Alan Clifford and Ian Costello were problem solvers at LivingSocial, the District-based daily deals company that was a sizzling start-up before its business model eroded.
When LivingSocial needed to hire 100 salespeople in 100 days, it turned to Clifford — a 20-something at the time who had barely hired anyone in his life.
When LivingSocial needed to relaunch its website and get the mobile experience right, Costello took it on.
The two young entrepreneurs absorbed the lessons from LivingSocial’s hell-bent expansion and are now focusing their operational skills on a different problem: how to deliver more than 1,000 fresh meals a night to upscale Washington-area professionals with surgical precision within a 30-minute window that is chosen by the customer.
Their ambitious start-up is called Galley, and it could make them rich if they pull it off. It won’t be easy. The 21st-century version of the TV dinner is a hot space right now, crowded with companies such as Blue Apron and Perfect Gourmet.
Galley expects to gross $3 million in revenue this year and turn a profit on the District segment of the business.
The logistics of navigating Washington traffic six days a week — Sunday through Friday — are mind-boggling. Even on slow nights, such as Fridays, Galley delivers 500 or so meals in a 30-minute window to all customers.
“We have to produce great-tasting and nutritious food every day . . . and do it at a large scale for the business to work,” said Clifford, an operations guru who studied accounting and health care administration at Arizona State University. “Most companies have to be good at one thing. We have to be perfect at both.”
Clifford, 31, insists that the on-time delivery rate is 98 percent for the 200,000 meals it has sold since launching in January 2015.
Galley is available in all of Washington and Bethesda, as well as parts of Arlington, Alexandria and Baltimore. Its customer sweet spot is the 250,000 households looking for a break from cooking each day.
The key to its (so far) survival, Clifford said, is driving down costs on each unit — or meal. Their profit margin after costs for food, cooking, delivery, packaging, credit card fees and customer service is about 30 percent; it costs Galley around $8 to make and deliver a $12 meal, Clifford said. The company is profitable in the District, and is working toward that goal in its other service areas.
More than 35 percent of customers order more than once per month. A decent chunk orders once a week.
Unlike Blue Apron, Galley does not have a subscription model and does not offer discounts for repeat customers, although Clifford and Costello are leaving the door open on subscriptions in the future.
“Our pricing is affordable enough for the quality that we’re serving that we don’t think we need to discount today,” Clifford said.
The top seller is the $16 crab cake dinner, followed by the chicken pot pie. My wife and I bought some grilled shrimp scampi, beer-brined chicken and shishito pepper and steak skewers recently. It was delicious.
“We basically take inspiration and recipes from everywhere,” Clifford said.
Clifford, 31, supervises the menu as well as departments for packing, human resources, finance, legal, sales and offline marketing. Costello, 34, a Georgetown business graduate who also studied computer science, takes care of delivery, customer service, computer analytics and technology.
Costello, Clifford, and the marketing team work out of a small space in a building on F Street NW that once served as the LivingSocial clubhouse.
Clifford, a culinary director and a chef meet once a month to discuss ideas, decide which menu items work and which ones don’t, and hammer out supply issues.
Galley’s genesis was over late-night pizza dinners at LivingSocial or scrounging at Whole Foods, where the two aspiring entrepreneurs commiserated over their bad nutrition.
“One of the ideas that drove Ian and I nuts was working long hours and trying to figure out how to make dinner convenient and healthy,” Clifford said. “We kept thinking that somebody is going to solve this problem.”
They decided on an experiment in which they would offer fresh, quality daily meals that could be ordered on a website or mobile app during the day for delivery that evening.
Galley delivers a chilled, prepared meal that can be heated in an oven in 12 minutes. There are microwave instructions, but Galley recommends using the oven.
Galley raised nearly $2 million from several local investors whom Clifford and Costello declined to identify. Galley said it has enough cash given its expected growth trajectory to reach profitability within the next year.
Some of the $2 million was used to outfit an industrial kitchen in Northeast Washington — in an old nightclub off New York Avenue — where Galley makes food from scratch each day.
When I visited the kitchen last week, about a dozen employees were filling rows of oven-safe food containers with some of that day’s offerings. Some were cutting carrots. One was using a giant, hand-held mixer to stir the strawberry vinaigrette for a salad.
Two employees were beautifying a grilled eggplant so it would be camera-ready for the website, where it will be featured as a coming dinner option.
Tommy Gordon was in charge of packaging and distributing last Thursday’s 900 meals; the busiest day is Monday. Gordon was dressed in a blue Galley T-shirt with the words “Dinner: Accomplished” printed on the back.
He lives by those words. The 24-year-old Virginia Tech graduate oversees the pool of 75 drivers, who are screened, trained and coached in how to communicate with customers.
The company leases four Mercedes-Benz “sprinters” that take the food — placed in giant duffel bags cooled with ice packs — from the kitchen to neighborhoods. The meals are then transferred to drivers, who have contact information for each customer. Drivers send a text message to a customer when dinner is about to be delivered, so the oven can be fired up.
Most orders arrive through Galley’s website or mobile app before 5 p.m. The company employs roving troubleshooters who can spirit a meal to a home in minutes to fix a mistake or make an unhappy customer whole. Last-minute orders, known as “on-demand,” are filled by other drivers up until 8:30 p.m.
Galley’s early focus is on heavily populated neighborhoods such as Ballston and Bethesda, where a driver can service many locations in a short time.
Costello said the company’s best advertising comes from live taste tests. Galley marketers are out several nights a week, offering samples at food fairs, apartment buildings, offices and any place he can find a crowd.
Clifford and Costello have been tweaking the company as they go along. They added family meals for a foursome. And there are $6 kids’ lunches so parents can skip making them the next morning. The company came late to corporate and catering, a small but high-margin segment that also expands awareness.
Clifford said the smartest thing he has learned in his business career is to get execution right before growing. The founders have been fanatical about staying lean, keeping costs low, leasing everything they can and not getting burdened with big investments and debt.
“Because we’ve remained lean and focused on profitability, we’ve been able to weather a very tough financing market,” Clifford said. “If we would have focused on growth, we would have likely been out of business.”
Lessons learned from LivingSocial.