, The Sky Is Falling! I’ve never seen such negative, one-sided discussion as at this site. This concept is strong and perfectly suited for the 21st century. Any service business takes 3-4 years to build, and meal prep is no exception. I believe some owners came into the industry with the thinking that “all I have to do is light up my sign and I’ll be laughing all the way to the deposit line.” Any business takes years of hard work and ample capital to succeed, I’ve seen it in a number of industries and a number of businesses. Top producers at many franchised companies can nearly always look back to Year 1 or 2 or 3 and remember thinking “am I going to make it?”, it’s just the nature of small business. Those who work through it and work at building their business every week will be very successful in this industry. Those who panic at the 6-month mark because they’ve yet to reach profitability were never cut out for small business in the first place. You should rename your site Meal Assembly Pity Party.

  • Wow- Did you read the same post that I just did? I guess if you are “one-sided, kool-aid drinker, rose-colored glasses’ MA Owner, then you would think that this website is a Pity-Party!

    However, I, amongest hundreds of Other Owners do not feel that Meal Assembly Watch is negitive. The information that is posted is helpful, full of wisdom & passionate about providing “Due Dilligence” for future MA Owners. If there is anyone that would purchase….

    Owners are finally sharing thier experiences Owning a MA business, and YOU (Mr. Vioce Of Resaon) think its negitive?

    You must work for one of the Zors.

    Keep up the great work Tuckerbox, Mistery Miss, Amy, cookgal, & Jack! I count this as a compliment!!!

    Much Joy,
    Mindy
    http://www.joyfilledyou.com

  • Former Kool-aid Drinker:

    Amen, Mindy!

    Based on my ‘name’, I used to say these same things. When you are completely bought into what your franchise is telling you – you just don’t want to hear the reality of how it is. It’s almost cult-ish and I’ve been seeing that pretty clearly for the last 6 months.

    Voice of Reason definitely must have deep pockets to still have this rosy of an outlook.

    If, in fact, Voice works for a Zor, I have an idea – maybe Zor employee’s pay should be coming out of their own home equity for the next 6 months. Maybe these employee’s should quit getting paid until things turn around. Maybe when they say we are all in the this together, they should triple mortgage their houses to free up money to keep things going.

    I think Tuckerbox has hit the nail on the head with this analysis. Let’s just wait and see – I guess that will be the proof.

  • DinnerZen:

    The first time I stumbled upon this blog (long before many of the names I see posting here now) I absolutely concurred and sometimes still do that the site would be more aptly named mealassemblybitch.net. That said, and before folks get their hackles up, I also have to say I appreciate what this site has to offer. I wouldn’t say it presents an unbiased (perhaps balanced is the better choice of words) source of info, but it paints a realistic picture of what many folks are/have experienced. I do appreciate the articles and reflections. And it is provocative to say the least. I find Tuckerbox’s commentary to be particulary well thought out. For some reason I always assumed Tuckerbox was a guy so am intrigued to find you referenced as a “she.”

    You have to give credence to Voice’s comment that service businesses take YEARS to become profitable and many people jumped on the MAK bandwagong assuming they would be laughing on the way to the bank in 6 months. I did. Stepping back, can you honestly say that you were well capitalized? I stupidly only set aside 6 months of operating expenses and didn’t budget NEARLY enough for marketing. I read materials that said I needed at least a year of operating expenses, ideally 2, but I was convinced I and this concept would be different.

    In fairness, you have to acknowledge that 60% of new restaurants fail in the first year (see other post with article), so why should MAKs be any different? More often than not, however, (for ME) as someone still trying to stake a claim in the small business game this site can surely suck the energy and enthusiasm out of a day.

    But, I still come back and read and occassionally post. I started my business with my eyes wide open and plan to keep it that way.

    I do find it interesting that any time anyone has a conflicting opinion to offer that folks instantly assume they are part of a franchisor. It is entirely possible that they are a successful (or trying to be) independent store owner.

    Curiously, Tuckerbox do you really have 100s of people using the site? Silent readers maybe?

    I’d love to see you put up a survey that asks your blog readers and posters where they are in the ownership process- researching, in business- successful, in business- hopeful, in business- on the way out the door, or out of business.

    As for your original post, I think it was a spot on assessment of the industry. Anyone in business for themselves who doesn’t see shaky times ahead is obviously living in a dream world. When I wrote my business plan three years ago it even had a cautionary section that said that IF the economy falls on hard times, then this is a business that will take a direct hit.

    Restaurants are alreadyseeing it– even forecasted it last year…several major chains who came out with their “budget friendly” options- smaller portions for a smaller price tag. Three course (smaller) meals for the price of one regular sized meals.

    It is crucial for stores who want to be successful to examine their business model, tighten up and make the case that meal assembly or take and bake can play a crucial role for folks even when the economy hits the skids. Have you tried to shop for and eat something besides hamburger helper? I did as part of an annual “iron chef” event I have with some friends. You can’t buy and make meals of the caliber and quality most MAKs offer for the same price. I love mac and cheese, but can only eat that so many days in a row. Have you taken a family of 5 adults/teens to McDonalds? Try getting out without spending $35/40.

    I was recently contacted by a customer who happened to mention that she is starting up a “personal organizing” business. She’ll come in and clean up your closets, clean out your garage, organize photo albums, etc. Talk about a luxury. When I asked about what she thought about a looming recession, she responded to say that if she didn’t take the risk she’d never know the reward. Granted her start up and overhead is SIGNIFICANTLY lower than an MAK so it isn’t exactly a fair comparison. Just a bright spot of optimism amidst a hail storm of news about how terrible things in the economy look.

    Yesterday the town center around the corner mentioned they were going to be opening 3 new restaurants this year- mid to high end. In a town center that is already inundated with (thriving restaurants). None of these restaurants are franchises, though two have other stores (not a lot) in operation in other areas. They have to see the same news we do about restaurants taking a hit in the pocketbook, rising food costs, etc. Just because they are opening, doesn’t mean they will be successful, but they are optimistic enough to take the risk.

    The point? While your observations are correct, the industry IS in an interesting and scary place in its early evolultion, I’m not convinced that is in any different or worse position than many other industries are with reference to the economy. It does suck to have to experience organizational and evolutionary “growing” pains at the same time, for certain.

    People keep saying that the concept has come and gone- seen its hey day. I think that is very far from the truth. The average consumer still doesn’t know what meal assembly or straight take and bake is. They might have seen a blurb in the news or mentioned in the paper, but they haven’t seen or heard it enough to push them to get off the couch and check it out. They also haven’t seen a “brand” assert itself enough to lure them into trying it out. I don’t wholly blame the franchisors, even the biggest guys on the block with 200 stores couldn’t penetrate overly thick consumer awareness and understanding.

    In my past life in health care quality management, we talked quite a bit about the “Diffusion of Innovation.” The concept itself has evolved quite a bit since it was first introduced by Ev Rogers who used Iowa corn farmers as the basis for his theory.

    Here is a quick link I could find that explains a little about the different “categories” of people who adopt innovative ideas:
    http://www.hightechstrategies.com/profiles.html

    NOTE: While you’re there click on the link on the left and read about Why Businesses Fail.
    http://www.hightechstrategies.com/10_reasons_technology_products_fail.html

    In fact, I encourage you to click on that link and scroll part way down the page to the picture of the curve that shows the “valley of death” for technology companies. I might be shooting from the hip with this, but I would suggest that that is where the MAK industry is right now- as a whole but also many stores individually.

    I think we are at the point of capturing what I call the “low hanging fruit” or the early adopters, their definition of early adopters:

    They are younger than the average farmer, but not necessarily younger than the innovators. They also have a higher average education, and participate more in the formal activities of the community through such organizations as churches, the PTA, and farm organizations. They participate more than the average in agricultural cooperatives and in government agency programs in the community (such as Extension Service or Soil Conservation). In fact, there is some evidence that this group furnishes a disproportionate amount of the formal leadership (elected officers) in the community. The early adopters are also respected as good sources of new farm information by their neighbors.

    If that definition isn’t what the original “target market” for MAKs is/was then I must have read all the wrong franchisor materials.

    Some people do believe we are at a make or break point, but that’s because we need to figure out what the MAK concept needs to look and feel like to keep the early adopters and start to capture the “early majority.” I think some stores have the staying power, flexiblity and capital to see this through to the next phase- both franchise and independent.

  • Gourmet Girl:

    I’m with Voice of Reason and DinnerZen on this one.
    This paragraph really sums it up …..”You have to give credence to Voice’s comment that service businesses take YEARS to become profitable and many people jumped on the MAK bandwagong assuming they would be laughing on the way to the bank in 6 months. I did. Stepping back, can you honestly say that you were well capitalized? I stupidly only set aside 6 months of operating expenses and didn’t budget NEARLY enough for marketing. I read materials that said I needed at least a year of operating expenses, ideally 2, but I was convinced I and this concept would be different.”…… me too- I feel stupid, but am glad to be learning A LOT and paying all my bills in the process. What’s a little blood, sweat and tears!? I figure I’m young (at heart) and I’ll bounce back soon enough.
    I also get the feeling the Franchisors aren’t requiring a lot of capitol from their franchisees before they sign on the dotted line. This is BAD, BAD, BAD for the industry as a whole when the MAK’s close shop before they’ve even been open for at LEAST ayear if not two!

    As for this doom and gloom website…I think it needs more visitors and more people posting. It’s tough to read the same people over and over and over again. I find myself skipping over their posts to get to others opinions. How are people finding out about the site!? Maybe you could email your closest MAK kitchen and introduce yourself and this site. The more the merrier!

  • Kim:

    I thought the post that Tuckerbox was right on the money! I was one of the original MA kitchens. I was told that in a matter of months I would be having 500+ guests a month. Because, the HO had that many….right? WEll, I quickly learned that that that was a “””Dream””” I fell for it….and will be paying on this “dream” for a long time.

    My point is, after five years of business, we should be making money NOW! but we are not. I have heard over and over that it is my fault, I am not marketing enough, I’m not doing such & such. and when I tried to “think outside the box” I was told It wasnt in my franchise agreement.

    Today, My store, along with the corporate stores, are still not profitable. and I am tired of it. The Zor’s should have been investing in the ideas that were working: ($20.00 off coupons) instead of selling bogus franchises.

    I dont respond to everything that is posted, but I what I read that IS posted, I feel validated. I want to Thank Mindy, Tuckerbox, MisteryMiss and others for speaking their minds. They Care, They Listen, They Show Empathy, They should be the next CEO’s for this Industry!

    Thats my voice of reason:)

  • No Credit?Don’t I get credit for trying?

    And in case you really wanted to know here are the stats on the site.

    There are roughly 150-220 visitors per day which works out to around 4,500 visitors per month with a little over 15,000 page views for the month (January 2008 stats from Google).

    Also keep in mind the scope of the audience this site caters to is about 1,300 people (1 owner per store). If you really want to push the upper limit it would be 2,600 people (2 owners per store).

    It’s also interesting to note my theory of 10% participation. 1,500 or so stores, 150 or so visits, 15 or so commenters. For such a niche topic I actually think that’s pretty good. But there is no doubt, the more the merrier.

  • “The Sky Is Falling-The Sky Is Falling” LOL!! I’m Thinking we could turn that into a song—-!

    Anyone who is a true Entrepreneur understands that it takes 3-5 years of hard work before a profit is made. Everyone took a Risk purchasing a MA- I am sure No One will contest that.

    Excellent post Dinner Zen & Gormet Girl.

    The issues that I have since the very begining, Is what DID the ZORS do with all the Marketing Monies they collected each month? Why wasnt the buying power for FOOD created? With the amount of Franchisee’ in place. Food cost should have gone down- Average food cost per an entree should be: 24-30% Think I am unrealitic- Think again. I have researched how this could have been done.

    (How do you think Walmart started- Let me refresh your memory- Good Ol’ Sam bought ‘panties’ and sold them for .10 a piece. HE DROVE sales to his store. It worked, he was onto something…To this day, Walmart Exec. know how to Negotiate the toughest retail products in hopes of customers to buy more. Once they have them in the store, the rest is history.

    It is time that Owners demand from the ZORS higher level of responsiblity for running a Franchise. If you are not going to-

    WHY ARE YOU STILL PAYING ROYALITIES?

    This site is intended to HELP, SUPPORT, & sometimes VENT Owners in Good Faith trusted their company that they bought a franchise from.

    I want to Thank Tuckerbox for the countless hours, He/She has devoted to making this site- The Best Talked About Site In The Meal Assembly Industry!

    Kim, Thanks for building Us up, it is Owners like yourself that make me work harder!!!

    Much Joy,
    Mindy
    http://www.joufilledyou.com

  • DinnerZen:

    Notable stats Tuckerbox…so why aren’t others chiming in?
    I don’t think it’s just me and a few others hitting the site with such daily frequency…seems like recent posts have drawn some newer folks out…
    And, thanks for posting the survey on the homepage, hopefully all your visitors will see and respond. I did.
    Thanks!

  • ChefGeorge:

    I have been one of those who have not chimed though was a frequent visitor for the past couple months…mainly because I was first interested in getting perspective on what went wrong (our store recently closed). I only wish I had found this site sooner! It is wonderful to know we are not alone with what we experienced.

    That said I will chime away and start by saying that anyone who says this is a bitching site is either representing a franchise or has yet to smell the coffee. We went into this understanding there was a risk certainly. We also understood that we were getting into something that had not been around for that long and was not as proven as we would have liked. However, now that it is clear that for most people it is not working, it infuriates us that there are some who say it’s just a matter of having the capital to keep working at it for 5 years. Who are these people that have 5 years of capital before making dime one?! And we are not actually talking about making a dime in five years, but rather bleeding red ink when talking about the Meal Prep industry. That’s a true Entrepreneur? That’s a true fool or millionaire looking for a hobby… take your pick. Our bank certainly didn’t see us as needing 5 years of capital to take the risk and when I mentioned that was just now being put forth by our franchisor, he looked at me in shock. How many people are going to buy into something if they are told with a straight face they won’t make anything for 5 years? How many years then to recoup all that was lost? Makes no sense. Are franchisors really checking to see that you have that in the bank before taking your money? Ya sure. Further, needed working capital is subjective. We had enough working capital to keep us going for a couple years if were not so far in the red after a year. But the thing is, I really don’t think it would have worked even after 2 years. It wasn’t even trending in the right direction which we have found was not unique to us.

    I don’t have the inclination to go into length about everything we did to make it work, albeit to say our restless nights have nothing to do with not giving it everything we had. There are so many excellent comments throughout this site as to why it is not working and we concur with many of them. We find some of them hard to accept as we LOVE the concept personally, but you can’t change people’s nature. At the end of the day, the reasons don’t matter at all. The important and troubling thing is that the model is still being sold. For the vast majority of folks the model does not work. You buy a franchise to increase your probability of success, not failure. The industry is morphing and that is a good thing. It will likely come out in some other form whether it be “Take and Bake”, pizzas or whatever. But until somebody figures out how to change it on their dime, the franchisee should not be the guinea pig.

  • mysterymiss:

    Here, Here Chef George, well said and Thank you very much for your comments, I personally appreciate them!
    Kelly

Leave a Reply

Recent Comments
Add to Technorati Favorites Small Business Blogs - Blog Catalog Blog Directory Blogarama - The Blog Directory Blog Directory Blog Directory Business blogs Top Blogs Blog Directory Directory of Business Blogs Blog Directory