From catering to pick-up windows and third-party delivery, restaurants are adapting their store operations and design to maximize lucrative off-premise opportunities.
But restaurants have overlooked one touch point: meal kits.
"I've been pitching [meal kits] to restaurants, but no one seems to see the opportunity that I see,” Mattson President and Chief Innovation Officer Barb Stuckey told Restaurant Dive. Mattson is a Silicon Valley-based food and beverage innovation firm works with CPG and restaurant brands. "It is somewhat short-sighted not to give at least a look to see if it is right for restaurant chains."
Many restaurants are focused on third-party delivery services as a path to off-premise prowess, but meal kits could solve some of the quality issues that come with this strategy, Stuckey said. Instead of offering a lukewarm dish that was cooked 30 minutes ago, restaurants can provide the ingredients for consumers to make meals fresh.
Chick-fil-A is the only major restaurant chain that's tested a meal kit. From August to November 2018, it offered Mealtime Kits with five different recipes from over 100 Atlanta-based restaurants, and customer feedback was positive, according to Forbes.
"We know our guests are busier than ever and need a variety of convenient dinner options," Michael Patrick, Chick-fil-A's Beyond the Restaurant program lead, said in a company announcement. "We designed our offering so our guests don't have to order ahead, subscribe to a service, or make an extra stop at the grocery store."
Customers would pick up the kits from participating restaurants either in-store or at the drive-thru, Patrick said. Instead of selling common favorites, like its chicken sandwiches, it offered chicken parmesan, chicken enchiladas, Dijon chicken, pan roasted chicken and chicken flatbread.
"It's brilliant because it allowed consumers to experience the brand in a different way," Stuckey said.
"It is somewhat short-sighted to not give at least a look to see if [a meal kit] is right for restaurant chains."
President and Chief Innovation Officer, Mattson
If a restaurant is primarily focused on lunch, they could offer dinner through the meal kits, said Stuckey. Restaurants could also boost lunchtime sales by offering kits that in-store diners can take home to make for dinner, she said.
The restaurant industry may be dragging its feet because few standard meal kits are profitable. The segment has been struggling with oversaturation, and Chef'd and Munchery have shuttered while budget-friendly kits like Blue Apron are just barely staying afloat. Meal kits are also competing with many different segments including QSRs, fine dining restaurants, food outlets within grocery stores, delivery, ghost kitchens and other off-premise options, LIDD Managing Director, Demand Chain Sean Butler, a Purple Carrot and Chef'd veteran, told Restaurant Dive.
"Ready-to-cook as a category is in a weird in between place where it doesn't offer the convenience of ready-to-eat, delivery or sit-down restaurants," Butler said.
The newest restaurant meal kit program is virtual
But despite a slow down in the growth of meal kits, about 100 million Americans are interested in trying them, according to Grocery Dive. And while budget meal kits have been particularly troubled, a new meal kit company hopes to capitalize on the less competitive premium segment that appeals to the foodie consumer. Chef Meal Kits partners with restaurants and chef entrepreneurs to license menu items that can be bought as a kit on an online marketplace.
"There are 200-plus meal kits ranging from the big guys, like Hello Fresh, to local meal kit providers," Chef Meal Kits founder Meg Ginimav told Restaurant Dive. "They all focus on budget meals for everyday use — that is a crowded market and very competitive. We don’t want to enter that space."
Unlike traditional meal kits that tend to be geared more toward families, Chef Meal Kits is focused on special occasions, like a dinner date or getting together with friends to cook, Ginimav said.
Chef Meal Kits streamlines the meal kit production process for restaurants in a way that could make this concept a viable option for many brands, especially since it uses a virtual kitchen model to fulfill orders.
Whereas traditional meal kits have more factory-level production and distribution facilities, Chef Meal Kits' operation is set up as individual 2,000 square foot kitchen block in one facility allowing it to support multiple virtual meal kit restaurants in one location.
At the virtual kitchen, staff go through and pick ingredients from the recipe like at a supermarket and package and ship the box to a consumer, he said. So instead of a restaurant using its own kitchen, it can move the production to a Chef Meal Kits facility to do it instead.
While its first kitchen is in San Diego, it wants to build a kitchen in every major metro, Ginimav said. It also plans to go live with 300 independent restaurants within the next six months and within the next few years to partner with 1,000 restaurants. Eventually, the company wants to partner with 10,000 restaurants. The company delivers to eight states — California, Nevada, Arizona, Washington, Oregon, Colorado, Utah and Idaho. Once the company gets more volume, Ginimav plans to offer two-day shipping across the country.
Many meal kits, like Home Chef and Plated have been focusing more growing partnerships with grocery stores taking the eye of the ball with direct shipments to consumers, which could give restaurants a chance to get into the overcrowded space.
For restaurant partners, there is no subscription cost and they get a 15% commission when the box sells. A chef consultant will work with the restaurant to figure out which menu items would best translate into a two-portion meal kit, he said.
This type of model is less costly than third-party delivery as well. Many restaurants have long-criticized the delivery fees they have to pay (sometimes as much as 30%) per order that eat into already thin margins. Many are trying to re-negotiate third-party fees to try and keep more of the meal profits or build out their own delivery services.
For chefs and food entrepreneurs, Chef Meal Kits charges a monthly fee of $350 to set up a virtual meal kit restaurant. These entrepreneurs go through a vetting process that includes a look into the chef’s background and assessment of whether the menu items would resonate, and upload four menu items with pictures, Giminav said.
Comparatively, for a chef entrepreneur, there are few options to test new concepts and recipes, such as a food truck, food hall, ghost kitchens like Kitchen United, and this new method could provide an additional avenue to grow a new concept quickly.
Supply chain and quality control is key
Chef Meal Kits has also had time to work out some of the early challenges of operating a meal kit program. During the initial phases of the company, Ginimav learned that having the restaurant partner package and portion meal kits directly slowed down restaurant sign-ups. He said he felt that restaurants were already focused on the day-to-day operations of their businesses, and having to pack food and raw ingredients was a whole new process for them.
Chef Meal Kits will focus on building out virtual commissary kitchens, build its platform and send out the kits, he said. Down the road, the company may shift to having restaurants pack and send out the kits once they become more comfortable with the process, he said.
But while having an off-site kitchen can make production more streamlined, it takes quality control away from restaurants. Butler said restaurants have to be acutely aware of meal kit food quality, especially since the profit can be very low.
That means working closely with meal kit providers to make sure the kits move through the distribution channels from warehouse through the delivery system without any issues, Butler said. Unlike a delivery of a restaurant ingredients that arrive on a refrigerated truck, meal kits usually have some kind of refrigerant within the box, but travel through typical delivery means, he said. That means if not done right, ingredients could be exposed to heat and unsafe conditions.
"The risk of having a bad consumer experience, which is maybe going to cause this consumer to no longer visit your restaurant or support your brand, is very high relative to the upside," he said.
Marketing meal kits well takes collaboration
Restaurants should be aware of what it takes to market a kit. Butler said what he learned at Chef'd was that restaurants need to be actively engaged in marketing these meal kits for them to succeed.
Whereas the company would often take high quality photos of the food and of the chef involved in the menu at the start of a partnership, the involvement of the chef ended there, Butler said. These chefs and restaurants didn’t have a good way to drive traffic to the website or other digital channel to purchase the meals, he said.
"There are lots of captive eyes in a restaurant and lots of opportunities for employee engagement to actively sell meal kits," he said.
Restaurants should also be wary of meal kits' low repeat customer rates and how to combat that. Meal kit companies will often spend $80 to $100 to acquire a customer, but that cost is really high, especially since many of these customers don’t stick around, Ginimav said.
Instead, his meal kit company will provide promo cards and marketing materials to restaurants where wait staff will hand them out to customers. The added incentive for wait staff is they receive a commission if the customer buys a kit.
"The restaurant will be our champion as well," he said. "That will help customer acquisition costs be a lot lower."
The platform also provides access to a wide variety of meals, which can help retain customers, since they will have the chance to try a new menu item each week from different restaurant partners, Ginimav said.
Having a marketplace with hundreds of different menu options also helps keep customer acquisition costs down, Ginimav said. As that network grows, it can attract more customers and ultimately lower marketing costs, he said. Airbnb grew rapidly using a similar marketplace model without having to spend a lot on marketing, he said.
"The restaurant will be our champion as well. That will help customer acquisitions costs be a lot lower."
Founder, Chef Meal Kits
Pricing and prep time can be stumbling blocks
Restaurants also need to be careful with their approach to meal kit pricing. Meal kits that are priced over $10 per person don’t create enough value for the consumer to buy instead of just going to the restaurant, Stuckey said.
One meal kit based in the Bay Area, Din, offered kits from high-end restaurants in San Francisco from 2014 to 2016. Stuckey said the quality was very high and offered gourmet meals like duck confit with blueberry reduction, but the price was also high. For two meals per week for two people, it cost $60, meaning it was $15 per person per meal. Comparatively, Chick-fil-A’s pilot meal kits cost about $16 for the entire kit.
"There are only so many consumers willing to pay for that and they still have to cook," Stuckey said.
The price of a meal kit on Chef Meal Kits would be the same as the price in the restaurant, Ginimav said.
Consumers will buy and re-buy meal kits at a higher rate if prep time is low, typically between 10 and 30 minutes, Butler said.
"That speaks to the need to balance home-cooked meals with convenience," he said.
On Chef Meal Kits' website, recipes have a wide range of prep and cook times, from 20 minutes to an hour, making it clear to consumers how much time the kit will take.
Restaurants that do meal kits also have to be smart about recipes because home cooks don’t have the same equipment as restaurants, so recipes that require deep frying aren’t going to work, Stuckey said. That means meal kits aren’t necessarily ideal for QSR or fast casual. She said kits make the most sense for casual dining since this area is not as convenient and already takes longer to cook.
With Chef Meal Kits planning to partner with 10,000 restaurants over time, more restaurants will soon have the opportunity to try a meal kit. But so far, many haven't entered the game, especially as budget meal kits continue to show meager results.
"I don't think restaurants are looking at it as a parallel path and business model that can compliment their restaurant," Stuckey said. "It may just not be the time for meal kits."
Still, she believes there is still opportunity here.
"It seems like an obvious way to up check averages and to increase revenue in a way that is a totally incremental business," she said.