Depending upon whom you listen to, Kitchit, the on-line booking marketplace for private dining events, is either closing down, reorganizing or waiting for additional funding. Which of these scenarios is true matters little to clients who have already booked events and all of a sudden find themselves without a chef, like a South Bay customer who sent this email to at least a half a dozen chefs, “hi- Kitchit canceled a 30th birthday dinner I’d set up for my girlfriend at our apartment this Sunday, May 1. I’m wondering if you can step in and save this party. I’d love to still have a great meal cooked by someone talented and cool. If you can help, please let me know. It would mean a lot”. Several Bay area chefs report receiving similar emails and calls from frantic hosts. (Additionally, Kitchit is not currently accepting bookings).
One of the early entries into the food-meets-tech sector, Kitchit, launched October 1, 2011 as an innovative service with a mission “to transform the way people eat at home, powered by outstanding food and service from chefs”. Bay area private chefs were excited. With per person pricing averaging between $80-$120, here was a great platform to connect them to clients; one that was professional, seemingly understood their talent and allowed them to focus on creating great food while it focused on marketing it. So excited, in fact, that by the time Kitchit folded its Marketplace with a surprise announcement to its chefs August 17, 2015 that it was refocusing “our company’s work exclusively on our Kitchit Tonight service [which allowed] diners choose from seasonal prix-fixe menus” from $39/person– there were over 150 chefs participating in Kitchit Marketplace in the SF Bay area, alone.
But many experienced chefs saw the move as shortsighted and damaging to the industry as a whole; some blaming Kitchit for building its reputation on the backs of real culinary talent, only to turn away from that same talent. One chef put into words what many felt, that the Kitchit Tonight offer, “devalued us, our craft, our worth”. Chef Tiffany Friedman describes her experience with Kitchit this way, “About 4 years ago I was lured in and asked to be a part of a very cool chef community and platform that looked impressive. Things were great for about a year I crushed lots of gigs around the Bay booking jobs through the Kitchit website for a fee. [But} after a while, with Kitchit adjusting the platform numerous times and bringing on more and more chefs, even ones with little to no personal or private chef experience, I become concerned. Suddenly, they were trying to sell a high end service to any and everyone.”
The margins in the restaurant industry are notoriously low. According to a June 2014 Forbes article, “Average industry net profit margins hit… 5.1% in 2013, according to Sageworks’ financial statement analysis of privately held restaurants.” One of the obvious differences in the restaurant business models and that of a private chef of even of a caterer what is known as “restaurant occupancy costs”: rent, taxes and insurance, why typically run 5-6%. While that may seem, on surface, like the difference between healthy profitability and none, it’s just not that simple. (To begin with, taxes don’t disappear and there are still insurance costs to consider.)
To begin with, because of the specific restaurant business model, in achieving the “32 percent of each dollar [an average restaurant spends] on the cost of food and beverages” there is a shelf stable inventory of ingredients that are purchased with volume discounts. Due to an event schedule that is more erratic than that of a restaurant and the lack of pantry space, the average private chef cannot purchase the same way, nor can smaller caterers. In fact, the time lost in repeat trips to purchase ingredients is an added cost, as is travel (most private chefs service an area that is within a 50 mile radius of their base).
On the other hand, the 33 percent an average restaurant spends on salaries and wages seems, at first glance, to be an area where private chefs can look to substantially improve margins; and it is. Costs of labor are, indeed, lower. For this reason, private chefs, working independently, can see health profits even when their customer bases are small, if they price their offers smartly. Kitchit Tonight’s lead offer of $39/person for a 3-course dinner isn’t just not a moneymaker for a private chef; it’s actually money looser.
Consider a dinner for 8 at $100 per person that includes a single server with the chef preparing much of the meal on-site:
- Cost of food: 25-33% (we can use $25 for purposes of discussion) = $200
- Cost of labor: 20% or $200
- Travel, insurance, taxes and other misc. costs 5% or $50
- Tentative profit = $350
Now, let’s look at the time allocated to produce the meal: Customer service hours (client proposal, menu development, staff procurement): 3 hours + Shopping: 2 hours + Prep: 2 hours + On-site: 5 hours= 12 hours. So that chef is earning $30/hour, if the dinner is $100 per person.
A Promise That Couldn’t Be Filled
It is not unusual for start-ups to change course, and there was no doubt pressure for rapid growth brought after “$7.5 million in funding led by Javelin Venture Partners to make its chefs available to more users in more places” (according to a Dec 9 2014 article in Tech Crunch). But Kitchit Tonight with their promise of “Your own personal chef from just $39 per person” created confusion about in-home or private chefs, a service that is relatively new to many consumers, and blurred the already blurry lines between a cook and a chef. Chef Tiffany explains, “I have been a private and a personal chef for almost 20 years and it was truly lame to see Kitchit come in to a positive flow industry and experiment on it by using and lying to all kinds of established chefs and potential clients. I’m sorry for the misconception that new clients have had to their introduction to the personal in-home chef service world but $40-50 per head price points won’t get us in the door”. And while there certainly are many talented chefs in the Bay area, few, if any, can produce meals at the price points touted by Kitchit, leaving the hosts on whom Kitchit has cancelled with few options.