Munchery, one of San Francisco's handful of meal delivery startups, is finally expanding its service to include lunch—but it's taking a safe approach.
On Thursday, the six-year-old company said it will start serving lunch to office workers whose employers sign up for a company account and order ahead of time. This way, Munchery hopes delivering several meals akin to a catering service to each office will keep its operations more efficient than if it ferried hot lunches one-by-one.
"We know, of course, that people eat more than just dinner," Munchery co-founder and CEO Tri Tran tells Fortune. Unlike delivery services like Postmates and UberEats, Munchery makes its own meals instead of simply delivering them from a restaurant. It also sells meal kits that customers can cook in as little as 15 minutes.
Munchery's new lunch service will be quite similar to how it's been handling dinner for corporate customers. To feed employees at lunch, a company signs up for a corporate account, and then works out details like a minimum number of orders, whether it wants to entirely pay for its employees' meals, or provide each one with a set amount of credits to use toward lunch. Munchery handles billing—even for individual employees who go above their company's allotted lunch credits—and in some cases, may give an employer a discount if it commits to ordering a large number of meals on a regular basis.
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Because employees can select whichever meal from the day's menu (Munchery rotates dishes adds new ones on a regular basis), Tran hopes the new lunch service will be more appealing than bulk orders of a few dishes from one restaurant. The company tested the new lunch service with several companies in San Francisco, including Smart Sparrow and Cloudflare.
For Munchery, being able to plan in advance—employees have to place their orders the night before—and deliver an entire office's meals at once is critical. A bit over a year ago, Munchery almost debuted a lunch service, but backed out at the last minute because it found its original idea too inefficient. Under that model, it planned to deliver lunch meals one-by-one to workers in select downtown areas in San Francisco, offering discounts when two or more customers in the same building placed an order within 20 minutes of each other. Ideally, coworkers would encourage each other to order from Munchery, which in turn would have a more streamlined delivery route if it dropped off multiple meals at once.
Though Munchery did a pilot test for a few weeks at the time, the company ultimately decided not to pull the trigger. As companies that deliver hot meals learn, it's a difficult business with thin margins and a lot of operational challenges.
This isn't the first time Munchery has made changes in the name of a more sustainable business model. In April, the startup rolled out a monthly membership fee for all new customers, leaving existing ones to decide if they want to switch. The membership model, Tran argues, lets customers buy each meal at a slightly lower price than it used to cost. Of course, the real advantage is that it helps Munchery better forecast its revenue. It knows it can count on the monthly fees, while customers are likely incentivized to order on a regular basis so they don't feel like they're paying for a service they don't use.
Not surprisingly, Munchery was only the latest so-called "on-demand" startup to adjust its business model in search of stability. Grocery delivery service Instacart has raised its delivery fees, while Zirx, a valet parking service has closed down its consumer service to focus on business customers with a more predictable revenue stream. And the list continues.
Many others that didn't made such changes have perished already, including home cleaning service Homejoy, virtual assistant service Zirtual, valet parking startups Caarbon and Vatler, “Uber for kids” service Shuddle, and most recently, laundry service Washio.