Company: Red Rabbit
Location: New York City
Number of full time employees: 54
Founded: 2005
What it does: A healthy food vendor that provides fresh, made-from-scratch meals to schools
2009 Revenues: $500,000
2010 Revenues: $1 million
2011 Revenues: $2 million
How he made it: Powell shifted his audience from a broad consumer base to schools and educational institutions. Red Rabbit has been able to double annual revenue each year since 2008 by offering meal choices that meet the growing demand of parents and their children at competitive prices for administrators.
Rhys W. Powell started Red Rabbit in 2005 with a simple mission: to provide parents with healthy food choices for their children. After a structural revamp and a major shift in target audience, the socially charged company eventually found success providing healthy packaged meals and snacks to schools throughout New York and New Jersey.
Red Rabbit is an alternative to the traditional food service vendors contracted out by schools. The Harlem-based business cooks from scratch; packages; and delivers breakfast, lunch, and snacks to public, private, and charter schools. But the company avoids processed foods, opting to buy 80% of its produce from local farmers and the rest from local suppliers. In doing so, schools get their choice of health-conscious meals, including pizza on wheat bread, multigrain pancakes, and hard-boiled farm-fresh eggs, among other menu staples.
“We used the United States Department of Agriculture guidelines as a starting point and then far exceeded them with the final menu,†says Powell. “We worked with nutritionists and pediatricians to set the program’s nutrition philosophy.†Powell and his team of 54 employees deliver more than 12,000 healthy meals daily to 70 schools.
Each day, 32 million children in the United States get a free or low-cost lunch at schools that participate in the National School Lunch Program, a federally assisted meal program administered under the USDA. However, the U.S. food service contracting industry is dominated by three multinational giants: Aramark, headquartered in Philadelphia; Compass Group North America out of Charlotte, North Carolina; and Sodexo Inc., in Gaithersburg, Maryland, with combined annual revenues of $45.3 billion in 2011. In total, the eight largest food companies hold 75% of school contracts, reports The Cornell Policy Review.
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Red Rabbit is competing against the big boys and is steadily reaping the rewards of a methodical approach to business. The 32-year-old Bahamian-born entrepreneur
says Red Rabbit is in its second iteration, having undergone a complete overhaul and transitioning from a business-to-consumer to a business-to-business model. After a shaky start in 2005, revenues for the startup have doubled every year since 2008, reaching $2 million in 2011. Red Rabbit supports local farmers, artisans, and suppliers for almost all of its “from scratch meals†as a key differentiator from competitors. In addition, Red Rabbit is able to provide fresh and healthy meals below federal free lunch reimbursement rate of $2.77 per meal while still turning a profit.Powell says some of the company’s growth can be attributed to the fact that an increasing number of parents and schools are seeking out healthy food choices as a way to combat child obesity, a growing problem that has been acknowledged by the Obama administration. Moreover, parents and child wellness advocacy groups have become disenchanted with major food providers as there has been some push back in providing healthier meals, arguing it would cause “plate waste‖students throwing away food instead of eating it.
The vision for Red Rabbit was spurred after a friend approached Powell about not being able to find healthy meals for his daughter. At
first the business sold individually packaged meals, mainly online, to parents. But lagging sales and a struggling client list left the entrepreneur watching his $100,000 in startup capital (pulled from his savings) wither away.“[The problem with a lot of entrepreneurs is that] usually you see yourself as the ideal consumer and you’re looking at it from your point of view,†says Powell. This narrow focus can spell doom for budding entrepreneurs, who inevitably end up designing a product or service that suits personal rather than consumer needs.
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Powell’s tenacity, verve, and meticulous studying of the marketplace led to two pivotal decisions that changed the course of the business. Instead of telling consumers what was best for them, Powell listened to them to unearth their needs. He held focus groups talking to parents, kids, and even school administrators. This led to a valuable conclusion: once parents drop off their children, the schools are responsible for how students eat. From there Powell created a new business plan and kicked it into high gear, reaching out to school administrators in an effort to pitch his healthy meals.
Between 2009 and 2010, revenues grew from $500,000 to $1 million.
The timing was opportune. The K—12 charter and private schools he served jumped from 30 to more than 70 in addition to Head Start and after-school programs that choose meal plans for breakfast, lunch, and snacks. To accommodate the growth, Red Rabbit relocated from an 800-square-foot office space to a new 10,000-square-foot facility with a full-service kitchen, which ties into Red Rabbit’s educational programs, including holding Saturday cooking sessions so parents and their children can learn recipes to prepare healthy meals at home. Red Rabbit personnel also visit classrooms to cover nutritional topics for students as well as to educate teachers about gardening and healthy eating habits.Powell plans to expand Red Rabbit’s reach in New York, considering there are 1.1 million students in 1,700 schools in New York City alone. He also recently opened a facility in New Jersey. Powell is also partnering with groups such as Rosie’s Theater Kids, an arts education organization founded by comedian Rosie O’Donnell, to host cooking labs.
“Our meals are not only evaluated by chefs, nutritionists, and pediatricians, but also by the toughest critics: kids,†he says. New menu items must be tested and approved by children.