How to Start a Meal Prep Business | SkillsAndTech

Did you know that meal preparation and delivery is one of the fastest growing industries in the US? It’s expected to expand threefold from 2017 to 2024 and reach $7.6 billion in annual revenue. This is definitely a fast-emerging market that offers real opportunity to make good money.

Of course, launching a meal prep business requires hard work. Thankfully, you’ve come to the right place, as this step-by-step will provide all the information you’ll need to start delivering delicious meals and running a successful business!

Table of Contents

Decide if the Business Is Right for You

It makes perfect sense to know what you’re getting into before you take the plunge. Without an in-depth understanding of the industry, you can never be sure if your idea will be profitable and sustainable.

Pros and cons

Understand the pros and cons of starting a meal delivery service to make sure the idea is worth your time and money.

Pros

Full or part-time work
Run your business from home
Little startup capital required
High profit margins & income potential
Relatively short break-even time (1 year)

Cons

Highly competitive
Finding good suppliers can be difficult
Building customer loyalty takes time
Compliance and licensing requirements

Meal prep industry trends

Several factors are driving sharp growth in pre-made meal deliveries, including increased preference among millennials for homemade meals and greater familiarity with delivery and mobile apps among younger generations.

In addition, it’s one of the few industries that was boosted by the pandemic, as nearly all restaurants were shut down, forcing people to eat at home with much greater frequency. Finally, people are more health-conscious today than ever before, and meal kit delivery caters to these consumers.

Industry size and growth

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Industry size and past growth – The US meal kit delivery services market is worth around $7 billion after growing 19% annually since 2017.
Growth forecast – Meal kit delivery sales are expected to cross $10 billion in the US by 2024 and continue growing at least 17% annually through 2030 globally.
Number of businesses – There are nearly 600 meal kit delivery businesses in the US
Number of people employed – The industry employs more than 9,000 people.

Trends and challenges

These are the latest trends in the industry:

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Dining in has become more popular than dining out because of the pandemic.
Cook and eat segment dominates the market because many millennials prefer gourmet-style home cooking.
Heat and eat segment is growing faster because of the convenience it offers.

Some of the challenges faced by meal prep operators are:

High prices
Shifting consumer preferences
Adherence to food quality standards

Demand hotspots

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Most popular states – The best states for chefs are New Jersey, Michigan, and Pennsylvania.^[5]
Least popular states – The least popular states for chefs are Nebraska, Iowa, and Wisconsin.

What kind of people work in meal preparation?

The most important role in a meal prep business is the chef.

Gender – Around 75% of chefs are male, while 25% are female.
Average level of education – A chef normally studies culinary arts, business or hospitality management.
Average age – Most chefs are over 30 years old.

How much does it cost to start a meal prep business?

Starting a home-based meal prep business can cost as little as $1,000, though it’s probably best to start your business in a commercial setting. For this, you’ll need to spend at least $8,000, and potentially as much as $30,000, to get your business off the ground.

A typical meal delivery startup will incur these costs:

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 – $200	175
Business licenses and permits	$100 – $300	200
Business cards and brochures	$200 – $300	250
Kitchen equipment	$5,000 – $8,000	$6,500
Initial supplies	$3,000 – $5,000	$4,000
Package design	$2,000 – $3,000	$2,500
Insurance	$100 – $300	200
Rent	$1,000 – $2,000	$1,500
Website setup	$1,000 – $3,000	2000
Total	$12,550 – $22,100	$17,325

How much can you earn from a meal prep business?

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The average profit margin for a food delivery business is 15-35%.

In your first year or two, you could have 20 clients who order two meals a day at $10 each for five days a week, bringing in more than $100,000 in annual revenue. This would mean $36,000 in profit, assuming that 35% margin. As your brand gains recognition, sales could climb to 100 meals a day and your operating hours are extended to six days a week. At this stage, you’d have to hire additional staff and move to a bigger commercial space, reducing your profit margin to around 15%. With annual revenue of $312,000, you’d make a tidy profit of $47,000.

What barriers to entry are there?

Like any business, there are challenges you’re likely to encounter when trying to venture into the meal prep business. These include:

Onerous regulatory requirements
Logistics and delivery tracking
Finding a central location is key

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

Hone Your Idea

With the basics out of the way, it’s time to drill down on meal prep delivery business specifics.

Why? Identify an opportunity

Meal delivery is a highly competitive industry, so you’ll want to do a competitive analysis to determine your competition’s strengths and weaknesses. Your direct competitors will be restaurants and food outlets that offer meal delivery services to their customers, as well as other meal prep businesses in the area.

Examine their prices, their product offerings, their delivery timelines and subscription models, to get an idea of what’s out there.

What? Determine your products or services

Some viable meal preparation business models you can evaluate include on-demand delivery, goal-oriented meal delivery, and pre-cooked storable meal delivery.

Under the on-demand delivery model, customers order food on an on-demand basis. The goal-oriented delivery model focuses on customers with dietary restrictions or healthier lifestyle goals through weekly or monthly delivery subscriptions. It involves prepping meals using handpicked ingredients as per the customer’s needs.

The pre-cooked storable meal delivery model involves preparing pre-cooked and frozen meals such as burritos, pizzas, and other dishes.

You should consider creating a niche for yourself by specializing in a certain aspect of your industry.

This could jumpstart your word-of-mouth marketing within your niche market.

How much should you charge for meal preparation?

You’ll want to have different pricing tiers based on the number of meals ordered. Research what your competitors are charging to help you determine your pricing structure. The standard price for meals in this market is:

$11.5 per meal for an order of 4 meals per week
$8.99 per meal for an order of 6 meals per week
$8.99 per meal for an order of 9 meals per week
$7.9 per meal for an order of 12 meals per week

To break even, you should charge between $10 and $12 for a single serving. Still, you can sell at a higher price depending on your niche and ingredients.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

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Who? Identify your target market

The primary customers for a meal delivery business include students, busy professionals, young families, and remote workers. Depending on your business model, you may want to target consumers on special diets by focusing on meals with handpicked ingredients.

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out a production facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

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When choosing a commercial space, you may want to follow these rules of thumb:

Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed

Ideally, you want a spot that allows you to deliver meals on time to as many customers as possible and maintain a high quality of meals on arrival.

Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
The name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “foods” or “meals”, boosts SEO
Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
Avoid location-based names that might hinder future expansion
Use online tools like the Step by Step business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

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Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
Product and Services: Describe your food products and services in detail.
Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Register Your Business

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Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to meal preparation.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your meal business will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just needs to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

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Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings, the sale of property or other assets.

Bank and SBA loans are probably the best options, other than friends and family, for funding a meal preparation business. You might also try crowdfunding if you have an innovative concept.

Apply for Licenses/Permits

Starting a meal prep business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Open a Business Bank Account

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Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your meal prep business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Get Business Insurance

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Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

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Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You may want to use industry-specific software, such as Sprwt, KitchenFuel, and NutriBot to build your menu, manage your customers’ orders, and plan your logistics, among other things.

Accounting

Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Some of your business will come from online visitors, but still, you should invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.

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Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:

Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
Instagram: Same benefits as Facebook but with different target audiences.
Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Order Now”. This can sharply increase orders.
Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as a free meal kit on the 10th order of each month.
Signage – Put up eye-catching signage at your store and website.
Flyering – Distribute flyers in your neighborhood and at industry events.
Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
Seek out referrals – Offer incentives to generate customer referrals to new clients.
Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
Testimonials – Share customer testimonials about how your meal prep business helped them.
Create infographics – Post infographics and include them in your content.

Develop your website

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Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your meal kits meet their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Some signature USPs for your meal prep business could be:

Farm-to-table local ingredients
American comfort food/exotic foreign dishes
Local gym membership free with long-term subscription

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a meal prep business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in meal preparation for years and can offer invaluable insight and industry connections.

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in meal kits. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Build Your Team

If you’re starting out small from home, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a meal prep business would include:

Kitchen Staff — cooking, cleaning
General Manager — hiring, firing, inventory, etc
Marketing Lead — SEO optimization, social media strategies

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Start Making Money!

Operating a meal cooking service is relatively simple. It involves checking the orders customers have made on your website or through calls, prepping ingredients, cooking the dishes, and finally delivering the meals. The industry has already experienced exponential growth over the past five years due to the rise of online meal delivery and changing consumer preferences. This is an industry that is just starting to take off.

You should now know what you need to do to start a meal prep business, and it’s time to go out and execute! But just to be safe, you may want to bookmark this guide and return when needed to be sure you stay on track for success.