Two entrepreneurs found a lucrative niche helping customers to make their own meals.
(Monday, August 22, 2005)
— By Larry Werner
Many entrepreneurs start companies to escape the corporate world and its cast of bean counters, blue suits and financial analysts. Meet two corporate refugees who say they enjoyed their time in corporate America, where they developed the expertise that will help them turn their small business into a national chain.
Darcy Olson and Ruth Lundquist are co-founders and co-CEOs of a company called Let's Dish, which operates stores where customers make family meals they take home to their freezers. Olson and Lundquist cooked up their business plan while living near each other in Savage and working in high-powered, high-paying corporate jobs.
For many of the 15 years they've been friends, these two women have dreamed about using their knowledge of business to do something on their own. But rather than being driven from corporate life, they said, they were drawn toward something new that they see as a national chain in the making.
With nine stores in four states after only two years, and $4 million raised in a private placement, these entrepreneurs look and talk like the executives they are.
And they recently hired Allan Hickok, a high-profile Wall Street investment banker and research analyst, who signed on as president after he raised the money they sought for expansion.
"I think Let's Dish is going to be a very, very big idea," said Hickok, a former Piper Jaffray analyst who gave up his own consulting company to join Let's Dish.
"It's an amazing business model. After we raised the capital, Ruth and Darcy asked me to stick around, and I thought about it for a while, and I said, `Yes.'-"
By 2008, Hickok predicts, [withheld for regulatory reasons.]
"It is kind of rewarding to look to our original business plan and see how close we were to so many things," Olson said.
"Now we're taking it to the next level," added Olson, a former manager of training and development with General Mills.
"We've exceeded our plan," said Lundquist, who was a technology analyst for a medical company before Let's Dish opened nearly two years ago. "It feels good to be successful."
These suburban mothers and wives met through Olson's husband, who was a college classmate of Lundquist's at the University of Minnesota, Duluth. They had much in common - two children each, homes in Savage, management jobs and graduate studies at the University of St. Thomas College of Business.
While working on advanced degrees at that hotbed of entrepreneurial studies, they developed a business plan that was, they said, "like a class project."
The plan called for kitchen-equipped stores where food professionals would help customers prepare freezer-ready meals for their families. Customers would sign up for a session and choose a menu on a website. With personal savings and a Small Business Administration loan secured by their homes, Olson and Lundquist opened their first store in Eden Prairie with an investment of about $200,000.
That was in October 2003. [Withheld for regulatory reasons]
They were introduced to Hickok by a former business associate of Lundquist's who also worked at Piper Jaffray.
Hickok said his former Piper colleague "called me up one day and said, `Would you have a cup of coffee with the co-founders of this little retail concept? You might have some ideas for them.'-"
Hickok said he was "dazzled by the concept."
Having worked for 20 years covering and capitalizing retail and food businesses, Hickok decided in minutes that these two women had a concept he could sell to investors.
"I understand retail; I understand food, and I understand the demography of America," Hickok said. "Let's Dish is so on trend it's almost scary."
The concept, he said, provides busy families with a way to prepare good food they can freeze for serving at home. For $125, the Let's Dish staff provides the ingredients and the instruction for preparing eight dinners that each serve six.
"That's $2.60 a serving," Hickok, the former financial analyst, calculated.
"There's a psychological dimension here at play that is very, very powerful," Hickok said. "Every year people have less time to cook, but they love to do it. Let's Dish makes it very easy to do that because you don't have to go to the grocery store and buy all the individual components."
Through the Minneapolis brokerage Feltl & Co., Hickok raised $4 million in a private placement that closed last month from a group of investors that he said represents "a who's who list of some of the biggest names in the fields of restaurant, retail, marketing, finance and operations."
Olson and Lundquist then hired Hickok to take the concept nationwide through franchising.
Franchises have been sold so far in Maryland, Virginia and Washington state for a total of nine stores, including four corporate-owned outlets in Twin Cities suburbs - Eden Prairie, Woodbury, Maple Grove and a prototype store opening soon in Apple Valley.
Before franchises were available - at $35,000 and 6 percent of sales - Hickok said, the company received more than 1,100 unsolicited requests from people who wanted to become franchisees.
The rapid growth, Olson and Lundquist said, didn't surprise them, because they used a proven tool of the corporate world to shape their business plan. Before launching in 2003, they hired a market-research company to conduct focus groups.
"From the very beginning, we've used consumer research to inform our business development," Lundquist said. "It had to be a good business model."
Since they opened, she said, consumer feedback has continued to energize them.
"We hear from our customers every day," she said. "People tell us how we changed their lives."
Said Olson: "We're able to give people involvement and ownership in what they're making."
From their focus groups, they heard potential customers saying, "Coming from Let's Dish would count as a meal that I cooked," Olson said.
The reception from customers and investors has been gratifying. But the ultimate endorsement, Lundquist said, came recently when she was recognized by her vanity license plate based on the Let's Dish name when she took her car in for an oil change at Jiffy Lube.
"So the manager comes out to greet me, and he looks at me and says, `Cuban ham and black beans and rice,'-" Lundquist said. "That was the latest indication this was going to work."
The expert's opinion: Rick Brimacomb, president of the Minnesota Venture Capital Association, said the addition of Hickok to the executive team at Let's Dish "greatly enhances their chance of success."
Brimacomb, a venture capitalist with Sherpa Partners and with Brimacomb & Associates, said franchise businesses have to be concerned with two sets of customers - consumers and franchisees. At $2.60 per serving, consumer happiness should be assured, he said.
"The company just needs to make sure that the unit economics are attractive to the franchisee," he said. "There is other competition out there, so now it's all about running fast and executing against the plan."
He said the company combines two major consumer trends - convenience and health-and-wellness.
"Successful demonstration of the model in four different markets, combined with an attractive value proposition to the customer, are checkpoints that the company may be able to scale on a national basis," Brimacomb said.
Larry Werner is at firstname.lastname@example.org.
From Minneapolis Star Tribune, August 22, 2005