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What prospects in the ‘grilled cheese and soup space?’

By
Dan Mitchell
Dan Mitchell
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By
Dan Mitchell
Dan Mitchell
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June 22, 2011, 12:46 PM ET
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Grilled Ham and Cheese Sandwich
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FORTUNE — Jonathan Kaplan, creator of the Flip video camera, is making the media rounds talking up his new venture: a chain of restaurants that serves nothing but grilled cheese sandwiches and soup.

Kaplan told Bloomberg Television last week  that he is starting The Melt, with somewhere between $10 million and $20 million in venture financing, because he looked around and noticed that there were a lot of ethnic restaurants — Mexican, Italian, Chinese — but he was “surprised that nobody had done anything in the grilled cheese and soup space.”

In 2009, Kaplan sold the Flip phone to Cisco (CSCO) , which recently discontinued it. Like that product, Kaplan said, grilled cheese, is “a very nostalgic, memorable, homey product.”

Ah, yes. Remember the grilled cheese sandwiches Mom used to make? The ones containing “experienced” gruyere cheese? That’s what Kaplan ordered on stage earlier this month at the D9 Conference, where he unveiled his plans.

Those plans also include an app for placing orders and paying for them remotely before they’re cooked and served, which Kaplan says will take just minutes. The app is apparently what makes this a technology company (that and the special, Electrolux-designed sandwich grill, just like Mom’s.)

In his interviews, Kaplan is playing up the tech angle, but the app doesn’t seem particularly innovative. Could it be that he really just wanted to open a chain of grilled-cheese shops, and he came up with an app to make it easier for him to approach tech-oriented venture capitalists?

“To be sure,” The New York Times‘ Claire Cain Miller wrote this week, “the Melt is a tech company in addition to being a restaurant.” But how sure should we be of that? It’s a restaurant chain with an app. Dunkin’ Donuts has an app, but its hardly a tech company.

It’s highly unusual for VCs to finance restaurants, which are notoriously risky. Of course, risk is what venture capitalists do.

But we’re talking about grilled cheese here. Just that and soup. And we’re talking about charging between $5 (sandwich) and $8 (soup and sandwich) per meal. And about each restaurant costing between $500,000 and $1 million to open. Plans call for five outlets in the San Francisco Bay Area by year’s end. Kaplan says he means to have 500 stores open by 2015.

He told the Times that he’s raised enough venture capital to open 20 stores, which, at a midpoint of $750,000, would come to $15 million. Those 20 outlets will have to sling a lot of grilled cheese if he wants to be able to open 480 more in the next four-plus years.

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