How to Start a Meal Prep Business
A meal prep business is a lifesaver for busy people and for those who don’t enjoy meal prepping for themselves. Starting a meal prep business is a rewarding venture as it is a valuable service that provides healthy and quick meals.
Your meal preperation business will save your customers precious time, provide healthy meals, and reduce the times they need to go to the grocery store or a restaurant. It is for these reasons and so many more that customers return week after week for prepped meals.
A meal prep business makes ready-made or near-ready-made meals for purchase. The business can operate wholly online and provide delivery services, or it may run out of a retail space where customers can visit in person.
The two most common meal prep niches are meal kits and ready-to-eat meals.
- The meal kit niche provides all the ingredients, including spices, sauces, meats, veggies, and dairy products, for the customer to cook the recipe quickly at home. The customer may need to do some dicing, slicing, and cooking. But all the measuring and gathering of ingredients is done—a huge time-saver.
- Ready-to-eat meals are similar to ordering a meal from a restaurant’s menu. The food is pre-cooked and packaged, ready to be reheated and consumed at home.
Many meal prep businesses operate on a membership or subscription basis. These memberships provide stability because it ensures regular income and helps the business account for how many customers they will serve each month.
Additionally, most meal kits or meal prep dishes are priced per serving, and sometimes a delivery or shipping fee too. For example, a meal will be priced at two servings if the ready-to-go kit has two servings.
In the early days of the 2020 global pandemic, meal kit delivery businesses boomed. Meal kit delivery services provided an alternative to grocery shopping and eating out, which many households took advantage of. From 2017-2022, the meal prep industry grew by approximately 19% each year. And in 2022, the meal kit delivery industry earned $6.9 billion, an increase of 3.3% compared to the previous year.
As of 2022, there were 527 meal kit delivery businesses in the U.S.—a 22.3% increase compared to 2021. Similar to the increase in revenue between 2020 and 2022, the number of businesses providing meal kit delivery also grew significantly.
Although a large amount of this industry’s growth was attributed to the need for grocery store alternatives, growth trends may change as the world adapts. For instance, economic changes and ever-evolving health awareness trends influence how well meal prep businesses do.
Economic influence. The economy plays a part in how a meal prep business performs. When unemployment is low, and consumer spending is up, customers are willing to spend more on extra services. Because of this, meal prep services do well when consumers have more disposable income to spend.
Alternatively, when the economy is down and unemployment is up, meal prep businesses may have a decreased demand for their services.
Health awareness. The increased focus on healthier meal options drives people to find alternatives to fast food restaurants or processed meals at the grocery store. Meal prep businesses meet this need because they often offer diet-friendly and low-processed meal choices.
Additionally, meal prep businesses appeal to consumers with restricted diets because many prepped meals or meal kits can be modified to be vegan, kosher, gluten-free, or dairy-free.
Meal prep businesses primarily appeal to individual consumers. But some of the specific markets of consumers include:
Diet-restricted consumers. Individuals with specific diet plans may use a meal prep service to help them learn how to prepare foods that accommodate their health needs. For instance, this could include consumers looking for gluten-free, dairy-free, vegan, or low-sodium recipes.
Time-restricted consumers. Individuals working full-time or with busy schedules may have less time or opportunity to meal prep and cook for themselves. For instance, by focusing on busy professionals in high-traffic areas, a meal delivery service may find a high concentration of customers needing this service.
Checklist for Starting a Meal Prep Business
Although becoming an entrepreneur can be exciting and liberating, there are also many challenges that come with launching a new meal prep business. From selecting the right ingredients to planning effective marketing strategies, it’s important to consider all aspects of setting up your own meal prep company. To help ensure success and efficiency in this process, I’ve created a checklist for starting a meal prep business that breaks down the most common steps.
Step 1: Write a Business Plan
A business plan for a meal prep business is incredibly important for setting up the business for success. It not only gives the owner a detailed plan of action that keeps the entrepreneur on track, but it also forces them to do a competitive analysis to differentiate what makes their business different.
Additionally, the meal prep business plan serves when approaching potential investors and/or lenders, who will want to see your detailed plans before they decide whether to invest in (and support) your company.
Related: How to write a business plan
Step 2: Name the Business
While brainstorming business names for your meal prep business can be a lot of fun, it is important to remember that the name you choose will become the very face of your business and often shape people’s perceptions of it.
With so many choices, it can be difficult to pick just one, so here are several tips that can help you get creative.
First, consider playing around with words related to meals, nutrition, and convenience. These words are all qualities associated with a meal prep service.
You can also aim for something concise and creative that conveys the idea of fresh ingredients, healthy eating, and speedy delivery. You want a name that stands out to your potential customers and helps you establish an identity.
Consider using alliteration or wordplay to make your name memorable or include geographical details or local flair to give it more meaning.
Above all else, make sure the chosen name is legal in your region by checking for any trademarks or other regulations that may prevent you from using it.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a legal structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a meal prep business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
Deciding on a location can be a critical decision for a meal prep business. Your business model will impact the ideal location, as a meal prep business can have a retail storefront where meals are made and sold, while others can be a mobile service and work out of a commercial kitchen.
Before signing a lease or purchasing a location, consider talking with your local health department, as they can help evaluate choices and help evaluate the investment necessary to make it legal.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A meal prep business will need to obtain certain business licenses and permits and these will vary based on the state and town where the business is located.
Most importantly, the business owner will also need to be compliant with food handling and safety laws and obtain a food service license, which is usually regulated by the state’s Department of Health and enforced by the local health department. Smaller services may fall under the state’s cottage food laws which typically do not require a commercial kitchen.
In addition, there will are general local, state and federal registrations that most businesses need to be aware of, which for a meal prep business could include a state sales tax permit, Employer Identification Number (EIN) from the IRS, and city Occupancy Permit.
Related: Common business licenses, permits, and registrations by state
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a meal prep business is another. Fortunately, the cost to start a new meal prep business is relatively low; however, funding to start a business can be difficult. Banks are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Source Ingredients & Supplies
Next, it’s time to start sourcing ingredients from local farmer’s markets or wholesalers, as well as any supplies, such as boxes, bags, labels, etc., that are required for packaging the meals. Having reliable vendors is critical to the long-term success of your business.
Also, some vendors will help in the calculation of your meal costs, so you are pricing them appropriately. Be sure to ask, as these additional services will help you be successful from the start.
Step 9: Get your Marketing Plan in Place
Developing a strong marketing strategy is vital for any business and should include several different tactics to reach as many potential customers as possible.
First off, having an eye-catching logo that is used everywhere from signage to apparel, will help to build your brand.
Networking with other businesses in the community is a great place to start, as they may be able to refer potential customers or may lead to a marketing partnership. Joining the local Chamber of Commerce is a quick way to get in front of local business and community members. Having business cards and brochures or coupons to hand out is a simple strategy that still works.
In addition to getting known in the community, creating an online presence with a website, online advertising, and engaging on various social media platforms such as Facebook, Instagram, or Twitter, can also help make your business visible and lead to sales.
Related: Low-cost ideas to market a new business
Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.
Step 10: Get Business Insurance
When running a meal prep business, it’s essential to have the right insurance coverage in place. This can help to protect you from any unexpected and potentially expensive surprises.
There are a variety of insurance policies that can be considered, such as general liability insurance; property coverage for any buildings or equipment; product liability insurance if food allergies are an issue; and worker’s compensation insurance in case of employee injury.
To get a more accurate idea of potential insurance costs, request quotes from multiple insurance companies. Compare the policies and consider factors like deductibles and coverage limits to find the policy that’s best for a business.
Related: Types of insurance your business may need
This material is property of StartingYourBusiness.com
Common Questions When Starting a Meal Prep Business
How much does it cost to start a meal prep business?
Starting a meal prep business involves planning, marketing, and budgeting. How much of an investment the business will be is determined mainly by ongoing expenses. For instance, supplies and ingredients are continuing costs for every meal prep business.
But employee wages and location costs are ongoing expenses that may not be relevant. Regardless, it helps to know how much these things cost, especially as your business grows.
Business formation costs. Your first costs in starting your business include purchasing a business license, permits, and insurance. Each state regulates licenses and permits—so check your state’s website for small businesses to determine these costs. Generally, the price is less than $1,000.
Insurance costs are variable because they are based on risk and coverage amounts. The best way to determine insurance costs is to contact an insurance agent or company for a quote.
Supplies. Initially, you will need food containers, cutting boards, knives, and appliances (if your location doesn’t include appliances). You can save money on to-go food containers when you buy them in bulk. For instance, Uline sells 250 entrée containers for $145 and corresponding lids for $110. The cost works out to $1.02 per meal for both the container and lid.
Ingredients. Ingredient purchases are ongoing expenses that will vary based on the types of meals you offer. But for example, the average cost for a pound of chicken breast in 2022 was about $4.42, pasta was $1.42 per pound, rice was $0.96, and potatoes were $0.94.
So, a one-pound meal kit (four servings) with meat and a grain or vegetable could cost around $6 at the minimum to produce.
Employee wages. Some of the employees you may hire for your business include chefs, customer service representatives, and delivery drivers. The average hourly rate for each is approximately $16 – $18.
Location costs. If you operate out of a commercial kitchen or retail space, rent will be another ongoing expense to budget. Commercial kitchens can be leased monthly or on an hourly basis and generally include equipment, such as access to freezers, stoves, and ovens. The cost for monthly rent ranges between $500 – $2,000, and hourly rates start around $15.
How profitable is a meal prep business?
Meal prep businesses earn a profit on the number of servings sold. The average meal kit sells for about $10 per serving. Based on this figure, your business could earn around $1,800 per 250 servings sold. Let’s look at the math.
If you sell 250 servings, your gross gains are $2,500. The combined cost for supplies and ingredients equals around $630 for 250 servings: $255 for to-go containers and about $375 for ingredients. After subtracting expenses from your earnings, you net about $1,800 in profits.
Of course, some of the net profits will go to employee wages and location costs if your business has those expenses, but with enough servings sold per month, you could easily cover your expenses with income left over.
Although you would need to sell a lot of servings each month, the servings add up quickly. For example, many customers buy at least two servings per meal and often multiple meals per week. A customer on a membership plan with two meals a week with two servings per meal will purchase about 16 servings in one month.
Are there grants to start a meal prep business?
It’s extremely rare to find a grant to start a meal prep business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a meal prep business?
Running a meal prep business requires some skills to help ensure your business runs effectively and profitably. Here are some of the essential skills:
Food handling. Food handling knowledge is one of the most important skills for a meal prep business. Knowing how to correctly prep and store food will ensure that the ingredients are kept from spoiling and free of bacteria or foreign objects.
Cleanliness. Reputation is vital for a meal prep business. Unclean workspaces, spoiled food, or cross-contamination can harm your customers and your business’s reputation. So, keeping a clean environment is essential.
Diet awareness. Your business will likely cater to unique diet plans and restrictions. So, understanding allergens and nutrition will help you meet your customer’s needs.
Employee management. You may hire employees to help prep and deliver meals. As such, being able to manage your team efficiently and uphold operational standards ensures that you maintain a positive reputation and happy employees.
Order management. Order management is another essential skill that involves taking, filling, and delivering orders. Good order management skills ensure that your deliveries are made on time and sent to the correct customers.
How much should I charge for meal prepping
When setting a price for your meal preperation business, it’s important not only to consider the labor to prepare the meal and the cost ingredients, but any overhead such as rent, marketing, etc. You should also research what other people are charging for similar services in your region so as to stay competitive, but don’t be afraid to charge more for a better product.
Setting a price too low can undervalue your work, or cause customers to question the quality of your meals, while setting it too high could drive away customers.
How to start a meal prep business from home?
While many areas allow a meal prep business to operate from the home, there are many regulations to follow. Every location is different, so check with your local health department to learn more about the rules for your area.
Although meal preperation businesses have considerable ongoing costs to maintain the business, they can be successful and have a good profit margin. So, if you have a passion for crafting delicious meals and helping ease the load of preparing weekly meals for your customers, then a meal prep business is a great opportunity to explore.