The founder behind Classpass is trying to get another two-sided marketplace off the ground. It is signing up restaurants at quite a rate, but is the model sustainable?
7 Apr 2017
How it works
The customer commits to the subscription and is given a highly discounted lunch (less than £5). They have to book it in advance before 9:30 each day they’re eating and choose a specific dish at a specific restaurant. Their lunch is reserved and a specific time given for collection.
Who’s behind it?
An American called Mary Biggins who was co-founder of Classpass – an aggregator of independent gyms, bundled together to offer people a subscription to lots of different places to work out. She’s recruited Nick Green, who was head of sales at Deliveroo. He was in charge of getting restaurants on the platform between March 2015 and February this year.
Why would restaurants do this?
They only need to have one dish on offer for Mealpal customers, they know the exact number they will need before 10am and they can have the orders ready to collect in a smooth fashion. It’s the efficiency sell. And Mealpal, in theory, is bringing in customers who wouldn’t have bought from this restaurant before.
Efficiency, fixed sales and getting people in and out as fast as possible during busy lunch times is a big draw for restaurants.
The old ‘incremental business’ chestnut
It’s a line frequently used by Deliveroo and is a big part of Mealpal’s pitch to encourage restaurants to sign up. The worry for restaurants is they will be selling more volume but with lower margins.
What’s the down side?
In theory, there are only a finite number of lunches up for grabs in a fixed area each day, and Mealpal is reducing the value of that entire lunch time business if it makes a big impact. Its potential success will also give it a powerful role in steering people towards certain vendors.
How much does it cost
There are various plans, but it’s typically 12 lunches a month, at £4.79 per lunch.
How does Mealpal get paid?
Mealpal ‘buys’ a volume of lunches from a restaurant at a discounted rate. The problem is that the discount it buys isn’t enough to make a profit on virtually any decent food it offers to customers if it’s passing them on for less than £5 per lunch.
Is it sustainable?
Unlikely in its current form. Mealpal has two options: either get a bigger discount from the lunch-time provider (restaurants won’t give this up easily), or raise the customer subscription fee.
What if it raised its subscription fee?
Classpass did this at the end of last year. After getting lots of customers in on an unlimited gym deal, it limited the number of classes a person could take and lifted the prices. The model was simply unsustainable. People quit in droves as a result, but it’s not clear if things have stabilised since.
How is it different to Classpass?
Fundamentally, Mealpal is much more about price than Classpass. Classpass was able to offer a variety of gym options that would be much harder to access through multiple sign-ups. Anyone can go to any lunch spot whenever they want, so it’s much more about the discount.
What progress is Mealpal making?
It claims over 200 restaurants are signed up in London. Mealpal started out in the City and Soho, and is now stretching to the usual candidates: Canary Wharf, Shoreditch, Fitrovia, Covent Garden, Chancery Lane.
It comes on the back of 1,000 restaurants signed up across the US, Mealpal’s home market.
Not needing drivers makes it easier to scale. Selling into restaurants is the focus for Green in the UK. He has two sales people right now, and another two will join soon, he says.
The company raised £12m in VC money last year, and is getting ready for another round to push into more cities and countries.