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On Demand Businesses 101

Munchery Tweaks its Business Model after Spoonrocket's Closure

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After the unexpected news of SpoonRocket’s closure, everyone seems to be somewhat skeptical about the stability of on-demand food delivery business models, especially those which cook their own food. The news has taken Munchery, (an on-demand food delivery startup that provides meals prepared by well known chefs) back to the drawing board to bring in changes in its business model. With this, Munchery is intending better estimation and management of its revenue and a more stable model to rely upon.

Munchery used to hire professional celebrity chefs on part time basis and take orders from customers based on daily changing menu. They had their own delivery network and a user used to pay for the food as well as a small amount as delivery charges to get the lavish meal delivered to his doorstep. While the basic model of getting meals cooked by chefs and delivering them through their own delivery network remains same, Munchery is trying to retain customers by introducing a subscription based model.

If we had to explain Munchery’s working in 4 simple steps, then here’s how it works:

  1. Munchery has its own kitchens where chefs prepare meals.
  2. These meals are listed on the online platform along with chef info.
  3. Users order meals and pay the price of that particular meal online.
  4. Meals are thus delivered to customers by Munchery’s delivery people.

The change that has come into effect in this 4 step working model of Munchery is at point number 3.

What’s New in Munchery’s Business Model

Munchery has launched special subscription plans in their business model so as to retain their customers and make sure that they order regularly. The new model of Munchery has already been introduced as of April 2016. This change has been brought in order to increase revenues for the company.

Subscription Plans

Munchery has introduced 2 subscription plans for its customers.

  1. A monthly plan of $8.50.
  2. Yearly plan of $85 (saves 20% of subscription fees).

As per Munchery’s website, they are now aiming to become a membership-only service, which would make subscription compulsory for the customers. But as of now pay per order and membership plans both can be availed. The subscription models have been designed so as customers can save n the delivery charges. 

Understanding Munchery’s strategy for introducing Subscription Plans:

  • Advance payments from the subscribers will enable the company to reduce the cost incurred per meal, and for the subscribers the price point per meal will lower down to about 20%, making this a win-win situation for the regular customers as well as Munchery.
  • Through this the company is trying to solely focus on the benefits of regular customers, while paying less attention to the one-timers.
  • Munchery’s previous membership program which had made delivery charges zero for the members had to be frozen because the company hires its delivery workers as W-2 employees, paying them fair salaries which meant the company’s expenses increased with the number of orders.
  • Munchery wants to ensure that its policies does not leave out any prospective benefit of their customers, which is within their capacity.
  • It does not want to risk driving away the new customers with the spending risk.

To loop its users into the subscription plan, Munchery is offering a free subscription for the first month. It will enable users to try out the services on subscription plan. This seems to be an excellent proposition. Do we need to mention – “Who does not like free things?”

All these changes happening in Munchery’s Business Model is a futuristic step that will give Munchery regular customers and make it more stable. We guess the closure of Spoonrocket has been a factor behind this change. Let’s know what made a service like Spoonrocket shut down its business.

Related Reading: How Munchery Works: Comprehensive Business and Revenue Model

SpoonRocket Shut Down: What Made it Do So

SpoonRocket had managed to achieve the milestone of a positive contribution margin, i.e recover the cost spent on the meals from their sales. But yet, the market receives the sudden news for its Shut down. It has surely been a shocking update for the food tech industry. The announcement was made through a GoodBye blog post published on their website. The operations came to an end on 15th March 2015. 

Now comes the question – what made this great starup shut down after being funding and performing well for 3 years? Were they performing well? Read on to know the 2 major reasons that made Spoonrocket to finally close down.

Reasons for Spoonrocket Shutdown:

  1. Investment crunch:

SpoonRocket began Operations in 2013, bagging a $13.5 million worth funds till 2014. But later, the company struggled in this field, not finding any investor.

  1. Unsound Approach:

Their approach was to be the fastest and a pocket-friendly food-ordering option for their customers. The SpoonRocket chefs used to prepare meals in volumes, which were then sent out for distribution in temperature-controlled cars. This approach led to a compromise with the food quality, about which many formerly-regular customers began to complain about as the company struggled with all the alternatives available to substitute the shortage of funds.

Does this say the food delivery On Demand Startups should stay alarmed?

Even though the venture capital market seems wary of investing into On Demand food delivery startups, the market is not totally averse them. As long as people stay interested in getting food delivered at their doorstep, the demand for such startups will stay. The key issue in this sector is obtaining profitable margins and survival. With that, lets wait and watch what would be the future of startups based on similar business models like Sprig and Munchery.

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