Tri Tran, Van Tran, and Conrad Chu conceived and then founded Munchery in 2010. The idea was to hire a team of gourmet chefs that would cook a variety of unique meals and allow users to order the food and then receive delivery of it in their homes. All the customers had to do was warm the meal in a microwave, and it was ready to eat. To make things more engaging and fun, customers could also rate the food and the chefs according to their level of satisfaction.

The first few years Munchery, which serviced the San Francisco area, did well. Partly because of its success, the firm branched into the mail meal-kit business in 2015, taking on Blue Apron and Hello Fresh in the new competitive space. Meal-kit businesses deliver a box to their customers, usually once a week, containing all the ingredients and recipes for two to four meals. Munchery’s meal-kit service differentiated itself on several dimensions. It was more convenient than competitors’ offerings. Rather than cooking the meals, you could microwave them. The firm was proud of the fact too that its products had only 100 percent natural ingredients and came from local sources only.

Along the way, Munchery raised \($124.5\) million and at its peak had a valuation of \($300\) million. Based on its success in San Francisco, Munchery expanded to New York, Los Angeles, and Seattle. Regrettably, in 2019, Munchery failed. What went wrong?

First, Munchery spread itself too thin. In an interview with the San Francisco Chronicle, Pascal Rigo, a celebrity chef and Munchery’s Chief Customer Experience Officer, said that startups can be a good food company or a good delivery company—but he had never seen a startup that was good at both. Second, as Munchery grew beyond San Francisco, it realized that its staple service—

cooking and then delivering microwave-andserve meals—had geographic constraints. To ensure quality, the firm needed to deliver the food from their kitchens to the customer in a short drive. To address this issue, Munchery built expensive kitchens in various locations in New York, Los Angeles, and Seattle. This strategy did not work. Running the kitchens was too expensive, causing the firm to close most of them by early 2018. Third, food delivery services, like DoorDash and GrubHub, were gaining traction. DoorDash could deliver good quality food from a variety of restaurants.

That made it hard for Munchery to compete, since it was delivering food from only its kitchens. Finally, Munchery experienced substantial customer churn. It tried to gain new customers through aggressive discount plans, but that effort failed to pan out.

Recognizing it was in trouble, Munchery laid off 30 percent of its workforce in 2018 and shut down its New York, Los Angeles, and Seattle operations. The company said it was doubling down on its biggest market—

San Francisco. It was apparently too little too late.

Munchery tried, without success, to find a firm to acquire it. In 2019, Munchery called it quits because it no longer had a viable business model and had run out of options.....

Discussion Questions:

1. At the time of its launching, how did Munchery create, deliver, and capture value for its stakeholders? How did the emergence of food delivery services, like DoorDash and GrubHub, affect Munchery’s ability to create, deliver, and capture value for its stakeholders?
2. Are there actions Munchery could have pursued to allow it to better anticipate the challenges that eventually led to its failure? If so, what are those actions?
3. In reflecting on Munchery’s failure, Pascal Rigo, Munchery’s Chief Customer Experience Officer, commented that startups can be a good food company or a good delivery company—but he’d never seen one that was both. What do you think Rigo meant by his observation? Why would it be hard for a startup to be a good food company and a good delivery company simultaneously?
4. List three takeaways from the Munchery case that can inform startups’ actions and hopefully help them avoid Muncher's fate.