Offline as a complement to online businesses

Our portfolio company Meal Box operates primarily as an online restaurant. Customers submit orders online and their food is delivered ready-to-eat to their home or office. This online-first approach lets Meal Box largely avoid the costs of operating offline locations. These costs include rent and restaurant staff.

However, as part of its growth strategy, Meal Box recently started launching select offline locations. These come in two forms.

The first is what we call Meal Box Express locations. These are small locations with limited seating and staffing (similar to the offline locations of some pizza delivery chains like Domino’s). They serve as a customer acquisition channel for Meal Box which then directs these customers to its higher margin online channels. The economics are such that the branding and cheap customer acquisition channel made possible by the Meal Box Express locations justifies the locations’ rent and staffing costs. While this is not the case in all countries, both of these costs are relatively low in Turkey. Meal Box currently has 3 Express locations (one tenth of its total 30 locations) and plans to roll out more in the future.

Meal Box’s second offline format is a flagship restaurant in the Astoria shopping mall. This is a medium-sized sit-down restaurant within walking distance from several office buildings in Istanbul. The flagship restaurant not only serves as a customer acquisition channel to drive online sales, but also a location for people working at nearby offices to repeatedly visit to get healthy and fast home-made Turkish food. This is a rare combination that isn’t offered by the other restaurants in the area. Meal Box doesn’t plan on opening more than a handful of flagship restaurants in the future, but they make sense on an opportunistic basis.

Online businesses have higher margins than offline ones. However, you need to acquire customers to be able to enjoy these margins and offline formats are a great way to do this. This is especially true in a space like food where customers need to trust you before putting the food you make into their bodies. Meal Box’s offline locations help build this trust.