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personal anecdote: I signed up for munchery after receiving some discount codes via marketing email, and a few more discounts from referral incentives. I found

personal anecdote: I signed up for munchery after receiving some discount codes via marketing email, and a few more discounts from referral incentives. I found the food to be high quality and the delivery service to be adequate. However, once my discount codes were used up I stopped using the service because they could not provide competitive pricing even in my very expensive zipcode (a nice neighborhood in Brooklyn). I really wonder what was going on. At a fundamental level, when competing in an ultra-competitive market (food delivery), you have to take price seriously, and they just didn't. Everything they were offering was 25% more expensive than similar delivery options from neighborhood restaurants.

vkou 10y ago
The problem with competing in an ultra-competitive market, like food delivery is that you don't have the margins to pay multiple software engineers ~$100,000/year. (Not to mention office staff, executives, VCs, and all the other costs of running a firm.) Pretty much everybody involved in food works like a dog, and gets paid an absolute pittance. That nice restaurant down the street? Their head chef probably makes ~$34,000/year, works 100 hours a week, and sleeps in the kitchen. Oh, and the restaurant is as likely as not to go bankrupt and shut down in <2 years. (And he's not doing it with the hopes that Ricky's Pizza Joint will IPO as the next Facebook.) Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table.
- PhasmaFelis 10y ago
  This is what happens when developers drink the startup Kool-Aid and decide they're the only smart people around. Not every industry is stodgy and "ripe for disruption".
- metaphorm 10y ago
  well, they aren't running a restaurant. it's a delivery only service and the economics are very different. For example, in the Brooklyn branch of the service the prep kitchen and delivery center was located in Gowanus (low rent, industrially zoned neighborhood) and they were certainly not running a full-compliment of front-of-house and back-of-house staff the way a restaurant would. They also don't have to pay high rent for a good location. They also don't have a head chef on premises, and they aren't locked in to a specific menu style. I'm not totally familiar with the economics of it but I can easily imagine that it could, in principle, be a profitable operation even with the overhead of having a technology division to produce the website and app. for point of comparison: https://order.andofood.com/ https://order.andofood.com/ that's David Chang's delivery-only food service, which also has a technology division that produces a website and app. the prices on ando's menu are in line with their competitors in NYC. Munchery was always overpriced. I don't know if ando is taking a loss on every order or what, but I doubt it.
  - vkou 10y ago
    That's the problem - they don't think they are running a restaurant. But they are - a restaurant with a ton of expensive, unnecessary overhead. That's why they will be out of business as soon as VC patience runs out. (And why Ricky's Pizza Joint, or a nearly-identical business will still be around.) The lack of head chef isn't an upshot for their business. It's a symptom of the problem. Compared to the cost of an engineering team, it's penny-wise and pound-foolish. If no-front-of-house-delivery-only could afford this kind of extravagance, then street food trucks would have gold-plated steering wheels.
  - petra 10y ago
    On top of that, you can add significant saving on materials(maybe 30%-50%), and a lower labor cost per dish - both because of large volumes.
  - potatolicious 10y ago
    The economics are different - though I'd hesitate to call them very different, but that's probably splitting hairs. I just took a look at the Munchery menu for my zip code, and honestly not sure why I'd ever use them in a market as competitive as NYC. The "aren't locked into a specific menu style" thing seems like more of a bug than a feature - lack of specialization means I drift towards more specialized restaurants that deliver. Why go for their beef stroganoff when I can get it from the amazing Ukrainian place that delivers to me? Why get the Korean rice bowl when there are several Korean places nearby? Chicken teriyaki - no shortage of Japanese-focused places that deliver, also. The nature of NYC's food market (and I'm sure true of other places too) is that delivery restaurants are running incredibly lean operations on razor thin margins - I think it's far from a given that a no-front-of-house-delivery-only restaurant operation can generate the kind of numbers that justify stratospheric VC-tech valuations. I'm also skeptical that they can achieve the kind of volume/market share they'd need to make their unit economics work. There seems to be this weird idea that, by serving 10-15 dishes a day, that they can capture a significant fraction of the total delivery orders in their service areas - in every zip code they operate in NYC they are up against literally hundreds of other delivery places. To the consumer they appear as one restaurant in a sea of many choices - I don't see how they can expect to capture and outsized portion of orders this way.
- MaysonL 10y ago
  And yet, it's possible to get fairly rich doing it: a friend of mine recently retired (in his 40s) after selling his ~decade-old catering business for FU money.
- Stanleyc23 10y ago
  well this also alludes to a classic scaling issue. I have family who worked in restaurants for years and one of the few things that would really drive revenue were banquets and other large catering events. From what I observed, it was almost like you play the daily nickel and dime game to put you in the running for those bigger opportunities as they come up.
- toomuchtodo 10y ago
  > Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table. Its kinda fun to watch VC dollars get burned up on each cycle of the attempt though.
marcell 10y ago
Interesting, I had the opposite experience. The prices were competitive with options like DoorDash and Postmates, but the quality wasn't there. A dish from Munchery would be $10-13 typically, and delivery was around $3, which compares well against competitors. However, the quality was really lacking. The food had just felt like it wasn't fresh. I assume it was the preservatives and/or salt they add, since it's often cooked a day or two in advance. I stopped ordering from them because of this.
jseliger 10y ago
I stopped using the service because they could not provide competitive pricing even in my very expensive zipcode (a nice neighborhood in Brooklyn The competition in this field is just immense. I don't get how any of these companies are going to make any money—Munchery, Ando, CookUnity.us, Uber Eats, and others are all competing fiercely against each other for a relatively low-margin, high-elasticity of demand business. In some ways, Blue Apron, Hello Fresh, and the other box companies are also competitors. Like you I've used the various discount codes at various times, but they're all too expensive to be worth using with any regularity.
- moonka 10y ago
  The amount of these companies that are popping up leads me to believe there is a desire for this type of service. I've always been surprised that the supermarkets around me don't put together Blue Apron style meal kits that one can pick up and make. For awhile I used a local service that did that, and it was incredible.
mc32 10y ago
I think much of their revenue was from corporate customers --office park enterprises where restaurants are sparse and selection minimal. But looks like they miscalculated costs and overhead.

vkou 10y ago

The problem with competing in an ultra-competitive market, like food delivery is that you don't have the margins to pay multiple software engineers ~$100,000/year. (Not to mention office staff, executives, VCs, and all the other costs of running a firm.) Pretty much everybody involved in food works like a dog, and gets paid an absolute pittance. That nice restaurant down the street? Their head chef probably makes ~$34,000/year, works 100 hours a week, and sleeps in the kitchen. Oh, and the restaurant is as likely as not to go bankrupt and shut down in <2 years. (And he's not doing it with the hopes that Ricky's Pizza Joint will IPO as the next Facebook.) Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table.

PhasmaFelis 10y ago
This is what happens when developers drink the startup Kool-Aid and decide they're the only smart people around. Not every industry is stodgy and "ripe for disruption".
metaphorm 10y ago
well, they aren't running a restaurant. it's a delivery only service and the economics are very different. For example, in the Brooklyn branch of the service the prep kitchen and delivery center was located in Gowanus (low rent, industrially zoned neighborhood) and they were certainly not running a full-compliment of front-of-house and back-of-house staff the way a restaurant would. They also don't have to pay high rent for a good location. They also don't have a head chef on premises, and they aren't locked in to a specific menu style. I'm not totally familiar with the economics of it but I can easily imagine that it could, in principle, be a profitable operation even with the overhead of having a technology division to produce the website and app. for point of comparison: https://order.andofood.com/ https://order.andofood.com/ that's David Chang's delivery-only food service, which also has a technology division that produces a website and app. the prices on ando's menu are in line with their competitors in NYC. Munchery was always overpriced. I don't know if ando is taking a loss on every order or what, but I doubt it.
- vkou 10y ago
  That's the problem - they don't think they are running a restaurant. But they are - a restaurant with a ton of expensive, unnecessary overhead. That's why they will be out of business as soon as VC patience runs out. (And why Ricky's Pizza Joint, or a nearly-identical business will still be around.) The lack of head chef isn't an upshot for their business. It's a symptom of the problem. Compared to the cost of an engineering team, it's penny-wise and pound-foolish. If no-front-of-house-delivery-only could afford this kind of extravagance, then street food trucks would have gold-plated steering wheels.
- petra 10y ago
  On top of that, you can add significant saving on materials(maybe 30%-50%), and a lower labor cost per dish - both because of large volumes.
- potatolicious 10y ago
  The economics are different - though I'd hesitate to call them very different, but that's probably splitting hairs. I just took a look at the Munchery menu for my zip code, and honestly not sure why I'd ever use them in a market as competitive as NYC. The "aren't locked into a specific menu style" thing seems like more of a bug than a feature - lack of specialization means I drift towards more specialized restaurants that deliver. Why go for their beef stroganoff when I can get it from the amazing Ukrainian place that delivers to me? Why get the Korean rice bowl when there are several Korean places nearby? Chicken teriyaki - no shortage of Japanese-focused places that deliver, also. The nature of NYC's food market (and I'm sure true of other places too) is that delivery restaurants are running incredibly lean operations on razor thin margins - I think it's far from a given that a no-front-of-house-delivery-only restaurant operation can generate the kind of numbers that justify stratospheric VC-tech valuations. I'm also skeptical that they can achieve the kind of volume/market share they'd need to make their unit economics work. There seems to be this weird idea that, by serving 10-15 dishes a day, that they can capture a significant fraction of the total delivery orders in their service areas - in every zip code they operate in NYC they are up against literally hundreds of other delivery places. To the consumer they appear as one restaurant in a sea of many choices - I don't see how they can expect to capture and outsized portion of orders this way.
MaysonL 10y ago
And yet, it's possible to get fairly rich doing it: a friend of mine recently retired (in his 40s) after selling his ~decade-old catering business for FU money.
Stanleyc23 10y ago
well this also alludes to a classic scaling issue. I have family who worked in restaurants for years and one of the few things that would really drive revenue were banquets and other large catering events. From what I observed, it was almost like you play the daily nickel and dime game to put you in the running for those bigger opportunities as they come up.
toomuchtodo 10y ago
> Yet, for some reason, people think that this business model has the margin to pay a team of developers, working out of a hip, air conditioned Market Street office, complete with a free beer fridge and a Foosball table. Its kinda fun to watch VC dollars get burned up on each cycle of the attempt though.

marcell 10y ago

Interesting, I had the opposite experience. The prices were competitive with options like DoorDash and Postmates, but the quality wasn't there. A dish from Munchery would be $10-13 typically, and delivery was around $3, which compares well against competitors. However, the quality was really lacking. The food had just felt like it wasn't fresh. I assume it was the preservatives and/or salt they add, since it's often cooked a day or two in advance. I stopped ordering from them because of this.

jseliger 10y ago

I stopped using the service because they could not provide competitive pricing even in my very expensive zipcode (a nice neighborhood in Brooklyn The competition in this field is just immense. I don't get how any of these companies are going to make any money—Munchery, Ando, CookUnity.us, Uber Eats, and others are all competing fiercely against each other for a relatively low-margin, high-elasticity of demand business. In some ways, Blue Apron, Hello Fresh, and the other box companies are also competitors. Like you I've used the various discount codes at various times, but they're all too expensive to be worth using with any regularity.

moonka 10y ago
The amount of these companies that are popping up leads me to believe there is a desire for this type of service. I've always been surprised that the supermarkets around me don't put together Blue Apron style meal kits that one can pick up and make. For awhile I used a local service that did that, and it was incredible.

mc32 10y ago

I think much of their revenue was from corporate customers --office park enterprises where restaurants are sparse and selection minimal. But looks like they miscalculated costs and overhead.