Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman (Part 4)

Sramana: What did you put on your menus?

Zalmi Duchman: We bought all the Zone Diet books and did our own twists on those menus. We tried to stick to the 40/30/30 concept [eating 40% percent carbohydrates, 30% percent protein, and 30% fat] back then. Today we have moved away from that. The menus back then were based on the Zone Diet, and Yosef put a gourmet flair in the dishes. He is a French-trained chef and really put that into the menu. Judah and Yosef both had parents who raised them on natural, nutritious food. I did not have that background at all.

Originally we called the company Zone At Home. A year later I received a cease and desist letter from Dr. Sears. There were 10 other companies that had the same concept, and they all received the same letter, but for some reason he sued us and Zone Chefs. That was the best thing that happened to us. I changed the name to Fresh Diet. That worked for us because our business was all about customer service and the food. Yosef and Judah are both serious foodies. They love great food. They can’t even [eat] the food we put out because it is not kosher, but it is great food.

Sramana: How did the three of you share equity in the company as you set it up?

Zalmi Duchman: I kept 50% and basically split the remainder.

Sramana: The first year you did $300,000. Did you hire any employees?

Zalmi Duchman: Very early on I realized the business was about technology. I brought on a programmer. I got him to make us a MySQL Web-based database. About a year and a half later, I brought him in as a partner and today he is our CTO. He is a programming genius and has a very long, accomplished history.

We hired one person to work in the kitchen with Yosef and Judah. He runs the Miami kitchen today. By the end of the first year we did our first marketing campaign, which was a direct mailing campaign. That campaign brought in 100 buyers, so we hired in the kitchen as needed. I also paid for drivers as needed. I handled the customer service and answered the phones.

By then end of the second year we did $1.2 million in revenue. We were making food for 100 to 120 people a day. That is when we really focused on expanding the business. I did not want to remain at just 100 daily clients. I wanted to move into New York and L.A.

That summer we had an opportunity to buy out one of our competitors in Florida. They had a very small operation in New York which had 50 clients, as well as a similar operation in Chicago. I took out an SBA loan to buy him out. That transaction doubled my clientele.

Sramana: How much did you have to pay to buy that business out?

Zalmi Duchman: I had to pay $900,000. However, I received $200,000 of that back in cash flow because he had to leave me money for all the days owed to the existing clients. It worked out very nicely.

This segment is part 4 in the series : Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman
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