Sramana: In 2008 when Lehman Brothers was declaring bankruptcy, you decided to raise money. Were you successful?
Zalmi Duchman: No, I was not. I did not even have a business plan. It was a year and a half later before we took money. At the end of 2008 we did $5.5 million, but I was not a happy camper because I was paying such large catering bills every week. I was sitting on an airplane reading a magazine that talked about the coming recession and the need to cut expenses.
That is when I decided we had to take back every one of our kitchens. By February 2009, I had taken back the Florida kitchen. I took back the kitchens in New York in April and in Chicago in August.
Sramana: What impact did that have on your margins?
Zalmi Duchman: Gross margins went from 30% to 50%. It has been the same since then. Cash flow is much better as well. I get two weeks for payroll now. It was amazing. We grew only 40% during the recession, but by the end of 2009 we did $7.2 million.
Sramana: What happened in 2010?
Zalmi Duchman: We invested very heavily in technology and bought out a company in Toronto. The company was Nutrition in Motion and their founders had a very similar story to ours. They had 100 clients and I really liked the founders. Rebecca stayed on and runs the Nutrition in Motion brand as well as Fresh Diet. We compete with ourselves in that market.
We also started using Groupon a lot. I am big on social media and found that it was a key factor for our opening Houston this year. It also allowed us to start serving San Francisco out of L.A. We see the returns on our investment there. We have come a long ways in terms of tracking marketing and with the overall organization of the company. We have brought in some middle managers to help us get organized. We will see over 100% growth this year.
We are now looking at modified atmosphere packaging to allow us to start shipping with FedEx. If someone is in Kansas City then we could serve them from our closest kitchen. That will give us lower shipping costs than any of our competitors. We are starting a joint co-branding effort with dLife. They are the largest diabetic community and they have over 2 million members. We are going to offer the dLife Fresh Diet. They are going to market our product to their clientele.