Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman (Part 6)

Sramana: How many kitchens were you running, and how many cities did you have this service in?

Zalmi Duchman: In 2008, we had three kitchens outsourced in Miami, New York, and Chicago. In New York, we were delivering in the tri-state area. In Chicago, we delivered to Chicago and the suburbs. In Miami, we delivered to the suburbs as well.

Sramana: What was the revenue level of the company at that time?

Zalmi Duchman: In 2007, we did $1.2 million in revenue and in 2008 we increased 400% to $5.5 million in revenue. Going into 2008, we had 300 clients. By October we were up to 500 clients. At that point we decided to open up L.A. from scratch right as the recession started. I found a kitchen that was gorgeous. It had 10,000 square feet and was right next to LAX for $15,000 a month in rent with a $30,000 security deposit.

That took every dollar I had in the bank at that time. We obviously had money coming in, but that money was paying for the caterers. I had to wire them money on a weekly basis for all of the meals that had been made. One guy in my office told me I was out of my mind to try and open in L.A., but I did it anyways, and it took us one month to get to 100 clients.

Sramana: Did you generate your L.A. business using Google AdWords as well?

Zalmi Duchman: I used Google AdWords and direct mail advertising.

Sramana: What was the split of customer acquisition between Google AdWords and direct mail?

Zalmi Duchman: Direct mail advertising was seasonal. We had one shot to get clients and then hope to renew them. When we use Google AdWords, there are clients coming in the door every day. It is hard to measure because it is so seasonal. Today we do direct mailings every month, and we continue to use Google AdWords. About 30% of our customers come from AdWords, while direct mailings and any other print advertising we do accounts for 70% of our new customers today.

Sramana: How has your menu evolved as you have expanded?

Zalmi Duchman: For the first two years you could go online and pick your dislikes. That is how everyone in the industry operated. One of the first big changes we made was to give people choices by creating the Premium Choice program. The Chef’s Choice became our normal program and allowed a customer to select eight dislikes.

Customers who selected the Premium Choice would be able to select from four menu choices for breakfast, and the choices differed day by day. We are always going to have things like pancakes or crepes made from whole-grain flour. Our focus is to select good carbs and employ portion control. If you like fruit salads then you will find a fruit salad option every day, but it will have different ingredients. The same thing applied at lunch, where a customer would always have two different salads to choose from. The food is gourmet and very much customized to the individual.

We offer regular, real food. We don’t offer fad diets. We offer customers choices, which is what they always wanted. As soon as we started offering customers more choices, we really saw our growth take off. In New York, we were able to eat up the market because our competitors there did not offer choices. We had almost the same experience in L.A.

This segment is part 6 in the series : Scrappy Entrepreneurship At Its Best: Fresh Diet CEO Zalmi Duchman
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