YOYO LunchBox turns 2 🎉
After investing more than ₹15 lakh ($20K) and almost shutting it down twice, nothing gives me more joy than the fact that YOYO Lunchbox turned profitable last month. This journey hasn’t been easy, but looking back I have enjoyed every bit of it and would do it all over again (of course differently) if I had to.
I’m writing this article to retrospect on this journey and share what part of it I would do differently.
First, a little bit of history
I started YOYO Lunchbox with Meghala, who had lost her job during the pandemic and was finding it difficult to meet ends and take care of her family (The Hindu covered this story). I knew she cooked well (she used to supply me lunchbox), and I always wanted to try my hands at the food business, so it seemed like a perfect opportunity. As I was earning decently with my job at Clarisights, I was okay with some part of my income being spent on this business.
We worked throughout October 2020 to ideate on the food menu, pricing strategy, built the website and set up some basic infrastructure on Google sheet to log the orders. Our concept was quite different from other cloud kitchens as we only accepted pre-orders for lunch and dinner with fixed delivery slots. The focus was on providing a simple healthy meal with lots of vegetables, something that can be (and should be) consumed every day. It was different menus every day making it similar to home-style cooking. We did not list on online platforms like Swiggy/Zomato as they didn’t support the pre-ordering framework.
On Nov 2, 2020 we delivered our first order with Meghala akka cooking the meals and her son, Rithick, doing the delivery. We acquired the first few customers from Google and Facebook ads, but soon the word spread and we started receiving ample orders.
We made significant progress in the first year with monthly orders 6X higher at the end of the year. More than acquisition, the focus was on retention as we were targeting an audience who would need daily meals. We enjoyed a retention rate of as high as 95% (18 out of 20 people re-ordered food). Looking at the feedback and review from our customers gave us confidence that we can make this big.
All that glitters is not Gold!
Although things look good with sales increasing, I was losing a lot of money to make this work. My net loss some months was more than 1 lakh INR which I never anticipated. This was mid-2021 when we were seeing healthy growth and the team of 2 initially had now become 4 full-time cooks, 5 part-time delivery riders, and 1 person for marketing and admin. Finance was one part of it, but keeping this afloat demanded a lot of time from my schedule which I wasn’t able to fit within weekends (as planned). More on what I would have done differently later.
Until now, we were taking orders on WhatsApp and maintaining all the data on a Google sheet. Gokul was the backbone of the operation, talking to the customers and coordinating with the cook/delivery team for execution. Though we had built some automation using Google Sheets and GlideApp, we weren’t able to manage the scale of orders and payments. There were frequent human errors that were hurting us.
The best thing that happened with YOYO Lunchbox
Srivathsan, who I worked with in Clarisights joined us as the Co-founder in June 2021. Building some automation for order management was naturally the next step for us and Srivathsan took it up as his weekend project to build the mobile app. After weeks of brainstorming and wireframing on Figma, Sri developed the app, all alone within just 6 weekends. We launched it on Google Playstore and App Store in October 2021.
Having an app gave a major boost to our sales and automated the process completely.
Earlier w/o the app —
1. Gokul would share the daily menu on Whatsapp Broadcast and take orders manually
2. Collate all orders and send them to the cook and delivery team
3. Receive payments via Google Pay, PhonePe or Cash
Now w/ the app —
1. Customers could see the menu for an entire week
2. The cook and delivery team could see the orders on a Google data studio dashboard
3. Customers could directly make payments on the app
Where it started failing 📉
Buoyed up by the growth, I had now built a team with specialist cooks and helpers along and delivery riders. (Meghala Akka had quit due to health reasons). The total salary + the rent (we’d moved to a new dedicated kitchen) was close to ₹1.5 lakh per month. I assumed the growth would keep up and I would be able to hit break even (I have said this word at least 1000 times) soon. But that didn’t happen. If I think retrospectively, I failed at a few things:
1. Usually, there is a honeymoon period in the startup where your customers love you, there is a healthy growth rate (because the base numbers are small as you are still starting up) and everything is merry. But soon you hit saturation and see that the graph isn’t going up but has stagnated. I relied on this initial traction and assumed I would enjoy the same growth rate and didn’t focus on marketing. With all the investment I was making in building the team, I should have spent more money on marketing.
2. I was operating all of this remotely, 700km away from the kitchen. Businesses, especially the food business needs a lot of work that can only be done if you are on the ground (including marketing). Also, managing a team remotely wasn’t easy, especially when you are working with blue-collar workers. There were a lot of moments when you feel helpless because you can’t give harsh feedback as they could quit (and hiring is not easy).
3. Most importantly, I should have kept a better tab on my expenditure and panicked sooner. I spent little time managing expenses (I’m usually not good at this) and the food business is all about keeping expenses in check. Apart from groceries, and vegetables, there are tons of miscellaneous expenses (which look one-time) that keep recurring. I did keep discussing cost of Tomato, Onions, Oil etc. once in a while but clearly, I should have been a little bit more frugal mindset. (It’s probably the time this task requires that put me off)
4. In continuation to the point above, the costs of goods had been increasing after the pandemic(Oil prices had almost doubled) and we must have revisited our pricing strategy. For a very long time, I wasn’t comfortable increasing the prices, worried that we will lose customers. But when we finally did increase the prices, we didn’t really lose customers. This was a slap on my face when I realized the low price was never our USP (Unique selling point). I have now come to the realization that using low prices to lure customers would be the last thing I would do in any business. Keeping high margins is always important, no matter what business you are in.
How did we turn it around 📈
At the start of this article, I proclaimed that we turned profitable last month. So how did that happen?
Until the start of 2022, all of the operations were done and managed in-house with a delivery team of 5 and a team of 4 cooks+helpers. While doing it in-house has the advantages of better control and cost-cutting, but to do it at our scale, that very same thing was detrimental. It takes a lot of time and energy to maintain all of this. For Srivathsan and I, this was always our side hustle.
We started working with an agency that provided delivery services to deliver lunch and dinner. Though the costs seemed higher initially, the benefit of someone else owning a function was massive. The biggest advantage is that you only pay when you use their service. Further, hiring new delivery riders was a nightmare as the attrition rate was as high as 50%, basically, half the team quits every month. We’ve now made a partnership with Dunzo which has a pan-India presence and are a leader in quick commerce. This has certainly been the best decision as this is scalable and now has become cost-effective as well.
Seeing success in outsourcing delivery operations, we started looking for a vendor to outsource food operations too. It was critical to find a partner who would match the quality of the food we were providing and also be reasonably priced. After some trial and error, I’m glad to say we now work with a partner who offers food of much better quality than we did (the costs are higher, but quality matters more).
With delivery and food operations outsourced, we got rid of the surplus salary and also the rent of the kitchen (we didn’t need the kitchen now). We now employ one full-time employee who manages the operations (coordinating with Dunzo and the food vendor) and also supports our customers with any queries.
And now we have become profitable since last month (making very small profits though), something I was striving for the last 2 years. Ironically, Srivathsan and I were working super hard all this while (when delivery and food preparation was in-house) but weren’t able to hit break even. After outsourcing, not just we hit break-even, we are spending very little time running it. Turning a side hustle into a sustainable profitable business without having to spend too much time and effort is something we are very proud of!
Turning a side hustle into a sustainable profitable business without having to spend too much time and effort is something we are very proud of!
Hope you liked this story of YOYO LunchBox turning 2. I promise you’ll see another article in a couple of years when we turn 4. If you’d like to talk to us about anything related to YOYO Lunchbox, hit us up on LinkedIn [Pranav, Srivathsan]
