How To Start a Meal Prep Business in 2024
EA
Summary:
Meal prep businesses provide convenient and delicious meals to customers near and far. However, despite the infinite combinations of cuisine styles and meal kits on which you can base your meal prep business, there are significant startup costs involved. By the end of this article, you’ll understand what it takes to start your own meal prep business.
Who needs to go to a restaurant when you can turn your home into one? As a result, meal prep delivery services continue to grow in popularity. The meal kit delivery market is worth about $7 billion, with a forecasted 17% annual growth through 2030.
As of 2022, there are nearly 600 meal prep businesses in the U.S., and we haven’t even scratched the surface of filling the needs of U.S. households. Starting and running a meal prep business is a full-time job, but it can be fun and rewarding. Keep reading to learn how to start a meal prep business.
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Is the meal prep industry right for you?
The meal kit delivery industry is one of the fastest growing in the U.S. People of all ages gravitate to the convenience and versatility of getting prepared meal kits delivered to their homes. In addition, due in part to the pandemic, more and more people opt to eat at home, opening even more opportunities for meal prep businesses.
Owning a meal prep business isn’t for everyone, but it could be perfect for you. It requires an investment of time, money, and energy, but a meal prep business can provide regular income, freedom, and satisfaction that you can’t get from working for someone else.
Before starting any business, you should ask yourself, “Why?” What impact do you want to have on the world? What kind of lifestyle do you want? And how can starting a meal prep business help you achieve those ends?
Qualities of successful meal prep business owners
Many entrepreneurs get started in the meal prep industry because they want to take advantage of the many benefits it can bring to both business owners and their customers.
Successful meal prep business owners, generally,
- Are passionate about bringing good food to many people;
- Enjoy being creative;
- Want to work close to home or in their home;
- Want to be their own boss;
- Are good problem solvers;
- Are skilled at managing employees and partnerships, sometimes remotely; and
- Often are efficient with their time.
Day in the life of a meal prep business owner
When you’re a meal prep business owner, every day is different. Meal prep business owners often split their time between the kitchen and the office. They get to have their hand in every part of the business.
An average day in the life of a meal prep business owner might look something like this:
- Start the day reviewing inventory and upcoming orders.
- Make sure the kitchen staff understands orders and priorities for the day.
- Get to work fulfilling orders.
- Check on the marketing and customer service teams.
- Attend meetings, answer emails, and take phone calls.
- End the day with accounting and administrative tasks.
How much does it cost to start a meal prep business?
Before you start a business, you should have a clear idea of what it will cost you. It takes an initial investment to get the business started, but don’t forget that once the business is up and running, you should expect ongoing operating costs. Let’s break the numbers down.
Startup costs of a meal prep business
The largest startup costs of a meal prep business include setting up a commercial kitchen and acquiring the real estate you need to work. These elements can vary greatly depending on the size, type, and location of your business.
The cost components that impact the startup costs of your meal prep company may include the following:
- Commercial kitchen equipment. Whether you decide to run your business in your home or office space, you’ll need a commercial kitchen. Required equipment varies by jurisdiction, so check with your local government requirements for commercial kitchens. Common equipment includes a commercial refrigerator, a commercial freezer, sinks, stainless steel tables, an oven, shelving, packaging and packaging machinery, construction, and utilities.
- Software expenses. Many meal prep software expenses are optional but can be beneficial. These include a hosting service, meal prep website and website domain, IT support, project management software, accounting software, and email marketing software.
- Real estate costs. Real estate costs are highly variable. Your options include renting an office and kitchen space, purchasing property, or using your existing home. If you decide to operate your meal prep delivery service out of your home, you won’t need to account for this expense in your startup costs. In fact, you may even glean tax benefits from running the business from your home.
- Inventory costs. Initial inventory costs are a necessity to get your business off the ground. They can include chef jackets and meal ingredients. You can purchase non-perishables supplies in greater amounts, but you’ll only want to stock enough food to get you through your opening week. Plan to purchase more after a successful launch.
- Advertising and marketing. This includes all the materials and contracted support to promote the launch of your business. Make sure to promote yourself both online through social media as well as through your storefront and physical presence.
- Business expenses. At the beginning of your meal prep business, business expenses include permitting and licensing, insurance, and registration.
Note the costs above will vary considerably when you’re estimating what the overall cost might be for your business. Some research into your local market can help you narrow your cost estimate down to a more precise number.
Starting a meal prep business can be relatively inexpensive, depending on your desired setup. If you purchase an existing meal prep business, you can expect to pay much more upfront, but you may not need to worry about spending so much on initial space and advertising.
| Meal Prep Business Initial Costs | ||||
|---|---|---|---|---|
| Cost Component | Variability | Minimum Costs | Average Costs | Maximum Costs |
| Commercial Kitchen Equipment | Average | $3,000 | $7,500 | $12,000 |
| Software Expenses | Average | $300 | $1,650 | $3,000 |
| Real Estate Costs | High | $0 | $500,000 | $1,000,000 |
| Inventory Expenses | High | $350 | $4,175 | $8,000 |
| Advertising and Marketing | Average | $100 | $2,300 | $4,500 |
| Business Expenses | Average | $100 | $550 | $1,000 |
| Total (excluding real estate costs) | $3,750 | $15,625 | $27,500 | |
| Total (including real estate costs) | $3,750 | $515,625 | $1,027,500 |
Recurring costs of a meal prep business
After your initial investment, you’ll need to account for the costs associated with running the business. Typical ongoing costs of running a meal prep company include the following:
- Salaries and commissions. If you hire help, you’ll need to factor their pay into your monthly costs. You won’t need to consider this cost when you’re operating the business all on your own. However, most meal prep delivery businesses require at least a couple of employees or independent contractors.
- Real estate costs. Ongoing real estate costs include rent or mortgage payments. You can probably ignore this cost if you’re working out of your home.
- Advertising and marketing. Advertising and marketing continue to be important to keep growing your business. Costs include paid advertising, promotions, and hiring marketing professionals.
- Business expenses. Monthly business expenses include insurance payments, accounting fees, registration fees, and any other basic administrative costs.
- Inventory expenses. Ongoing inventory costs may be more than initial costs. This is a good sign for your business. Increasing inventory demand means increasing sales.
- Maintenance and operations. This includes the costs of keeping your kitchen and office space in good condition. Utilities, cleaning supplies, repairs, and maintenance services fall under this category. Part of running a commercial kitchen includes maintenance and upkeep of the equipment. The more equipment you have and the more you use it, the higher this cost will be.
Remember that each of these categories will have varying costs. Every meal prep business requires a different amount of capital based on its location and operations. Speak with your accountant and other local experts for help with financial planning specific to your situation.
| Meal Prep Business Operations Costs | ||||
|---|---|---|---|---|
| Cost Component | Variability | Minimum Costs (per month) | Average Costs (per month) | Maximum Costs (per month) |
| Salaries and Commissions | High | $0 | $11,000 | $22,000 |
| Real Estate Costs | High | $0 | $3,000 | $6,000 |
| Advertising and Marketing | Average | $1,000 | $3,500 | $6,000 |
| Business Expenses | Average | $2,500 | $5,000 | $7,500 |
| Inventory Expenses | High | $300 | $3,525 | $6,750 |
| Maintenance and Operations | Average | $50 | $525 | $1,000 |
| Total (excluding real estate costs) | $3,850 | $23,550 | $43,250 | |
| Total (including real estate costs) | $3,850 | $26,550 | $49,250 |
How much do meal prep business owners make?
Understanding the profit margin of the meal prep delivery business is simple. Your profit is equal to your gross sales minus the overall costs of running the business. The profitability of a business is directly affected by expenses, sales, and efficiency. The average profit margin for a meal prep delivery business is 15% to 35%.
The average owner of a meal prep business makes $70,000 per year. It can take time to reach a stable salary as a meal prep business owner. Salaries range from $30,000 to $110,000 per year.
Pros and cons of starting a meal prep business
Like with any business, there are advantages and disadvantages to running a meal prep business. Here are a few potential risks and rewards to consider before you open a meal prep business.
How to start a meal prep business
Ready to join the ranks of small business owners? Here’s everything you need to know about how to start a meal prep business.
1. Choose your meal prep niche
The first step to starting a meal prep business is to determine what type of meals you want to offer and in what format. You must also consider whether you want to start your business from scratch, purchase an existing business for sale, or buy into a meal prep franchise. To keep this guide simple, we’ll only cover the build-from-scratch model.
Conduct market analysis in your area to determine your competition and what your target demographic needs. Ask yourself the following questions:
- Who am I making this for?
- What are their needs?
- How can I meet those needs with my business?
Give thought to how much capital you want to invest in the business, which can help you determine the type of meal prep you can afford.
There’s always room for innovation in the meal prep industry. Don’t feel confined to any existing categories. Use this matrix as a jumping-off point, make a hybrid, or invent something completely different. The most successful businesses bring something unique to the market that addresses the needs of their target customers.
| Category | Cuisine | Dietary Restrictions | Complexity | Freshness | Target Market | Delivery |
|---|---|---|---|---|---|---|
| Description | Defining the theme of the food; global or regional cooking style; unique or traditional cultural ingredients or methods | Food that fits within the diet of those with allergies, lifestyle preferences, or weight loss goals | How much work the customer has to do to bring the food from delivery to the table | The level to which the food is prepared before shipping to the customer | Who is the ideal customer that would need and enjoy your meal prep services? | How will you get meals from your kitchen to the customer’s home? |
| Examples | Mediterranean | Paleo | Oven-ready | Raw | Families | Local shipping |
| Healthy | Organic | Partially premade | Prepped and portioned | Young professionals | Nation-wide shipping | |
| Southern comfort | Gluten-free | Meal kit | Pre-cooked | Holistic hippies | Local pick-up |
Pro Tip
Remember that if you purchase an existing business or franchise, you’ll likely avoid some of the capital expenditures and marketing costs that come with starting a brand-new meal prep company.
2. Set up your business
Once you’ve decided on your meal prep niche, you’re ready to set up your business. But this step alone comes with quite the checklist.
Write a business plan
A business plan will help you organize the structure and operations of your entire business. It may even be required to register and license your business or secure funding.
There are many resources and templates online to help you build a strong business plan. Here is a general outline you can start with to build your meal prep business plan:
- Executive summary
- Company description
- Concept and menu
- Management and ownership structure
- Employees and staffing needs
- Market and competitor analysis
- Advertising and marketing strategies
- Financials
Register your business
Here is where you decide on a great name for your business and choose your business structure. First, pick a name that is attention-grabbing, concise, and representative of your business’s services. Then decide on how you will structure your business. Talk to a business consultant or attorney for advice on which business structure will get you the best balance of legal protections and benefits.
The following are a few common business structures for meal prep businesses:
- Sole proprietorship
- General partnership
- Limited liability company (LLC)
- Corporation
Next, you’re ready to register your business with your state or local government. Some business structures must register with the Secretary of State or the business agency where they plan to operate. You can register online or by mail.
Finally, you must obtain a state and federal tax identification number for your business. Register with the IRS to receive your business’s employer identification number (EIN). Then you can apply for your state tax ID.
Get business licenses and permits
Licensing is a crucial step for meal prep companies. You’ll need multiple licenses and permits to build and operate your business. These are usually dependent on your location, as every state and local jurisdiction will require different licenses. Check with yours to see what’s required of your business to avoid being shut down due to improper licensing and permitting.
As a food business, here are some basic licenses and permits you’ll most likely need to obtain:
- Seller’s permit
- Certificate of occupancy
- Business license
- Food handler’s license
- Catering license
- Health department permits
- Zoning permits
- Dumpster placement permit
Depending on what you plan to serve, your business may require additional licenses to those listed. Check with your business attorney or the Secretary of State’s website to get a more precise idea of what you need.
Purchase a business insurance plan
Meal prep businesses come with some risks. Cooking accidents, property damage, injury, and food-borne illness are rare but not unheard of in this industry. Comprehensive small business insurance will protect you and your business in the case of a mishap.
At the least, your insurance may include general liability insurance, workers’ compensation insurance, and commercial umbrella insurance. Talk to your local insurance agent or business lawyer to find the best insurance coverage for your meal prep business.
Set up a business bank account
It’s best to keep your business and personal finances separate from the start. Use your EIN to open a business bank account and credit card. Manage all your meal prep business finances with this business account and use your business credit card to build business credit.
Consider your financing options
It’s time to decide how you are going to finance your meal prep business. If you don’t have enough capital of your own, you’ll have to take another route. Finding investors is a great way to raise funds to open your business. Remember, a strong business plan can help you secure investors.
Another financing option is to get a small business loan. If you’re not sure where to start, check out SuperMoney’s guide to the best small business loans for all types of credit. And don’t worry; even if you have bad credit, it may still be possible for you to get a startup business loan.
3. Find a workspace
To run a meal prep business, you need two workspaces:
- A commercial kitchen (or a space where you can set up one)
- An office space
You can either buy or rent new business space. A commercial real estate agent can help you scout out buildings and land for sale based on your unique criteria. Keep in mind that your location will dictate what permits and licenses are required. Once you find a location that meets your criteria, start making offers until one is accepted.
You can also use your home as your kitchen and office. This can come with some tax benefits, but it won’t last forever if you plan on scaling up your business. That being said, a home office is a great place to start a meal prep delivery business. It can lower starting costs and allow you to get some profit under your belt before investing in larger spaces.
A central location is key to optimizing shipping costs, but not mandatory. Check with your local health department to understand the requirements for a compliant commercial kitchen and make sure your space can meet those requirements.
Related reading: If you want to start a business in California, check out this guide from SuperMoney.
4. Define your shipping strategy
Meal prep delivery services require logistical planning on the part of the business. Food must arrive at your customers’ doorsteps fresh and at food-safe temperatures. To accomplish this, you’ll need a solid shipping strategy.
A shipping strategy includes the following factors:
- Packaging. How will you keep the food safe and cool?
- Shipping services. What reliable carrier will you use?
- Cost. How much will it cost? How much should you charge your customers for shipping?
- Procedure. What is the procedure for keeping the food safe throughout prep, packing, shipping, and delivery?
5. Determine your pricing structure
What will you charge your clients? Will you offer subscription options? What does it cost to make and ship food and keep your business running? Do you have an idea of your business goals and target profit margin? What is the average market price of competing services?
Ask yourself these questions and use them to help you set up your pricing structure. Know that you can adjust as your business grows and you work out the kinks.
6. Set up an ordering platform
Every food prep business needs an online ordering platform. It doesn’t have to be a fancy app or meal prep software, but it can be. An excellent, easy-to-navigate website will make the ordering process smoother for you and your customers.
When setting up your online meal prep business for ordering, make sure your website includes the following pages:
- The Meal Plans
- How It Works
- Pricing
- Gifting
- My Account
- About Us/Your Business’s Name
- Contact Us
7. Hire employees
It’s time to get some more hands on deck. The number of employees needed is different for every business. You might be able to start the business alone with the help of family, friends, or independent contractors. Eventually, you’ll likely need to hire more help.
As your business grows, you’ll likely have to hire cooks, marketers, accountants, packagers, and customer service terms. The larger you get, the more people you can bring on. For instance, though you may not need one during your first few years, a nutritionist may offer additional ideas for different meals and make your business stand out.
8. Order supplies
You’re so close to launching your business. Purchase any equipment and supplies you need to start operating. You’ll need to get ingredients, portion packaging supplies, and shipping supplies to be ready to open. Buying in bulk is a cost-effective way to order ingredients and supplies.
Try to estimate accurately so that you don’t waste any food. When you’re just launching, order enough for one week of orders, then closely gauge how much inventory you’ll need from there.
9. Craft a go-to-market strategy
The go-to-market (GTM) strategy determines how a company makes a splash in the marketplace. It involves identifying the business’s value proposition, buyer persona, and roll-out strategy. A great GTM strategy optimizes the seven “P”s:
- Product
- Price
- Place
- Promotion
- People
- Process
- Physical evidence
Define these seven factors clearly and use them to plan how you’ll introduce the business into the market.
10. Market your meal prep business
Marketing is one of the main contributing factors to the success of a meal prep business. A good marketing strategy will generate more sales in less time. Begin by marketing in your local area, which is often a great way to gain momentum for your business. It will organically spread outwards as your momentum continues to build.
Use social media, radio, TV, and newspaper campaigns to build brand awareness. Generate leads with a great website. Grow your online presence by asking customers to leave reviews on sites like Yelp, Facebook, and Google. Partner with other businesses in the community to spread the word about your business. The more connected people feel to your business, the more likely they’ll think of you the next time they need food prep services.
Pro Tip
Consider hosting a grand opening event with promotional discounts to start building a customer base. If you don’t have a storefront, you can rent out a trendy space or partner with a local business. It’s a great way to engage with potential customers and encourage them to come back for more.
11. Provide quality service
Some say that the best form of marketing is high-quality service. If you treat your customers well, they’ll be more likely to return and recommend your business to others.
In addition to this, continue investing in your business and connecting with your customers. Take note of pain points and use them as opportunities for improvement. If you do this, you can look forward to many years of business success.
FAQs
How much does a meal prep business make?
An average meal prep business can make $100,000 to $2,000,000 in revenue per year. However, this obviously depends a lot on the size and annual costs of your business.
Is a meal prep business profitable?
The typical profit margin of a meal prep business ranges from 15% to 35%. It’s a business that has great profit potential.
How can you promote a meal prep business?
Because meal prep businesses are e-commerce businesses, online marketing works best. Social media platforms and online advertisements are great ways to promote a meal prep business. That being said, it’s never a bad idea to market offline as well through promotional events, flyers, and simple word-of-mouth.
Key Takeaways
- A meal prep business delivers convenient and delicious meal kits to their customers’ homes.
- Costs of starting a meal prep business include kitchen equipment, real estate, business expenses, software, inventory, and marketing. Starting the business in your home can significantly help reduce the initial investment, but it may get crowded if your business grows.
- To start a meal prep business, you will need to plan, register, license, and insure your business. Then you can start looking for a workspace, ordering equipment, purchasing supplies, and getting ready to launch.
- Like with any e-commerce business, marketing is important for the success of a meal prep business.
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