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Web startup Foodem connects food distributors to those who buy in bulk

Kash Rehman was only four years removed from the University of Maryland when he returned to College Park in 2004, this time to take ownership of a small Middle Eastern café on the town’s main thoroughfare.

Rehman,35, was quickly ascending the ranks at food-service distributor Foodco USA in Laurel but wanted to apply his business degree and experience to his own venture. He added American fare to the menu, installed flat-screen televisions and extended weekend hours until 4 a.m.

But as Rehman logged 85-hour workweeks, he began to notice a disconnect between the food supply and restaurant business. He spent many hours each week placing food orders for the restaurant because prices were difficult to compare among several distributors.

“In the restaurant business, the biggest expense is the food,” he said. “So if you bring your costs down, it directly puts more money in your pocket as profit. The bigger the restaurant, the more money you can save.”

That was the impetus for Rehman began work on the business in 2008, after conceiving the idea for a Web site where bulk food buyers, such as hotels, restaurants or caterers, could compare prices from multiple distributors and place orders electronically.

Kash Rehman,35, wants to create a marketplace where local food distributors can compete with the big players. (Jeffrey MacMillan/For Capital Business)

In doing so, he is trying to upend the status quo.

Even as most other industries have gone digital, Rehman said bulk food orders remain largely a pen-and-paper task. Buyers scan their inventory to determine what’s missing, then phone in orders or meet in person with a distributor’s representative.

Bob Goldin, executive vice president at research firm Technomics, said that’s the way many shops, particularly smaller establishments, still prefer to do business.

“For many up-and-down-the-street-type accounts it’s more convenient to have someone come and help them place the order rather than place the order online,” Goldin said, adding, “I know that sounds a little counterintuitive.”

“They value the relationships — the personal relationships — they have with distributors,” he added.

Rehman is hoping they value their money more. His Web site allows a merchant to search up to 50 items, such as lettuce, disposable forks and pork chops, simultaneously. The buyer then sees a list of local distributors’ prices. Compare. Click. Check out.

“I always had in the back of my head that one day I am going to create a product that does this because I was hearing this [demand] echo from all different corners of the food industry,” he said.

Rehman said right now a handful of big players capture a disproportionate share of the market. By pulling local distributors into one, easily accessible location, smaller dealers might attract more businesses and big players would be forced to come down on prices.

Goldin acknowledges that “there’s no transparency in pricing” today. A distributor may offer to trim a buck off each case of ketchup to secure one client while raising the price on another, for example.

Business as usual, even if it’s not ideal, can be difficult to disrupt. Rehman, who has bankrolled Foodem with his own money to date, wants to secure $1.5 million from angel investors to hire a sales team and ramp up marketing.

He aims to capture the Washington market before expanding to other cities, but that requires a boots-on-the-ground sales force that can help the Web site to establish a personal rapport with merchants.

“We have to go out to these restaurants and distributors and show them value,” he said. “We have to hold their hand and show them why this is something they should sign up for.”

Steven Overly is a national reporter covering federal technology and energy policy with a focus on Capitol Hill. He previously covered the business of technology, biotechnology and venture capital.



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