The Ultimate Guide in Starting a Meal Prep Business

Last Updated Sep 1, 2020 | Published on Jul 25, 2020 | Small Business

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One of the good things that technology brought to people is the ease of access to almost everything, including food. These days, with just a few taps on your phone, your food will be delivered on your doorstep in less than 30 minutes. Because of the time people get to save in food preparation, people are becoming more dependent on these businesses.

Meal prep businesses is an alternative to these online food delivery options. Instead of fast food, people can order whatever food they like that are healthy and nutritious. For that reason, a lot of meal prep businesses are opening up. These businesses take of food preparation off the hands of busy people, so by the time it’s done, the customers can pick it up and bring it home – no cooking needed.

If you’re one of the people who have a passion for food and loves doing service to others, meal prep business is one you should consider.

But before you open your business, it’s important to learn the basics of it first. After all, how can you achieve success without knowing its foundations? With that said, here are all the things you need to know about opening a meal prep business.

What is a Meal Prep Business All About?

In a nutshell, meal prep businesses provide their customers with food using the ingredients of their choice and preferred style of preparation. They work as a person’s personal cook where they make whatever the customer orders. Once the food is ready, the customers can pick it up or have it delivered to their homes or office. They can order food for one or a whole tray which they can reheat for later. This helps them save time in food preparation.

One of the benefits of meal prep businesses is that it gives people a chance to enjoy wholesome nutritionally-packed food. Unlike fast-food, they can enjoy a wide variety of healthy meals without any added preservatives. Meal prep businesses provide people a chance to enjoy a home-cooked meal without having to do the cooking themselves.

Other meal prep businesses also work by providing recipes to people. This is especially helpful for those who are conscious about their diet. It works by having people subscribe to your exclusive recipes. For a specific charge, your clients can have access to different meal recipes and make the meal themselves. They can either stop by at your location to make their meal or pick up the ingredients and cook it in their homes.

What are the Steps in Opening a Meal Prep Business?

Learning how to do one thing can be tedious, especially if that thing requires creativity, critical thinking, and a lot of patience. Meal prep is one of those. But, opening one can be a rewarding experience. If you do it right, you might be able to earn more clients, expand your business, and make your company one of the best in the industry.

There’s no other secret to a successful business other than commitment, hard work, and a well-thought-of plan. If you want your meal prep business to thrive in a very competitive market, you must overcome the obstacles the lie ahead. One way of doing that is having your process and navigating through it one step at a time.

With that said, here are some of the things that you should consider in starting your meal prep company:

1. Identify the Niche You’re Going to Serve

Before you open your meal prep business, you have to know what niche market you’re going to be targeting. This way, you can easily structure the services you’re going to provide. This also lessens competition in your industry. Among the most popular niches are:

    • Diabetic-focused diet
    • Gluten-free diet
    • Senior citizen diets
    • Dairy-free diets
    • High-protein diets
    • Vegetarian diet

For example, targeting people whose health conditions require them to stick to a specific diet can be a good start. These people often have no idea what food they can prepare that can sustain their health. With the help of meal prep businesses, they won’t have to stress about their meal preparation every day. You can deliver a day or weeks-worth of food, salad, and dessert and your clients only have to reheat the food.

Eventually, you can expand your service to people who prefer a gluten-free or high-protein diet. Once you get the hang of it, you can add more services and expand your client base.

Additionally, a lot of meal prep businesses also offer different types of uncooked meals. All they do is prepare the necessary ingredients and the customers can cook it themselves whenever they like. This helps save the time they spend on grocery shopping. It’s also a great way to avoid wasted food since their customers only get enough ingredients for one meal.

2. Plan Your Menu

While you are waiting for the approval of your licenses, certifications, permits, and other documents, you can make use of the time to plan or create your menu. Remember that this part may depend on the type of niche you’re planning to target. For instance, if you’re offering gluten-free meals, it’s helpful to do your research about gluten-free foods beforehand. This will give you an idea of how you can design your meals. This will also help you determine what extras to add to make your meals more attractive to your target audience.

Your menus may contain appetizers, main meal, dessert, drinks, and sides. You can also include the ingredients on the menu to make your clients aware of what’s used in the meal. This is also helpful for people who are conscious about what they eat.

Consider where you’ll get your supplies, too. Since you’ll be making food every day for a long time, you have to find a supplier that can deliver your needs. You also have to make sure that your suppliers only provide high-quality products every single day. This will ensure that the food you make will also be fresh.

3. Write Your Business Plan

By this time, you have probably identified the niche you’re going to target. The next step is to craft the steps you’re going to take to make your business come to life. Your business plan will serve as your roadmap to success. As such, it should contain all the necessary techniques or strategies you’re going to use to make your business a success. It should have the following sections:

  • Executive Summary
  • Company or Business Description
  • Marketing Strategies
  • Market Analysis (including forecasts)
  • Organization and Management Team
  • Service or Product Description
  • Funding Options
  • Financial Projections

Aside from serving as your guide, your business plan will also be useful in applying for business financing – which every business will need, eventually. In reality, you won’t always have a stable cash flow in your company, having different financing options will help increase your chances of business loan approvals. Moreover, a good business plan will let lenders determine whether your business will be viable or profitable. It’s their way of knowing whether you will be able to repay the money you owe.

Related: 8 Things Lenders Definitely Want to See in Your Business Plan

To create a good business plan, there are some areas where you can focus on. For one, choosing a business name can be a huge factor – given that the name isn’t taken by other businesses. Next, determine your business entity (sole proprietorship, LLC, corporation, etc.). This will determine the organization and structure of your business. Finally, make your products or services unique from your competitors. Consider things like what type of meal prep you’re going to provide, the production costs, price, and time and money you need to perfect your product or service.

Never rush when creating your business plan. Once you complete that, it will be easier for you to operate your meal prep business and bring it to success.

4. Register Your Business and Obtain the Necessary Licenses and Permits

Now, the tedious part – registering and obtaining business permits and licenses. Once you have your plan, the next step is to register your business and obtain the necessary permits and licenses. Remember that your business structure and type may need to apply for additional licensing. This step is the least exciting and the most tiring, but it’s necessary to smoothen out your business operations.

Head on to your state secretary’s office and make everything official. In obtaining your business’ licenses, contact your county clerk’s office. To make sure that you have everything covered, head on to the SBA’s website. They offer resources for small start-up businesses and provide a step-by-step guide in starting a business.

Since you’ll be running a food-related business and will be serving the public, you’ll need to apply for additional permits and licenses. Depending on the state where you’ll be operating, you may be required to obtain a food handling certification. This holds in meal prep businesses in California, Alaska, and Alabama. Moreover, you may also be required to renew this certification from time to time, depending on the requirements of the state.

As with all food-related businesses, you may be required to secure the following additional licenses on top of the main ones:

  • Catering license
  • Health department permits
  • Sales privilege
  • Food handler’s licenses (for the owner and other people involved in food handling)
  • Zoning Laws and Permits
  • Kitchen and Safety Inspection

Don’t forget to apply for an Employer’s Identification Number (EIN), as well, especially if you’re planning to hire staff. While this is primarily required for tax purposes, there are also other benefits associated with obtaining an EIN. Be sure to explore what types of insurance you need for your business and employees.

Laws on Your Business Location

Aside from the licenses, you’ll also have to consult your health state department on where they’ll allow you to prepare the meals. Based on state laws, food businesses are only allowed to operate in licensed kitchens. But in states with Cottage Laws, food vendors may be allowed to prepare meals to be sold later on in your home. To do so, you must follow the regulations per advised by the law.

The downside of the Cottage Law is that there are some restrictions on which food you can sell. For instance, baked goods, in general, are deemed safe to be sold to the public. On the other hand, meats may not be allowed. This restricts the food you’ll be allowed to provide your customers. For that reason, a lot of meal prep businesses opt to lease commercial spaces where they can operate without restrictions.

Test kitchens (refers to space where the meals will be prepared) for meal prep businesses can be in a church or community centers. Other times, entrepreneurs can negotiate an hourly rate for using a restaurant’s kitchen during its off-hours.

5. Apply for Financing

No matter how much you want to stay debt-free, if you want your business to grow, you will need to apply for a business loan. The cash you obtain will help in improving your cash flow, thus, helping your business strive in the competitive market. All business types need to apply for some kind of financing to keep their operations going.

Other than that, your financial accounts will help in building your business’ credit background. This, in turn, helps you in attracting suppliers and investors. The better your credit background is, the better your opportunities will be.

With that, here are some of the most appropriate financing options you should consider:

Equipment Financing

If you do deliveries, then you might need a van to accommodate all the orders. Aside from that, the equipment you’re going to use in your food preparation can be quite expensive, too. Considering the steep costs, you need to have access to additional funding. This way, you won’t have to deal with cash flow gaps, which if handled poorly, could lead to irreparable cash flow issues.

With equipment financing, you can get all the necessary materials you need in food preparation. The best thing about this financing is that the equipment you bought will serve as the guarantee for the loan. Since the loan is tied up to the equipment you need, it’s generally easier for new businesses to qualify for.

Business Line of Credit

For start-up businesses, a Business Line of Credit (LOC) is usually the first thing they apply for. If you’ve used a credit card before, then it will be easier for you to get the concept of a line of credit. Once approved, the entrepreneurs will be given a credit limit. From there, they can withdraw any amount they need as long as they don’t exceed the given limit. It’s also a revolving credit which means you can withdraw money again whenever you need it and pay it back plus the interest.

With a business LOC, you can control where the money goes, given that it’s business-related. You can use it to buy office supplies, inventory, rent, or other payables.

SBA Microloan

The Small Business Administration (SBA) also backs up loans to allow small-time entrepreneurs to establish their businesses. It’s important to note that the SBA isn’t the one that provides the loan but, rather, they guarantee it. They partner with banks and other lending companies where the entrepreneurs can then apply.

Related: 3 Main Types of SBA Loans for Small Businesses

However, one SBA backed-up loan works differently than others. SBA microloans offer start-up businesses small loan amounts (up to $35,000) which they can use for different business-related things. Unlike other SBA-backed up loans, the funds given to entrepreneurs will come directly from the Small Business Administration. These loans will be available through the non-profit community-based intermediaries. You can easily look for an SBA loan intermediary by visiting the SBA’s website.

SBA microloans are an option that all start-up businesses can qualify for. The only catch with SBA microloans is that the borrowers may have to enroll for a class that the intermediaries offer. However, it could also be a good resource that many businesses find useful in the future.

Business Credit Card

Aside from a business line of credit, a business credit card can also help you in your business’ expenses. You can buy your kitchen equipment using your card and pay for your suppliers. It’s also a good financing option for start-up businesses that don’t have enough credit history to qualify for larger, more comprehensive loans. A business credit card will allow you to pay for business-related purchases anytime you need it.

Business credit cards also make it easier for you to separate business and personal expenses. Other than that, there are a lot of perks that come with credit cards. It usually comes in the form of rewards. Businesses often apply for one because of the benefits that come with it. For instance, you may convert your credit card points into flyer miles or discount coupons. Nevertheless, it’s a great financial resource to have when running a meal prep business.

6. Market Your Meal Prep Business

Now that you have everything ready, it’s time to get your business known to the public. This is then where your marketing strategies come in handy. You need to make your business attractive to the public. Make sure that your business stands out among the others in the field.

One way of getting your business out there is to register it on an online platform. Yelp, a company that reviews businesses, is a good place to start. You can also make use of social media platforms to market your meal prep businesses. Social media also allows you to connect with your target audience in real-time. Through chats, your customers can easily ask what type of food you offer and even order from there.

Another way is to establish your business website. Make sure your website is sophisticated and easy to navigate through. This way, your customers won’t be too overwhelmed and distracted with the unnecessary design.

It should also be noted that when crafting your marketing plan, costs versus profits generated should be considered. Don’t spend unnecessary amounts on a marketing strategy that won’t produce viable results. Otherwise, you’ll end up fixing one cash flow issue to the next.

7. Bring in More People

As your business grows, your team will also grow with you. While you may have managed to do everything at first, you’ll eventually need to bring more people to handle other tasks as your customer-base expands. Essentially, you’ll need to hire at least 2 more people to start. One is in charge of deliveries and the other can assist you in preparing the meals.

Attempting to handle everything by yourself often leads to mistakes in food preparation. In turn, these mistakes can cost you your customers. With that, it’s better to allocate tasks and ask for help. This way, you won’t be overwhelmed with the number of things to do in a day.

Furthermore, make sure that the employees you hire have good people skills. Since they will be on the front lines of your business, they should be able to handle and maintain customer-relationship well.

Tips in Running a Successful Meal Preparation Business

Now that you have an idea of how you’ll start your meal prep business, it’s time to make sure that you do it right. Learning is one thing, being good at a specific thing is another. With that said, here are some tips to a successful meal prep business:

  1. Always do a Competitor Analysis

The meal prep business is a competitive industry. Chances are, there are a lot of companies that are more established than you are. This is why it’s always better to study what strategies they did and how they did it. Consider their food, pricing, delivery services, and what makes them stand out among others.

  1. Learn from Someone with Experience

Another smart thing to have is a mentor. He or she doesn’t have to own a meal-prep business. However, she should be knowledgeable when it comes to food and people. Find a mentor and use their knowledge about the business to your advantage.

  1. Be Smart in Hiring Your Staff

Remember one thing: your staff can make or break your meal prep business. So make no mistakes when hiring. Your delivery guy should have a pleasant personality and a people’s person. Aside from that, your chef should be trained and knowledgeable about the type of food you’re looking to sell. Most importantly, your team should have a good sense of camaraderie.

  1. Know the Driving Routes

It’s common for delivery men to get off track, especially when it’s their first time delivering to that location. You, as the owner, should get a bird’s eye view of the delivery routes. This way, you’ll be able to guide them on where to go and avoid late deliveries.

  1. Always Prepare for the Worst

Challenges and obstacles can halt the growth of your business. Be sure to prepare for these. This way, you won’t be caught off-guard. As much as possible, prepare a back-up fund, so when emergencies arise, you won’t be left to dry out.

Planning to Open Your Own Meal Prep Business?

Whether you’re looking to grow your meal prep business or open one, it’s always a good choice to learn more about the venture. The meal preparation industry continues to grow and business owners need to keep up with it. They have to find out how they can gain a competitive advantage if they don’t want to end up at the bottom.

Most importantly, be sure to prepare adequate working capital and secure a back-up financing option. This will help stabilize your cash flow and keep your business profitable for the years to come. With that and the guide above, you can give your start-up meal prep business a good start.

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