Shervin Pishavar makes the case for Munchery, which I had not heard of before, although I predicted the model in client scenarios.
The Munchery Model
Munchery is a full stack, end-to-end meal provider that specializes in delivery. It isn’t a restaurant and it isn’t a delivery service. It’s a whole new type of business that provides the quality of restaurant food with the convenience of ordering in. Using Munchery’s app or website, customers order from a daily changing menu. An average day might feature 50 unique items including entrees like spicy clam and chorizo pasta and chimichurri flank steak.
Before Munchery, a restaurant that offered this level of variety and culinary quality would have been very, very difficult to scale. Munchery addresses this by centralizing cooking into a single kitchen optimized for large quantities and investing in the latest cooking technology, such as programmable, WiFi-enabled, high-capacity ovens that use a combination of dry and moist heat. Technology like this automates the predictable, rote parts of cooking, which in turn allows Munchery chefs — drawn from top local talent — to focus on creating the best dishes possible.
We see Munchery as a platform for the creativity of chefs. Chefs are the new DJs. They can now go on tour and serve tens of thousands of people in cities around the world. Their recipes can now scale. And by having normal 9–5 hours they can live wholesome, happier lives rather than slaving away in a physical restaurant at all hours of the night. They have more time with their families. By not having to operate a physical restaurant they are freed to focus on their creativity as chefs.
In four short years, we estimate that Munchery has grown to half the size of Chipotle (NASDAQ: CMG) in the areas both companies serve in the Bay Area. At their current rate of growth, we expect Munchery to eclipse Chipotle in the Bay Area sometime in the next year. Chipotle is a $20 billion company. Munchery is growing 9 times faster than Shake Shack (NASDAQ: SHAK) and will be bigger than Shake Shack in 24 months. Shake Shack is a $2.7 billion company. As importantly, by combining the route density of Uber and FedEx with the cost advantages of Amazon and GEICO, Munchery has built a food business that’s highly defensible against competition.
Munchery could use its impressive cost structure to support margins that are significantly above market, but the company’s co-founder and CEO, Tri Tran, has broader ambitions. Tri’s vision is to make real food — healthful, delicious, fresh food — accessible to everyone. In pursuit of that vision, Munchery will continue to leverage its unique approach and scale to drive prices down so Munchery can be an everyday habit for a wider range of people. In a world where the vast majority of multi-billion dollar food businesses are built at a price point of under $10 per person, this was the vision that got us at Sherpa excited.
Add autonomous delivery plus robotic prep the costs go down even more.