The meal prep delivery industry has exploded, growing by more than 18% annually for the last five years to reach a value of $8.3 billion in 2023. Consumers are seeking the convenience of having the specific ingredients of each meal delivered in a kit rather than having to plan and shop for meals. We covered the meal kit service in depth in the past, but in this post – we’ll go over how to start a Meal Prep business.
If you’re a chef, or even if you’re not, starting a meal prep business could be a great entrepreneurial avenue for you.
In this guide, you’ll find all the key steps involved in starting a meal prep business.
Choose a Niche
While meal prep delivery started as the delivery of ingredients for recipes that then need to be prepared in the customer’s home, pre-cooked meals are emerging as a popular choice. You’ll need to determine which route to take, as well as what types of meal plans you want to offer. You could go with healthy meals, meals for weight loss, gourmet meals, or internationally inspired-meals.
Watch this video by Future Proof to learn why meal kits are so popular:
You should probably start with one meal plan option, and then you can grow your product offerings by expanding into other niches so that customers have a choice.
If you go with pre-cooked meals, you’ll have to determine how to package your meals and whether or not they’ll be frozen. Packaging is an extra cost for your business, but pre-cooked meals are the fastest-growing segment of the meal prep market.
Calculate Startup Costs
Starting a meal prep business comes with several costs to consider. If you start on a small scale from your home, you’ll need a website, a significant marketing budget, printed recipe cards, packaging and shipping materials, and, of course, your ingredients. You should plan on spending at least $10,000 before you can start handling orders.
If you start on a small scale from home, you might want to consider targeting your local area and personally delivering your prepped meals to save on costs.
As you grow your business, you could expand and begin delivering your meals nationwide. Doing so, however, will probably require renting a commercial space to store ingredients and prepare them for shipping. At that point, you’ll also likely need to hire employees to help you handle your sales volume.
Keep in mind that companies like Hello Fresh and Blue Apron needed significant capital along the way to get to where they are today. If you’re thinking of starting your business on a large scale, you’ll also need capital, which means you’ll need to seek investors.
Determine Prices
Pricing for meal prep kits can be per meal, but most companies offer a plan in which customers receive a certain number of meals per week for a set price. Typically, the more meals you order, the less each meal costs. For example, a single meal may cost about $12 per serving, while if you order 4 to 6 meals per week, the cost might go down to $9 per serving.
Generally, customers can choose meal kits that make 2, 4, or 6 servings per kit.
You’ll want to choose recipes that can allow you to sell your kits for those average prices and still make a decent profit margin.
Watch this video by to see some more tips on how to price your meal kits:
Create a Business Plan
If you’re going to need funding to start your meal prep business, you’ll need a business plan to present to lenders or investors. But even if you don’t need funding, writing a business plan forces you to think through and plan for every aspect of your business.
A business plan should include several sections.
- An executive summary that covers all the highlights of your full plan
- A company overview that includes your company history, mission, and vision
- A section that describes your products, which is the types of meals you plan to sell, and their prices
- An analysis of the meal prep market, including the size and growth prospects of the market
- An analysis of your main competitors, their target markets, and strengths and weaknesses
- Your sales and marketing strategy
- Your operations plan means how the company will run on a day-to-day basis
- A description of how the company will be managed and by whom, as well as your staff hiring plan
- Your financial projections
Keep in mind that your business plan will likely change over time as you learn what works and what doesn’t work. Be sure to spend a lot of time on your business plan, and research it well. Your plan will contain many assumptions, so you’ll need to have information that can back up your assumptions.
Choose a Business Structure
If you start your business without forming a business entity and you’re starting it by yourself, by default you’ll be operating as a sole proprietorship. With a sole proprietorship, you and the business are considered one and the same, so the profits from the business will pass through to you, the owner, to be reported on your personal tax return. The business itself is not taxed. However, this also means that you are personally liable for the obligations of the business.
If you’re starting your meal prep business with a partner or partners, you’ll be operating as a partnership, and the same pass-through taxation and personal liability still apply.
Suppose you instead form a limited liability company (LLC) or a corporation. In that case, you’ll be considered a separate entity from the business, which means you are not personally liable for the obligations of the business. Most new entrepreneurs choose an LLC because it’s far less complicated than a corporation and it offers the same pass-through taxation as a sole proprietorship or partnership.
Forming an LLC simply requires filing a document with your state, which in most states can be done online. Fees to do so vary by state.
Obtain Business Licenses and Permits
You may need different sorts of business licenses and permits at the state and local levels. A meal prep business may require certain health-related licenses and permits, even if you’re starting your business from home. Check with your state and local governments for requirements.
Apply for an EIN
If your business has more than one owner or if you’re hiring employees, you’re required to have an employer identification number (EIN). An EIN allows the IRS to identify your business for tax reporting purposes and also allows you to withhold and pay employee taxes.
You can apply for an EIN on the IRS website. There is no cost.
Get Business Insurance
You’ll also want to protect your investment by getting business insurance. Speak with your insurance agent to find out what types of business insurance may be right for you. At a minimum, you’ll need general liability insurance which protects you in multiple situations.
In Closing
Starting a meal prep business can be complicated, but you’ll be entering a fast-growing industry. Keep in mind that to get your business to a level like Hello Fresh, you’re going to need investor funding at some point unless you have very deep pockets. Be sure to create a comprehensive business plan before you start doing business, so you’ll have it ready when you need it.
Here’s another video by Marketing Food Online – that will help you see the main steps in starting a meal prep business:
Also, do your homework to prepare for what you’re getting into. The more you know, the better chance you have of building a successful meal prep business.
