Fast food
by Lisa Stammer When the co-founders of Let’s Dish Inc. were plotting their expansion with an adviser in 2005, they knew they had to move fast. Just how fast quickly became apparent.Local competitors were starting retail food preparation companies, in which customers come to a store to prepare large batches of food to freeze and take home to serve. Big national players, including Super Suppers and Dream Dinners, were moving toward 150 stores in 30 states each.
Ruth Lundquist and Darcy Olson mapped out three potential business models, with the help of Allan Hickok. He is a restaurant industry consultant in Minneapolis, and a former investment banker who has raised money for many companies. The best plan, they decided, was to develop some corporate-owned stores, but rely mostly on franchised stores throughout the nation. They would sell rights to open those stores to area developers, who can “gobble up big cities” quickly, says Lundquist.
That would take serious expansion capital. Starting in mid-2005, they raised $4 million in six months and started the expansion. Hickok himself joined the company as president to connect them with investors and sell the first franchises. By the beginning of 2006 he was gone, back to his own practice, and the founders were hiring a new executive with national expansion experience as they prepared to return to their co-founder titles. (See this month’s Informer.)
The first Let’s Dish store opened in Eden Prairie in October 2003. By January 2006, there were four stores in the Twin Cities, as well as three in Maryland, two in Virginia and one in Washington state. By March 2006, area developer agreements were secured in Kansas, St. Louis and Boston.
Meanwhile, there are 14 other competing retail meal prep stores in Minnesota, and more than 500 across the country — all in a category that few people had heard about a half-dozen years ago. Lundquist is philosophical about the competition. “It’s a great category, and it’s growing. A great category attracts competition,” she says. “In retailing we believe competition makes you better."
Lundquist and Olson envision the day when Let’s Dish is as ubiquitous as Starbucks, the coffeeshop where they first met with Hickok to map strategy. But everyone has heard of coffeeshops, not so with meal-preparation stores.
Everyone has to eat, Lundquist and Olson might counter, and they offer a way to get healthy meals on the table. Olson and Lundquist like to call the category “productive leisure.” The idea is to get your best friend or your sister, book a session, and make a whole bunch of dinners while catching up.
“You’re getting something done and you’re having a good time while you’re doing it,” Lundquist says. “We really focus not just on the food, but on the personality and the experience that customers are having because there is a need to connect.”
Lundquist, 37, and Olson, 38, have been friends for years, but it wasn’t until late 2002 that they began seriously looking for a way to stretch their entrepreneurial wings. As busy moms working in corporate jobs, they were just as time-starved as many Americans. But they recognized that the desire to fix healthy, interesting, good-tasting dinners is universal.
By skillfully combining their specialties (Lundquist’s background is technology and Olson came from the food industry), and calling upon the expertise of friends and others in the business world, Lundquist and Olson created Let’s Dish, one of the country’s first retail meal preparation businesses.
The concept of Let’s Dish is “elegantly simple,” says Hickok, a 20-year Wall Street investment banker who has been a consultant to Lundquist and Olson since late 2004, and holds a stake in the company. “It’s one of the most fascinating things I’ve run across, on a number of dimensions.”
Here’s how it works: Customers begin by visiting the store’s Web site where they make a future food preparation, or “dishing,” appointment and choose up to 12 meals from a menu of 15 or so choices. They pay online via credit card. On the day of their appointment, they go into the store to “dish.”
Customers spend a couple of hours moving from station to station, packaging the pre-sliced and diced ingredients for each of their dishes into freezer bags or pans. They take home the cooking instructions and a list of suggested side dishes, along with the prepared meals, to freeze and cook at a later date.
Hickok points out what he saw as the brilliance of the business plan: Does the box work? Yes. Is it repeatable? Yes. Can you grow these? Yes. “I got it immediately,” he says. “People order in advance and pay with a credit card so there are no receivables and there is very little cash in the store. They pay in advance so you know they’re coming. Since you know they’re coming you know the precise ingredient requirements so there’s no waste. And you know who’s going to be there today so labor scheduling is easier than staffing up a restaurant.”
The first year Let’s Dish was open, Lundquist and Olson received 1,200 unsolicited leads from people wanting to open Let’s Dish stores in their towns. They eventually created licensing agreements for stores in Maryland, Virginia and Washington — a move that proved to them the potential of their company. “We knew that this was successful in places other than Minneapolis,” Lundquist says. “Since we’d proven it in the Baltimore area, we knew that we had the opportunity for national expansion.”
The question was: How? The women turned to Hickok and his business partner, Phoebe McMillan, for help. The first step, which began in early 2005, was to develop a business strategy and further define their business model. To grow the company fast — and beat out the mounting competition — they decided to base about 90 percent of the company on franchises, while keeping the other 10 percent as corporate-owned stores.
“We decided if we are going to be in this business we want to really walk the walk,” Lundquist says, “so we didn’t want to be just a pure franchising company.” However, remaining a purely corporate-owned entity would slow down growth.
To raise capital, Lundquist and Olson again turned to Hickok McMillan Strategic Advisors. (Hickok and McMillan have since closed the firm.) Hickok has raised more than $2 billion dollars of equity for restaurant and specialty retail owners. After determining how much money Let’s Dish would need to continue moving forward at a fast clip, Hickok McMillan put together a private placement memo, allowing them to raise up to $4 million, in the spring of 2005.
The process of raising money went quickly — unusually quickly, according to Hickok. “Interest was really strong from the beginning,” he says. “If we would have known, we could have raised more.”
But that’s not to say there weren’t challenges and questions along the way. Some of the potential investors questioned the new retail segment Let’s Dish was helping to create: Is it here to stay or is it just a flash in the pan? The next question: If the segment is viable, why is Let’s Dish the best company to invest in? And then, finally: Does Let’s Dish have the right management team to grow and nurture the concept?
It was important to everyone involved that the investors’ questions were answered honestly, openly and thoroughly. Hickok wanted the investors to understand and believe in Let’s Dish, not just to give them money and then walk away. “We weren’t just out to raise capital,” he says. “We wanted to find investors who would also be our sponsors and would help credentialize Let’s Dish.”
After contacting around 100 potential investors, they found just that. They raised the $4 million and closed the private placement in July 2005. Today, according to Hickok, Let’s Dish’s list of approximately 50 investors (which he and the co-founders decline to disclose) includes CEOs of publicly traded organizations and influential players in the areas of retail, restaurant, food, finance, marketing and operations.
Since raising the capital, Lundquist and Olson have wasted little time in putting it to work. By the end of 2005, they had signed franchise development agreements with business people in Boston (16 stores), St. Louis (seven stores), and Kansas City (eight stores) over the next three to four years. On the corporate side, the women are planning to open an additional six stores in the Twin Cities this year.
Lundquist and Olson were not the first to open this type of food establishment. That honor goes to Stephanie Firchau and Tina Kuna, co-founders of Seattle-based Dream Dinners, in 2002.
Still, there weren’t many other retail meal preparation businesses out there when Lundquist and Olson were getting started. “No one had a road map for us,” Lundquist says. “We really worked to create something from scratch.” This work included writing their first business plan, consulting with the local Small Business Administration, and seeking advice from trusted family and friends.
Steve Swantek, president of PROSAR (a health and safety call center) and Lundquist’s former boss, knew about the plan for Let’s Dish from the beginning. He describes the women as intelligent, motivated, energetic and creative. “When I read the business plan, I thought it sounded like a really interesting idea,” Swantek says. “I just didn’t know if there was a market for it. I guess the surprise was really how well received it was. Obviously there was a market there just waiting to be tapped into.”
One of the biggest challenges — and biggest surprises — when Lundquist and Olson were starting out was the difficulty they had getting the people who own the retail space to understand the Let’s Dish concept and agree to lease the space to them. “It was difficult being a brand new concept,” Lundquist says. “The people who lease the spaces are used to dealing with Panera, Subway and Papa Murphy’s — proven concepts and chains. To even get their attention was a challenge early on.” On the other hand, it was much easier than they expected to get the bank loans they needed.
Within 10 months, the women had gone from brainstorming to opening their first store. “I have no idea how we did it,” Lundquist says with a laugh. “We were both working a full-time job and still pulling this off. You know how it is. You just do it.”
RJ Dourney, co-owner of BW Passion, LLC, is impressed with the women’s energy, intelligence and business sense. “From the moment I met Ruth and Darcy and spent time in a Let’s Dish, I realized that they had lightning in a bottle,” he says. Dourney and business partner Shawn Ryan are the restaurant veterans who will be opening 16 Let’s Dish franchises in the Boston area over the next four years.
BW Passion was the first company chosen as a Let’s Dish franchise owner. “I think they’re being very picky about who they’ll franchise to, and as a franchisee I’m thrilled because you want to make sure that they’re very protective of their brand,” says Dourney, a former executive with Outback, Applebee’s and Chili’s. “They also understand that they’re going to have long-term relationships with these people and that’s important.”
It’s that sort of planning that gets to the heart of Let’s Dish. Lundquist and Olson didn’t start this business on a whim, so they developed every aspect of the business carefully and methodically. “This wasn’t just a hobby for us,” Lundquist says. “We really needed to make money and to replace the incomes that we were leaving behind.” Unlike some of the other stores in this niche, all of the Let’s Dish outlets are built for volume and profit and are open every day of the week for multiple sessions.
All of their planning and due diligence has paid off so far. “I don’t think we’ve been surprised that it’s been so successful,” Olson says, “but maybe at how fast it’s taken off. It really exceeded our expectations.” At the end of 2005, Let’s Dish had 130 employees. In addition, each of the company’s 2,400-square-foot stores was generating average annual revenue of more than $1.4 million.
Lundquist and Olson see little direct competition on the local level. According to customer feedback, they say, Let’s Dish is mainly replacing families’ weekly trips to restaurants. They say, instead, that the entire food industry, including restaurants, supermarkets and delivery services, are their competition.
Of course, there are other local retail meal prep stores who are selling franchises, but as of January, none of them had expanded beyond Minnesota. Mix it Up (White Bear Township) and Sociale Gourmet (Eagan), the next largest local chains, each have three stores in the Twin Cities. Two national chains — Super Suppers (Fort Worth, Texas) and Supper Thyme USA (Omaha, Neb.) — have also opened franchises in Minnesota.
As Let’s Dish expands further on a national level, Super Suppers, which has close to 150 stores in more than 30 states, will become a force to contend with. So will Dream Dinners, which also has close to 150 stores in nearly 30 states.
Bert Vermeulen, an independent consultant and founder of the Easy Meal Prep Association in Cheyenne, Wyoming, has studied the industry in depth. He believes Lundquist and Olson are setting up their business just as they should. “Let’s Dish is definitely in the race,” he says “It’s an intelligent organization and they have a good formula.”
Vermeulen’s research has revealed three categories of retail meal preparation — each making up about a third of the industry. The first category is made up of the two large franchises — Dream Dinners and Super Suppers. The second category includes independent businesses with only one store, such as ChefSpace in Blaine and Lakeville-based Dinner Tonight. Let’s Dish fits into the third category — businesses with more than one store, but fewer than Dream Dinners or Super Suppers.
Vermeulen refers to Dream Dinners as the “McDonald’s of the industry,” noting that Dream Dinners is going for simple and efficient, while Let’s Dish is going for convenient and social.
Not only does he say that the food is superior at Let’s Dish (fresh food vs. canned and frozen), but there’s also more to Let’s Dish than just the food: “What Let’s Dish has done…is to provide more on the social side, to build a nicer facility and to have more special things that make the place a cut above what a Dream Dinners franchise would have.”
The Let’s Dish experience includes a brightly colored and well-lit store with lots of signage and an abundance of friendly staff members ready to answer any question the customer may have. The dishing stations face each other — to simulate kitchen islands — which facilitates more socializing. In addition, freshly baked snacks, such as scones, are offered at every session, and the newer locations include sitting areas for customers to sit back and relax if there’s some down time when the food prep stations are full.
“All of us are constantly evaluating the best use of our time,” Olson says. “The act of ‘dishing’ is so worth it. Customers tell us that they can come and really get something done that helps them out every night at home. At the same time, they can have some time for themselves or to connect with friends.”
A Los Angeles-based entrepreneur who is investigating the retail meal preparation industry — and considering purchasing a franchise or starting up her own business — was impressed with Let’s Dish. She’s visited a Dream Dinners franchise in California, as well as Let’s Dish stores in Baltimore and Woodbury. “The idea and concept are identical,” she says. “It’s just the little nuances that differ.” She noted the sitting area and snack provided at Let’s Dish, as well as the superior taste of the food that she “dished.”
It’s these differences that Lundquist and Olson plan to capitalize on—that and their plan to grow smartly and steadily over the next several years. Their ultimate goal? They see the potential for opening as many as 750 stores in every major market across the country.
“Twenty years ago there weren’t coffee shops on every corner and now coffee is an integral part of everybody’s day,” Lundquist says. “Fifteen years from now I want Let’s Dish to have that same standing in our culture.”
[contact] RJ Dourney, Hearthstone Associates: 508.435.9777; rj@hearthstonea.com. Allan Hickok: ahickok@restaurantstrategy.com. Ruth Lundquist, Let’s Dish!: 952.767.3410; ruth@letsdish.com. Darcy Olson, Let's Dish!: 952.767.3420; darcy@letsdish.com. Steve Swantek, PROSAR: 651.917.6108; sswantek@prosarcorp.comBert Vermeulen, Easy Meal Prep Association: bert@corp21.com
