Leaked documents from startup Maple show the brutal economics of food delivery

It has been a challenging year for food-delivery startups. SpoonRocket went out of business. Munchery is struggling. DoorDash and Postmates secured new investments at a lower and flat valuation, respectively.

Maple, the restaurant-in-an-app backed by celebrity chef David Chang, is facing an uphill battle, too.

The New York City-based delivery startup appears to have lost money on average on every meal in 2015, resulting in an operating loss of $9 million for the year on $2.7 million in gross revenue, according to an investor presentation reviewed by Recode.

By March of 2016, Maple began squeaking out a tiny profit of 30 cents per meal — or a gross margin of 2 percent — driven in part by reduced food costs.

But Maple was still forecasting an operating loss of $16 million for 2016 on revenue of $40 million. Those plans were predicated on expanding its service to other boroughs and to other Northeastern U.S. locations. Currently, though, Maple appeared to still only be servicing Manhattan.

A spokesman declined to comment.

It’s not uncommon for venture-backed startups to operate in the red for years while pumping investor money into revenue growth. (Case in point: Uber.)

But the on-demand delivery sector has been a notorious cash burner in recent years, and Maple’s business does not appear to be an exception, especially with the added cost of preparing its own meals. Food costs equaled 63 percent of gross revenue in 2015, a very high number for a food business. Costs from food waste came in at 26 percent of gross revenue. The startup also spent 17.5 percent of its sales on marketing.

As of March of 2016, the startup was spending $5.57 per meal on labor and $1.01 on packaging, which consists of Maple-branded mini shopping bags and compostable food containers.

Maple sent this investor presentation to investors in the first half of 2016 as it was struggling to raise a new round of funding on terms it liked, according to a source. Another source cautioned that many of the projections in the document have since changed because they were predicated on Maple raising a bigger round of funding than it did.

That’s why it’s tough to know what to make of the 2017 projections in the document, where Maple projected a profit on a huge increase in annual revenue to $213 million. Or its model that predicts a 42 percent gross profit margin on each meal when a market is “mature.”

Maple eventually succeeded in the second half of this year in raising a round that was larger than its $22 million Series A investment round. But the investment came in at a lower valuation than its Series A — a “down round,” in startup parlance — which was $93 million pre-money, according to startup data firm PitchBook.

The startup was incubated by Thrive Capital, the New York City venture firm founded by Josh Kushner, brother of Donald Trump’s son-in-law Jared Kushner. Maple is run on the business side by CEO Caleb Merkl and on the culinary side by Executive Chef Soa Davies, who spent six years at New York City’s fabled Le Bernardin.

The idea for Maple was that it would differentiate itself from traditional restaurants by operating as a delivery-only service and from other meal-delivery competitors by crafting high-quality meals itself. It also makes its delivery people employees instead of contractors, which involves providing health benefits — something that is not common in the delivery space.

“We’re leveraging technology and logistics to build the next multi-billion dollar food brand,” the investor presentation reads. “We’re able to operate and adapt in a way that legacy brick-and-mortar players can’t.”

Maple offers a limited but rotating selection of lunch and dinner options sold exclusively via its app. The meals range in price from around $11 to $17. Friday’s menu includes a vegetarian banh mi sandwich for $12.50 and a spicy chicken sandwich for $11.50.

Part of the startup’s original pitch to customers was that all taxes, fees and tips were included in the meal price — something that many competitors do not do. Maple, however, recently added a $1.95 delivery fee on each order, which suggests that its original model was not sustainable.

Update: On May 8, 2017, Maple announced it was shutting down, with some employees joining U.K.-based delivery firm Deliveroo.

This article originally appeared on Recode.net.

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