Food.com: The 1999 Business Plan

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Ever since we adopted, I’ve been staying up late through the night on a daily schedule of feeding and changing diapers every 2 hours. In those early morning hours, I’ve spent a lot of time watching the Food Network. No, I’m not a good cook or anything, but I sure love to watch others cook. Occasionally, I’ll cook and I enjoy it, but I’m no good.

Out of curiousity, I wanted to learn a little bit behind The Food Network. So, I checked out the Business Plan Archives to see if there was anything on Food.com — and, there was.

But first, a little bit about the archives: The Business Plan Archive is rich with history of what did and didn’t work during the Dot Com Bust. There, you’ll find interesting facts, business plans, and technologies that were just plain lame, very good but marketed poorly, or just too early for its time — all publicly available and free.

Back to food –

I found the 1999 business plan of food.com; below are some highlights from this 1999 document:

Food.com (Food.com or the “Company”) is the leading restaurant destination online. The Company’s website, www.food.com, is the only site at which consumers nationwide can browse menus, find restaurants in their neighborhoods, see daily specials and order their meals online. Food.com has produced interactive websites for over 13,000 restaurants in its network and has over 700,000 registered members.

The Company has established distribution and content relationships with leading online and traditional media companies, including AOL (exclusive takeout and delivery partner), The Chicago Tribune, The Washington Post, The Los Angeles Times, The Orlando Sentinel, The Philadelphia Inquirer, The Tampa Tribune and The Miami Herald. A seasoned management team leads Food.com headed by Rich Frank, who previously held senior management positions at the Walt Disney Company, and Comcast Communications and Content Corp.

Food.com generates revenues from restaurant website creation and maintenance, advertising, sponsorships and transaction fees on food orders placed through the Food.com network. During the next six months, the Company plans to significantly expand its offerings, including additional content (increased listings, restaurant news, reviews and profiles), services (such as dining reservation bookings and directions), commerce (sending meals as gifts and an online gourmet food and wine store) and community features (chat, reviews and recommendations). The Company’s strategy is to be the “Food Network” of the Internet: the most comprehensive and accessible resource on the Web for restaurant information, reservations, food-related shopping, food community and ordering food for takeout or delivery.

Food.corn’s market opportunity is substantial -annual restaurant industry sales exceed $345 billion, and food, dining and entertaining are popular media categories. Annual sales of takeout and delivery food alone exceed $132 billion, and this segment of the food industry is growing seven times faster than the rest of the industry and is expected to reach $195 billion annually by 2007. The restaurant industry is highly fragmented; there are approximately 620,000 restaurants in the U.S. with the largest chain representing only 1.4% of industry sales. Due to the fragmented nature of the industry, the potential for business-to-business activities with the restaurants aggregated in the Food.corn network and the Company plans to develop this area in 2000. Foreign expansion through joint ventures or licensing is also being explored.

Now, here is some data that really strengthens their case;

• The number of Internet users will grow from approximately 97 million worldwide in 1998 to approximately 320 million by 2002 (International Data Corp (IDC)).
• The percentage of these users buying goods online will increase from 28% in 1998 to 40% by 2002 (IDC). Internet Advertising Spending (In Billions) Internet Commerce Spending (in Billions).

• 78 % of US households makes at least one carryout or delivery purchase each month.
• Takeout and delivery expenditures constitute half of restaurant sales today, and are expected to constitute 60% of total food industry growth during the next 10 years.
• 47% of US adults state they cook fewer meals at home than they did two years ago.
• Demographic trends, such as the riseofdual income households, increasing work/commute times and rising disposable incomes, suggest continued growth in home meal replacement (HMR) purchases.
• In 1996, takeout occasions outnumbered on-premise occasions (54% vs. 46%) for the first time.
• At 4:00 p.m. everyday $136 million hangs in the balance as people decide what to do for dinner.
• The typical person (8 years old and older) consumed an average of 4.1 commercially prepared meals per week in 1996, up from 3.8 five years earlier.

Food.com addresses the dining patron’s need for timely, relevant information about Solution dining options, and facilitates their dining experience-whether the patron is dining out, taking out or having food delivered. Further, Food.corn takes advantage of the interactivity, targetability and other features of the Internet medium to offer a service unequalled by traditional media or offiine dining service providers. Key benefits of Food.com’s service include:

• Food.corn will enable a consumer to examine restaurant reviews, menu listings, restaurant descriptions and photographs, obtain directions to the restaurants, placereservations, learn of new restaurant openings and special events in their neighborhoods and receive special internet-only offers.
• Food.com’s order service is preferable to a telephone-based order service as it provides certainty of order entry accuracy, anytime ordering capability (no waiting on hold), the ability to manipulate data (i.e., selection of a certain cuisine within a certain radius of one’s home), and the ability to save favorite restaurant and menu selections.
• Relative to traditional restaurant delivery service businesses (“RDS’) that use printed menus mailed to consumers as their primary marketing device, Food.corn has a more cost-effective business model. Its online listings are dramatically less costly than printed menu books and allow real-time editing of information. Food.corn’s email direct marketing messages can be more targeted and are much less expensive than the bulk mailings of paper menu books. Actionable menu listings can be electronically routed straight to the restaurant, bypassing the human phone operators of a typical RDS for additional cost efficiencies.
• As broadband and other “always on” technologies continue to be developed and adopted in consumer households, the benefits of the Food.corn service will increase dramatically. As the line between television and the Internet blurs, consumers will be able to order food and access food/restaurant-related information instantaneously from their television/computer. The Company has already begun to forge relationships with the leaders in this industry.

Well, I’m glad Food.com didn’t fold under the weight of the dot com bubble. I like The Food Network, I occasionally check out food.com for recipes, and I think it’s a value-added service. Also, the business plan cited above is also well-written and convincing. Nicely done.

Below is an email to Lycos Ventures from the Director of Business Development at Food.com, pitching the Food.com business plan and requesting to meet and discuss an investment opportunity. Below is that email:

Westley, Peter M”on 11/09/1999 03:11:53 PMTo: “‘businessplans@lycosventures.com’”>

< < businessplans@lycosventures.com

cc: (bcc: DarleneZankey/Lycos)
Subject: Investment Opportunities for Lycos

Dennis,

I have recently presented an investment idea for Lycos to Ted Philip, who
suggested that I forward them onto you and follow up with you.

Food.com:

Salomon Smith Barney is currently managing a $30 million private equity placement for Food.com. Attached you will find a brief description of the company.

I will call you during the next couple of days to see if you would like to learn more about this company and opportuny. A Confidential Information Memorandum describing the Company, its operations and financial condition has been prepared and will be available for your review subject to the signing of a Confidentiality Agreement. I look forward to speaking with you soon.

Regards,

Peter Westley
Director
Salomon Smith Barney
Internet investment Banking
(415) 951 -1793

Learning the history of american enterprise is fascinating — there are rich lessons that entrepreneurs can learn and then apply to their own ventures found in these documents.

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