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Food Tech Fail 3: How Chefler's Choice To Launch In San Francisco Proved Fatal

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This article is more than 8 years old.

This is the third of a five article series about lessons learned from five start-ups that have failed in the foodtech space: Pop-Up Pantry, Chef Day, Chefler, Farmstr and Fresh Dish. To read the first of the series, on Pop-Up Pantry, click here. To read the second of the series, on Chef Day, click here.

Chefler announced its launch out of beta roughly two years ago, on September 16, 2013. The concept was straightforward: prepare and deliver fresh meals to young professionals and busy parents in San Francisco. Chefler’s Founder Omar Restom and Chef Jaime Harrington launched their company because they believed that people weren’t eating healthy due to lack of time and lack of healthy alternatives to fast food. With the on-demand meal trend moving in Chefler’s favor, the startup looked like a great concept that had the potential to break out, but by May of 2014, less than a year after their launch, Chefler was no longer delivering meals.

Restom built Chefler with convenience in mind. After a quick sign-up, customers selected days of the week, delivery times, and dietary preferences to set up automatic delivery of quality meals. Chefler meals consisting of an entrée and side were priced between 10 and 14 dollars including delivery. Payment occurred post-delivery and changes could be made at any time. Chefler hoped to stand out by delivering their meals on a silver platter, literally. Instead of having clients meet them curbside, Chefler drivers delivered meals to their customer’s door on a silver platter—like something out of a scene from "Downton Abbey."

After its September launch, Chefler seemed on the path to success. By November of that year, Chefler had run a very successful Gilt marketing campaign and had a 5 star average rating on Yelp. Customers were happy with the service and Chefler was seeing repeat orders and many referrals. At its peak, Chelfer delivered to over 600 clients a week.

Then competition started to heat up. Spoonrocket, a venture-backed startup with a very similar concept, moved into Chelfer’s South of Market (SOMA) delivery neighborhood, in the process lowering it's price per meal to $6 including delivery—half of what Chefler was charging. Other players began targeting Chelfer’s market, including venture darlings Munchery and Sprig, two on-demand meal delivery companies that raised millions in funding. Because Restom was bootstrapping his company and didn’t have the necessary capital to fend off his competitors, Chefler stood no chance of surviving.

Price wars were the main reason Chefler couldn’t maintain the volume or growth needed to attract much-needed venture capital, but there was another reason for the company’s failure, a reason that provides a big lesson for entrepreneurs wanting to learn from Chefler’s story: pick your launch area very carefully.

Launching in San Franciso was one of Restom’s biggest mistakes. The United States is a very big country, but back in 2013, the only place where you could find on-demand meal companies was…San Francisco, California. When Chefler launched, Munchery was already operating there and Sprig and Spoonrocket had just began as well. I can’t say whether or not Restom was aware of these other companies, but he should have been.

If Restom had launched in, say, New York or Chicago, Chefler might still be delivering meals today. Maple, a New York startup very similar to Chefler, launched this year and has already raised over $21 million dollars in funding. And in Chicago, two of Restom’s former employees, Blake Bible and Joe Andrews, launched Radish in April with highly acclaimed Executive Chef David Yusefzadeh, formerly of Mario Batali’s Baffo restaurant. So far, the company is off to a fast start.

Like Chefler, Radish offers dinner on demand, but with a few twists. Unlike Chefler, which offered all types of food and cuisines, Radish focuses on healthy meals only. But within that focus, Radish provides customers with more options, offering three choices each for protein, vegetable and starch. Within limited dinner hours, Yusefzadeh creates nine new dishes every day from a mix of proteins, vegetables and starches, often using local, farm-raised ingredients. Food is cooked every hour before delivery, and the Radish iOs app lists ingredients and nutritional values for each item. Radish was the first on-demand meal company in Chicago, Sprig—who recently raised $45 million in additional funding—has just entered the market.

It’s too early to tell whether Radish will have the same quick success as Munchery, Sprig and Spoonrocket or if it will end up like Chefler, but early indications are that they are super ripe for a large capital raise needed to compete in the space. Choosing an unsaturated market like Chicago and focusing on healthy meals was a smart move by the Radish founders, and it’s a move I’m sure the Chefler founders wish they had made. When I launched my company, The Fresh Diet, my main impetus was the lack of real competition in Miami. Had I launched in New York or Los Angeles, two major markets with lots of competition, I doubt we would have had the early success we did. By launching in an unsaturated market, I had almost two years in which to learn my business and tweak it until I was ready to expand nationally. I expect Radish to do the same. Once they have perfected their customer experience and raised the necessary capital, I can easily see them expanding to other markets and growing their brand.

As entrepreneurs, we need to find the lessons in every story, successful or not. These two Chefler employees have learned a lesson first hand, and now they are applying it as they write their own new story.

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