Bloomberg Businessweek (Europe)
Domino’s for Foodies
With Munchery, Tri Tran tries to embody the American dream
Tri Tran was always looking for something better to eat than government gruel. He grew up in the desperately lean decade after the end of the Vietnam War, in the small city of Ba Ria, about 50 miles southeast of Ho Chi Minh City. Because his parents were public school teachers, they received discounts on rations of rice, root vegetables, and sorghum, which his mother cooked together. The paste was barely enough to subsist on and gave Tran terrible digestive problems. So he, his older brother, Trac, and their father occasionally sneaked into desiccated rice fields to gather wild vegetables and, if they were lucky, paddy crabs.
Tran’s parents knew their sons faced limited prospects. Tran was only 11 years old in 1986, but he remembers failed escape attempts, brokered by shady operators who skirted the communist government’s prohibition on leaving the country. Once, the family stowed away in a canoe and paddled into the middle of Ganh Rai Bay to meet a larger boat that never arrived. Later, walking back from the bay after another failed attempt, they were caught by police and thrown in jail for 24 hours.
They tried once more and found a smuggler willing to get them on a boat. But there was a catch: The man was superstitious and, deciding the four family members’ zodiac signs together somehow added up to bad luck, would give them only three seats. Tran’s father was originally set to go with the boys, but his maternal grandmother, a 64-yearold war widow, insisted that she take the boys herself so that the parents could keep their marriage intact. Tran’s parents reluctantly agreed and took them to a bus station. There were no goodbyes—an emotional public farewell would have drawn attention.
Tran, his brother, and grandmother took the bus 9 miles north to the oceanside village of Phuoc Hoa. From there they made a middle-of-the-night trek to a waiting canoe. They reached open water and a 35-foot-long fishing boat, which had a capacity for 40 people. It was already packed with at least 115, crowded shoulder to shoulder in the holds below.
Not wanting family members to talk during the escape, the captain separated the Trans. As the boat began its journey toward the open sea, each wave threatened to capsize the overloaded craft. Diesel fumes hung in the heat; the passengers threw up on each other and tried to sleep standing up. All they received to drink were a few sips of water per day. “I remember being so thirsty that I didn’t even want to think about food,” says Tran, now 40. “I knew that if I ate something, I was going to die.”
Tran is telling this story from an office on the third floor of a former warehouse in San Francisco’s Outer Mission district. He’s a Silicon Valley entrepreneur and chief executive officer now. Four years ago he started Munchery, which delivers fully cooked meals to people’s homes, each day presenting an abundance of foods that stands in stark contrast to the deprivation of his early life.
Munchery is one of dozens of technology startups around the world trying to solve the challenge of mealtime planning with the tap of an app. GrubHub in the U.S., Just Eat in Europe, and Ele.me in China, to name just a few, all connect Internet users with restaurants and their takeout menus. Critics derisively call the proliferation of these businesses the “lazy food economy,” but Munchery is different. It cooks and delivers its own relatively healthy fare.
The company is in four cities—San Francisco, Los Angeles, New York, and Seattle—operating industrial kitchens in each. One recent afternoon in San Francisco, chefs and their assistants, wearing white caps and long-sleeved smocks, toiled over trays of grilled salmon atop brown rice with edamame and sweet carrots ($10.99) and pork belly buns with hoisin sauce, shredded cabbage, and pickled daikon ($10.95). There were about two dozen other entrees, side dishes, and kid-friendly options being prepared that day, some in simmering sauce pots, others in a massive, $50,000 stainless-steel industrial oven capable of cooking 500 pieces of meat or fish at a time at a precise temperature and moisture level. After they’re prepared, the dishes are chilled in refrigerated rooms, packed in compostable boxes, and loaded into cars for delivery. Customers heat them up for about two minutes in a microwave or 10 to 20 in an oven.
Munchery has served more than 3 million meals since Tran and a friend, Conrad Chu, delivered their first entrees in 2010. The company has raised more than $115 million in venture capital, and Tran says it’s now the largest single-kitchen producer of freshly prepared food in the cities where it operates. He hopes to open in at least 10 more markets in the next few years but is secretive about expansion plans. Like many other startups in the frenzied on-demand economy, Munchery isn’t yet profitable. It’s churning through venture capital in search of new customers.
The crowd of well-capitalized dining startups, all fighting for attention, is Munchery’s biggest challenge. There are services that send you groceries, services that send packages of ingredients and recipes in boxes, even services that send cooks to your home to make you dinner. “People need to eat three times a day,” says Michael Dempsey, an analyst at CB Insights. “Munchery is in a great position. The problem is that there are so many other options, and there always will be. There will never be a monopoly on dining out or getting food delivered, and it’s always going to be impossible to raise prices.”
After two days in the overcrowded boat’s compartments, Tri and Trac were free to go on deck. They spent hours peering into the churning ocean; the boat was so small, they could touch the water. Five days into their trip, they started to see trash in the water and birds circling overhead and knew they were near land. “That last day was the longest,” Tran says.
The boat docked on the first island it encountered, where local residents gave the passengers water and bananas. But they couldn’t stay; there was an Indonesian naval base nearby, and the military ordered the refugees to get back on the boat and leave. The captain resisted, pretending to have engine trouble. The navy sent out helicopters that strafed the waters near the boat with machine-gun fire. “I remember bullets landing a couple of meters away. It was right from a James Bond movie,” Trac says. Pursued by the helicopters, they headed back to sea.
After another day, the boat came to a more welcoming island. The passengers were identified and processed by the Indonesian government and sent to the Palau Galang refugee camp in Indonesia’s Riau Islands. The Trans spent months there amid 10,000 other displaced people, some of whom had been stranded at the camp for as long as a decade. They lived in dilapidated barracks, slept on wooden boards, and washed and went to the bathroom in a nearby creek. In the few photos the
family keeps from the camp, the malnourished Tran looks years younger than his actual age.
The camp did have a telegraph, and, 30 days after leaving home, the three sent their first message to Tran’s parents back in Vietnam, telling them they’d arrived safely in Indonesia. The boys’ mother had spent that month of suspense crying, hiding from neighbors, and reciting Buddhist incantations.
Six months after they arrived at Galang, Tri, Trac, and their grandmother boarded a flight from Singapore to San Francisco. It was the first time any of them had been on an airplane. Their destination was San Jose, where Tri and Trac’s uncle had a threebedroom house in a Vietnamese neighborhood. They moved in with him, his wife, and two kids and stayed for the next eight years.
Tran assimilated. He muddled through the local middle school, learning English, then excelled in high school. For a while, he nurtured a secret bitterness toward his mother and father, feeling they’d abandoned him and turned him into a burden on his uncle’s family. “I thought to myself, ‘Why did they do this?’ I couldn’t really understand,” he says. They communicated every few weeks through what felt like superficial letters.
As a senior in high school, Tran played varsity tennis, dominated local math tournaments, and aced the math portion of the SAT. Like his older brother, he was accepted to the Massachusetts Institute of Technology and attended on scholarships and Pell Grants. Near the end of his first year in Cambridge, Tran was able to speak to his parents on the phone for the first time. His mother’s voice sounded foreign and unfamiliar. “My auditory memory of her was completely different,” Tran says.
By then he’d learned that his parents had sold the family home in Ba Ria, sent their entire life savings to his uncle, and moved in with his father’s parents in Ho Chi Minh City. “For a long time I didn’t realize how difficult their situation was,” he says. “Now that I have my own kids, when I look back, I can’t understand how they had the courage to do this.” After graduating from MIT, Tran landed an engineering job back in California at a software company that made tools for nonprofits. He got married at 23 to another Vietnamese immigrant, Maria Su, now the executive director of San Francisco’s Department of Children, Youth, and Their Families. Soon they had two boys.
But one aspect of his prosperous new life bothered him: Neither he nor his equally busy wife had time to cook. They usually picked up takeout on the way home. He pined for the home-cooked meals his grandmother prepared for the family when they all lived in San Jose and rarely had the money to go out to dinner. “When I was 22, I could eat cardboard. As I got older, I couldn’t eat that junk every day anymore,” he says.
At the time, the family lived in Union City, south of Oakland. Their neighbor was a former personal chef who’d visit people’s homes, cook meals, pack them in glass containers, and then put them in the fridge to be reheated later by the client. Serving one or two homes, the chef earned $500 to $700 a day, but he wasn’t cooking as much as he’d have liked. “He could make real good food but had no way to do it for a lot of people,” Tran says.
Tran shared his frustrations about home cooking with Chu, his friend and colleague, and the experience of the personal chef got them thinking. The idea for Munchery
was born, and Tran and Chu quit their day jobs.
In the beginning, they ran a sort of Etsy for food. They signed up individual chefs who, working from their own kitchens or restaurants, would sell meals online on the side. There was little quality control, for either food or customer service. The chefs were also supposed to deliver the food themselves. If customers complained about a soggy meal, the chefs tended to bark back obscenities.
In the early going, Tran himself ran deliveries in his dark green 1998 Lexus sedan, which already had 200,000 miles on it. The family had moved to a rental in San Francisco, which doubled as Munchery’s headquarters. Tran’s in-laws started teasing nervously that he’d gone to MIT to become a food delivery boy. “They half-jokingly asked, ‘Are you going to protect our grandchildren?’” Tran says. “I said, ‘Look, I’ll give this a year. If it doesn’t work out, I’ll get a job.’”
A year passed, and he still wasn’t making any money. But instead of folding the company, he stopped telling his in-laws about it. Munchery was rejected by Silicon Valley’s popular Y Combinator startup program in 2011 and the next year started delivering prepared lunches from its chefs to other tech startups to bring in some cash. Customers were fickle. When Munchery didn’t get the boss’s lean grilled chicken breast exactly right, it usually lost the account.
Eventually, Tran and Chu, by then his chief technology officer, realized catering was a distraction. They needed to get more production from their chefs, who were constrained by their primary jobs. So Munchery rented space at a shared kitchen and offered it to chefs with the promise that they’d sell their cuisine beyond the physical walls of conventional restaurants. Putting so many chefs together, each running his or her own business, turned out to be a problem. Tran had to break up constant fights over access to tables and equipment. During one confrontation, he remembers, a chef just stared at him while menacingly sharpening a knife.
The company kept shifting strategies. It offered a subscription plan for a few meals each week, then pivoted to an a la carte model, where customers could schedule a delivery time online if they didn’t feel like cooking dinner that night. A series of angel investors—some of whom first discovered Munchery as customers—contributed the first $210,000 in 2012.
A year later, Munchery took over the lease for the entire kitchen and started hiring its chefs as employees instead of contractors. That was more expensive, but it allowed the company to control the food’s quality and buy ingredients in bulk. Lamb dishes were popular but hard to make money on—the meat was costly and didn’t come with discounts. Salmon and chicken were both popular and profitable, especially at volume. Anything with kale did brisk business.
Last May, Munchery raised $85 million in a round of venture funding that valued the company at $300 million. It’s a relatively meager sum by Silicon Valley standards, but it made Tran a millionaire, at least on paper.
In August, Hillary Clinton visited the offices of Munchery on a presidential campaign swing through the Bay Area. She talked to Tran and a dozen other tech company executives, including the CEOs of Airbnb, Lyft, and the grocery delivery service Instacart. How to classify contract personnel who work on flexible schedules was one of the main topics of conversation.
Munchery had just reclassified all of its delivery people and kitchen staff as either full-time or hourly employees instead of contractors, out of pragmatism more than benevolence. Categorizing them as employees and giving them benefits—and in some cases a share of the company—made workers feel invested in doing a better job for customers, Tran says. The company had also examined IRS regulations and found its workers met most of the legal definitions for employees. They were carefully screened and trained, asked to work at specific hours, and given Munchery jackets to wear.
Still, Tran told Clinton that a new classification between contractors and full-time hires wouldn’t require employers to shoulder the full burden of health and retirement benefits. It also could allow him to employ more people to work a few hours a day around dinnertime. The CEOs were “advocating for a way to make this fair for workers but to allow our businesses to operate,” he says. “Every presidential candidate is going to have to deal with this subject.”
Munchery’s high fixed costs pose one of the main drags on its business. Services such as GrubHub, which connect diners and restaurants online, don’t have significant fixed costs, because the restaurants make the food and in most cases deliver it to customers.
Tran and his executives, naturally, pitch Munchery’s expensive infrastructure as its biggest advantage. It enables the company to control all of its operating costs, so it doesn’t have to wring profits out of delivery charges. Cooking tens of thousands of meals each night also lets Munchery save on ingredients. Using routing and scheduling software and state-ofthe-art computerized ovens makes the operation more efficient. Munchery is also trying to save on real estate costs: In the next two months it will open a 30,000-square-foot kitchen in South San Francisco, a less expensive neighborhood than the Outer Mission.
Over time, Tran and Chu’s argument goes, meal prices will go down while the food stays delicious and nutritious. As evidence, they point to one of their salmon entrees: It started at $22 a portion four years ago. Now they can charge $11, with diners still regularly giving it five-star reviews. It’s a balancing act that traditional food franchises and chain restaurants have struggled to pull off—they typically sacrifice quality as they get bigger. “This is a much harder thing to build, but when we’ve built it, it’s going to be incredibly difficult to compete with,” says Kris Fredrickson, Munchery’s vice president for operations, who joined the company after six years as a banker at Goldman Sachs.
The closest direct competitor Munchery has is Sprig, another San Francisco startup with a haul of venture capital—more than $50 million—a centralized kitchen (in a former Chevys Fresh Mex restaurant), and a gospel of high-quality, low-cost food. It delivers meals hot, no microwave required. Sprig CEO Gagan Biyani calls Munchery “an interim solution”— fightin’ words in Silicon Valley.
Tran laughs genially at that. He says he, too, tried to deliver hot meals early on, but it doesn’t work if the food needs to travel any significant distance. You can always put food under a heat lamp in the back of a car, but if it’s a fish fillet or steak, the proteins break down and quality suffers.
Tran is making some surprising hires. Pascal Rigo, founder of the ritzy bakery La Boulange, which Starbucks bought in 2012 for $100 million, recently left the coffee chain after overhauling its breakfast-food business and joined Munchery as “chief customer experience officer.” Rigo wants to add things such as French bread, breakfast, and more wine pairings to the menu; he’s overseeing a new line of ready-to-cook meal boxes, which have partially prepared packets of ingredients and take about 15 minutes to cook at home. The meals, like chicken skewers with salad ($19.95) and falafel wraps ($18.95), serve two people each and put Munchery in competition with a pair of popular New York-based startups, Blue Apron and Plated, which also deliver high-quality ingredients to customers, though they cater to enthusiasts who are drawn “to the fun and love of cooking,” says Blue Apron CEO Matt Salzberg.
Munchery introduced its meal kits in San Francisco in October and will roll them out in its other cities in 2016. “I don’t know a lot of Tri’s story, but I know why he’s doing things,” says Rigo, who’s almost a parody of a chef—heavy French accent, extravagant hand gestures. “He has the intention of bringing great, affordable food to people’s homes. It starts with this intention. If it doesn’t come from the heart, you have no chance to do it.”
Tran says his experience as a refugee has stayed with him. He hates wasted food. Obstacles make him think creatively. The need to prove himself in a foreign country makes him work harder. And there’s the enormity of his parents’ sacrifice, which he feels he must validate.
He and Trac made their first trip back to Vietnam in 1997. They traveled the country and visited their childhood home. A few years later, their parents immigrated to the U.S., first moving in with Trac in Maryland—he’s now an engineering professor at Johns Hopkins University—and then with Tran and his wife in California, just as his resilient grandmother, Thinh, was nearing the end of her life.
America was a difficult adjustment. Initially his parents couldn’t find jobs, and his father, Tram, who’d taught English at the most prestigious university in Ho Chi Minh City, had to take work making curtains. Eventually he became a translator for the Oakland school district, a job he loves. Tran’s mother got a degree in early childhood education and then worked at a day-care center. She recently retired.
His parents told him that those biweekly letters, which he’d viewed as shallow correspondence, were their lifeline. “We never lost considerable time with my children while they were growing up in America,” says his mother, Phi Phuong Nguyen. “From halfway around the planet, we followed their every step.” When Tran was preparing to give up a safe job to start Munchery, they never questioned it.
Last fall, he invited his friend Thuan Pham, chief technology officer of Uber Technologies, over to his house for dinner. They ordered a banquet of different Munchery items, spread them around the dining room table, and talked about their companies and backgrounds.
Pham, too, was a refugee as a child, escaping from Vietnam to the U.S. with his mother and brother. He also graduated from MIT and has had a distinguished tech career. “The thing we all share is that we saw the level of sacrifice that our parents had to go through for us,” Pham says. “We have to make something of our lives in order to be worthy of it.” <BW>