Homemade food delivery startup Foodpeon Founder and CEO Mahdy Hasan on his journey to entrepreneurship, how Foodpeon came to exist, struggles and challenges of building a business, Foodpeon’s business, strategy and long-term ambition, and lessons from bootstrapping and the business of food.
Future Startup
Thank you for agreeing to do the interview. Could please tell us about your background and your journey to what you are doing today?
Mahdy Hasan
I have, to be honest, had a diverse range of experiences throughout my life - both professionally and academically. My academic life began in the Madrasa-based education system.
After HSC, I studied at the University of Dhaka for a brief period where I could not continue for several reasons, and then later on studied at the East-West University. Afterward, I studied at the University of Sunderland in the United Kingdom. I came back to Bangladesh in 2013 after graduation.
Upon returning, I worked in two companies. I first joined Grameenphone. Since I had prior experience in sales and retail and was interested in retail, I left GP to work at Shwapno toward the end of 2013.
Working at Shwapno gave me a steep learning curve. It was a demanding job, retail being a daily number driven business, but I learned a lot. Around that time, I felt a growing desire inside me to build something on my own which eventually led to the decision of leaving Shwapno.
This was the early days of ecommerce and I wanted to do something in the e-commerce space. After leaving the job, I served as a consultant to an e-commerce venture in order to learn and understand the mechanism of the industry. Then, in the middle of 2016, I got together with a few friends of mine who had a similar interest in starting a new business.
In the first few months, we came up with a number of business plans and discussed amongst ourselves. At that time, a friend of mine suggested whether we could help stay-at-home women who produce food, clothing and other things in marketing their products. All of us fancied the idea.
We prepared a plan based on it, evaluated it further and finally decided to work with stay-at-home food-makers. The initial idea was that our customers will order food on our online platform within a fixed time, say, within 11 am every day and then we would process their orders in a few hours and deliver to their place.
With that plan, we developed a website, set up an office in Dhaka and decided to bootstrap our venture for the next six months. We were three founders who started the business.
Our expectation was that we would be able to generate enough number of orders from the beginning to sustain ourselves. It was not a realistic expectation and we soon found out that it was a rather lofty expectation.
In reality, we weren't getting that many orders; our investments were being drained out; and as a result, we were having internal problems in the company. In business, money is always a problem. If you have too much of it, that is a problem. If you run out of it, that s an even bigger problem.
Long story short, after much discussion, we decided to separate. My other two partners decided to call it a quit and I became a solo founder of Food Peon.
From November 2016 to the middle of 2017, Foodpeon went through a very difficult phase. I was the only founder and things were very challenging. The old office was too costly for us to maintain. So, we left it. I managed to set up a new office in a single room at a friend's workplace. We were getting a few orders per day. There was only one delivery guy at that time. But things turned for the worst soon. The delivery personnel left after a while. My friend with whom I was sharing office decided to vacate office, so I had to shift my office as well.
It was a tough few months after that. With no definite office and no delivery personnel, I had to look after the entire operation by myself. I served as a one-man-army at that point.
During the day, I delivered products to our customers, served as a customer service rep; and, at night, I was the tech-officer updating and fine-tuning our website, processing orders, and speaking to the customers.
In March, I participated in GP Accelerator in the hope of procuring seed money for the business. They considered my pitch positively but showed no particular interest as I had no team. I received an incredible training in those few months on entrepreneurship and building business. Nothing scares me anymore.
After that, I approached my present co-founders at Food Peon whom I got in touch via a personal connection. We came to an agreement after much discussion and began working together from April.
Over the past months, we have worked really hard to build a solid operation. Now we are seeing a consistent monthly growth. We have just launched our app and we have big plans going forward.
Our expectation was that we would be able to generate enough number of orders from the beginning to sustain ourselves. It was not a realistic expectation and we soon found out that it was a rather lofty expectation. In reality, we weren't getting that many orders; our investments were being drained out; and as a result, we were having internal problems in the company. In business, money is always a problem.
Future Startup
Could you please give us an overview of Foodpeon? How does your process work i.e. your technology, process and other aspects of your operation?
Mahdy Hasan
Frankly, our business is still pretty nascent. We are a relatively young company. There are currently 10 people working at Food Peon. The top management consists of three members including me. Among them, two of us have committed our time and effort to Food Peon. We have a mentor who helps us with his valuable advice whenever necessary.
Now let me briefly describe how our business works. Our customers can order any item via our website. Each item on the website contains essential information including the time needed for preparation.
On the other end, we work with stay-at-home food-makers - these are women who usually make food for their household need and with us, they are becoming entrepreneurs. Part of our ambition is to create and help these women entrepreneurs.
When we get an order, we forward it to respective kitchen partner and they make the food in their personal kitchens and then our delivery team takes care of the delivery.
We only work with homemade food-makers who are conscious of ensuring quality and can devote the necessary time and energy. If they think they can work in the kitchen from, say, 11 in the morning to 7 in the evening and get benefited, we sign the contract with them, albeit this contract is mostly oral in nature.
At present, we have contracts with over 100 kitchens.
Quality is an important factor for us. We haven't been able to put together a supervisory team to do the kitchen inspection on a daily basis yet. Our delivery personnel act as quasi-inspectors right now.
Whenever they visit a particular supplier to pick the food, they perform a quick assessment of the premise. If a certain supplier gets negative feedback from the customers and/or her/his order level remains low over the time, we have to close down the kitchen.
Alternatively, suppliers who consistently receive positive reviews from customers and are observed to be conscious of quality, we promote them ourselves. Say, for instance, a customer places an order for a vanilla cake via telephone or SMS. In that case, we first check on the suppliers who have a good track record of that particular food item and recommend the best fit to the customer. This is basically how we work with our stay-at-home suppliers.
We serve around consistently receive a good number of orders on a daily basis. We also have a few corporate clients who take our service. Among these on-demand orders, about 40% are recurring customers.
We are offering around 800 homemade food items under 17 different categories from our company including Bengali, Chinese, Thai, and Italian and South American cuisine.
Future Startup
How have you attracted users and grown Foodpeon?
Mahdy Hasan
As my professional career has primarily been around sales and retail, I believe in the philosophy that the customer is always right.
At Foodpeon, we focus on creating not just loyal customers who place orders with us once or twice every week; but also creating advocate customers who in addition to using our service recommend it to others. So far we have undertaken only a few digital marketing campaigns in the last few months. Our growth has largely been organic in nature.
We are still not thinking about running large-scale marketing campaigns. We anticipate that such promotional activities would increase our order level to an extent we won't be able to process efficiently. That, in turn, would result in a negative impression of our service.
Since we are running a business that is relatively new in Bangladesh, we are facing some challenges in marketing and operational aspect. Most of the stay-at-home food-makers that we work with have little to no experience in the business. This is why we have to take care of a lot of issues (e.g. cataloging their products, showcasing the food items on the website) from their end.
We are also developing a digital order management system (OMS) where our suppliers and delivery personnel will be connected with us.
The OMS will keep the record of the activities of the stakeholders. We have invested a considerable amount of our resource into automating our operation.
It was a tough few months after that. With no definite office and no delivery personnel, I had to look after the entire operation by myself. I served as a one-man-army at that point. During the day, I delivered products to our customers, served as a customer service rep; and, at night, I was the tech-officer updating and fine-tuning our website, processing orders, and speaking to the customers. In March, I participated in GP Accelerator in the hope of procuring seed money for the business. They considered my pitch positively but showed no particular interest as I had no team. I received an incredible training in those few months on entrepreneurship and building business. Nothing scares me anymore.
Future Startup
How do you reach out to your customers and suppliers? How does your marketing work?
Mahdy Hasan
Retention has been the key growth strategy for us. We focus on retaining our customer base rather than acquiring new customers. We observe our existing customers and employ strategies in order to increase their basket size.
One such strategy is called cold call where we called a customer who was satisfied with our previous service just to remind her/him of our new offers. This is a very simple technique but often yields amazing results. A few days ago through one such cold call to a customer generated a revenue of more than BDT 6,000.
We have also started an offer called referral program where we are encouraging our recurring customers to refer our service to their friends and families. We provide them with a unique code which they give to the person they refer to. If the person who is referred to our service uses the code, s/he would get a discount and the person who has referred her/him would be rewarded with a 100-taka coupon.
Future Startup
How does your business model work?
Mahdy Hasan
We don't have a periodical subscription fee system right now. Whenever we enter into a contract with a new supplier, we charge a registration fee.
More than a source of revenue, we charge this fee in order to create a sense of responsibility in our kitchen partners. We return the amount to them in many ways afterward.
Our business model is mainly commission-based. From every order, we get a 15% commission of the gross amount.
The delivery charge is determined based on the distance between the source (e.g. the supplier's kitchen) and the destination (e.g. the customer).
It is not uniform like most other businesses. Another situation is when a customer orders from multiple different kitchens. In such cases, we charge additional fees.
Future Startup
What are the challenges for Foodpeon now?
Mahdy Hasan
For most e-commerce businesses, a major problem is the logistics. Since we had to collect prepared food from kitchens and deliver to the customers across the city, it is our first and foremost challenge as well.
Extreme traffic jam is an insult to that injury and often slows down our lead time. To counter this challenge, we need to increase the number of kitchens and build a hyperlocal model.
Increasing the number of suppliers entails another challenge. Before getting them onboard, we have to ensure whether they are capable of processing the orders. In addition, since most of our suppliers have no prior business experience, we have to educate them on a number of things, such as--ensuring the food quality and kitchen hygiene, packaging, and so on. This has remained an enduring concern for us.
At Foodpeon, we focus on creating not just loyal customers who place orders with us once or twice every week; but also creating advocate customers who in addition to using our service recommend it to others. So far we have undertaken only a few digital marketing campaigns in the last few months. Our growth has largely been organic in nature.
Future Startup
Do you plan to raise funds?
Mahdy Hasan
We haven't raised any investment yet. But we are considering raising investment and is in talks with a few interested parties.
We are currently bootstrapping the operation in hopes of gaining experience. We think we would raise new funds within 2018.
Future Startup
How does your growth look like?
Mahdy Hasan
Foodpeon is growing at a rate of 10%-15% on a month-to-month basis.
Future Startup
What are your major plans for this year?
Mahdy Hasan
For 2018, we have a few goals to achieve. First, expanding our operation, for which we may have to raise investment. We are already in conversation with a few interested parties.
We are also contemplating about appointing a specialist who would take the responsibility to streamline the operation.
We want to increase the number of suppliers to, at least, 100 and expand food items to around 3,000 by the end of the year.
Business-wise, we want to focus particularly on our corporate clients. Right now, we are only serving food during the lunch hour. This year we plan to offer breakfast and dinners to our regular clients.
Future Startup
As an entrepreneur, how do you stay motivated?
Mahdy Hasan
For me, motivation comes from within. What keeps me going, I believe, is the urge that I feel inside me to build something on my own and contribute meaningfully to the society.
Another thing, that might be considered as an unorthodox source of inspiration but inspires me nonetheless, is watching films. I often watch old films and they motivate me in peculiar ways.
I have been concerned about 3P's throughout my life: persistence, patience, and passion. I think it's evident in my entrepreneurial journey. I am passionate about Foodpeon and haven't let it go in vain in the face of hardship. And, as for persistence, I'm always trying to make it better in the future.
Future Startup
What are some lessons you’ve learned?
Mahdy Hasan
Domain knowledge is important for entrepreneurs. At the same time, as an early-stage founder, you should able to do the basic things that require in order to operate your business smoothly.
For instance, I didn't know much about marketing when I began Foodpeon. But over the years, I have learned the basics of the field.
This is particularly important when you are starting out and bootstrapping your business. If you need to hire help for every small thing, your expense will be too high from the day one. That would be prohibitive to start a business. If you know basics of every aspect of your business, you can easily leverage your skill and reduce your cost significantly.
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Domain knowledge is important for entrepreneurs. At the same time, as an early-stage founder, you should able to do the basic things that require in order to operate your business smoothly. For instance, I didn't know much about marketing when I began Foodpeon. But over the years, I have learned the basics of the field. This is particularly important when you are starting out and bootstrapping your business. If you need to hire help for every small thing, your expense will be too high from the day one. That would be prohibitive to start a business.
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Interview by Ruhul Kader, Transcription by Rahatil Rahat
