EASY MEAL PREPARATION PRESENTS NEW AVENUE FOR COMPETITION

MARIA TORTORETO

CHEYENNE, Wyo. -- At a time when supermarkets are encountering increased competition from several different channels, one more area is quickly getting national attention: easy meal preparation companies.

These firms provide customers with a venue to prepare family meals ahead of time in a prep kitchen, typically two weeks' worth of dinner entrees for a family of four to six. Entrees can be frozen and heated up when needed.

"The key thing is this particular business is solving some very significant problems for people who want to have dinner at home and don't have time and want to do it efficiently," said Bert Vermeulen, founder of the Easy Meal Preparation Association here, a membership organization that provides a forum for discussion and sharing ideas and recipes for these businesses. In particular, he said working families and busy, stay-at-home moms can benefit from these services. "These families end up eating a higher variety of food, [and this concept] lets them have a fancier meal in less amount of time."

Easy meal preparation companies are drawing loyal customers, who, in many communities with established businesses, are taking advantage of the service on a regular basis.

According to Julie Duffy, founder of Dinner by Design, Grayslake, Ill., consumers' desire to control their family's nutritional intake plays a large part in the success of these businesses. Grab-and-go meals, either frozen or prepared, from supermarkets have grown exponentially in recent years, and busy parents are willing to spend a little more money for these products because of the convenience they offer. However, consumers concerned about health don't always know what ingredients go into the products, which she said are often loaded with salts, preservatives or saturated fat. "Control is very important to American moms, because they are becoming much more aware of what children are eating and what goes on the table," she said.

Most companies have programs offering 12 meals for a flat fee of about $200 (varies depending on the company), averaging about $3 per serving.

Upon arriving for a preregistered session, customers will find fresh ingredients -- already washed, cut and measured -- along with instructions and recipes, all of which were chosen upon registration, usually online. Customers simply have to assemble the ingredients. There are no wasted ingredients, no messes to clean up, and there is very little planning on the customer's part.

Duffy opened the first Dinner by Design kitchen in Grayslake in August 2003 out of necessity. She was a working mother of three small children and was struggling to get a nutritious dinner on the table every night, but was concerned that her kids were eating too much pizza, cereal and fast food. And she knew she wasn't alone.

"My original goal was to bring a service to the community," she said. "I knew there was a niche, that there were other moms who needed what I needed."

Within months of opening her first kitchen, Duffy was inundated with calls asking her to bring the company to other communities. She looked into franchising, but "I didn't have big expectations," she confessed, expecting only a handful of agreements. But as of early this month, 14 locations were in operation, with 21 franchise agreements in the works. By the end of 2006, Dinner by Design expects to have 100 more agreements. Average stores are seeing about 150 clients per week -- mostly repeat business -- and are generating between $500,000 and $750,000 in their first year of operation.

And Dinner by Design is just one company. Others, such as Super Suppers, Fort Worth, Texas, with 78 stores, and Dream Dinners, Snohomish, Wash., with 87 stores, according to the Easy Meal Preparation Association's Web site, don't see any signs of slowing down either. Franchises of both chains are popping up all over the country as well.

"This is an untapped market. We have just scratched the surface when it comes to market penetration, and we see a lot of potential out there," said Duffy.

In total, fewer than 500 stores exist now, but Vermeulen estimates that 550 to 600 stores will be open by the end of this year, and by the end of 2006, he expects 1,200 to 1,500 stores open in the U.S. About one-third of the total stores open now are independent stores.

And as the industry grows, so could potential concern for supermarket retailers. Supermarkets stand to lose business in the area of prepared foods, observers said, as well as main ingredients for entrees, although side dishes generally still need to be bought. Vermeulen noted that most easy meal preparation companies buy ingredients directly from suppliers, both local and national, and from discount or club stores such as Sam's Club or Costco.

"[These companies] are clearly siphoning dollars away from supermarket meal programs," said Jon Hauptman, vice president, Willard Bishop Consulting, Barrington, Ill. "They've been able to establish a foothold because supermarket meal solution offerings are not as robust as shoppers are looking for."

Duffy doesn't see the new channel as having much of an effect on supermarkets at the moment, but with the expected growth of the industry, she thinks in a few years supermarkets will see an impact if they don't take action now. A major supermarket chain has already approached her about a potential partnership, which would put Dinner by Design stores and the retailer in the same strip malls in order to share customers.

Hauptman, however, doesn't think it is necessary for supermarkets to worry about losing large amounts of sales to these companies, but believes supermarkets have ample potential to offer their own versions of this business and should take it into consideration. "This is another competitor that supermarkets need to take account of," he said. "Everybody is looking for growth, and clearly [these companies] are an avenue for growth. It could be the source of incremental sales and enhanced customer satisfaction [for supermarkets]. These companies are illustrating a demand for a service that supermarkets are well equipped to offer."