Incubating New Products
Food incubator startups like Smashmallow are enjoying early success.
America’s cottage industries have spawned thousands of home bakers and cake decorators over the past decade. But a more recent development involves a different path for aspiring bakers and food entrepreneurs to get their businesses off the ground.
This country happens to be on the cusp of witnessing a surge in demand for commercial kitchen incubator space, where food startups (sometimes called “foodpreneurs”) lease kitchen space or time blocks for a fraction of the cost of owning their own space. Bakeries, restaurants and other food startups use the commercial kitchen space to produce their signature products, while culinary professionals working with the incubators lend their expertise in branding and distribution.
There’s an important business distinction between food incubators and accelerators, another type of service that is experiencing a wave of new interest. According to RealFoodMBA.com, incubators tend to work with earlier stage startups, while accelerators often work with companies that have made progress and already have customers and revenues.
Incubation programs can last between two and five years, while accelerators focus on rapid development over a shorter time frame, like several months. According to RealFoodMBA.com, incubators typically expect a large equity stake (up to 20 percent) and charge fees, while accelerators are less likely to charge fees and take a smaller equity stake. Both types of programs tend to provide capital, access to mentors, advisors and professional services.
California-based Sonoma Brands, for example, specializes in food incubator startups like SmashMallow (premium marshmallows made with 100% organic sugar and gluten-free ingredients) and plans to launch up to five new products a year, according to a January report in Forbes. Jon Sebastiani, who sold his startup KRAVE Jerky to the Hershey Company for an estimated $220 million in 2015, is the founder of Sonoma Brands.
Another newcomer founded in 2015, Food Future Inc. bills itself as a scale-up accelerator in New York City for established yet small organizations (less than $1 million annual sales) that are providing unique products and solutions across the food system. Focus areas include agriculture, food and beverage, and health & wellness.
Blue Plate Catering, a Chicago event catering company, just announced the unveiling of Round The Table Hospitality, which will house a family of independent brands with a common culture and vision. RTTH stems directly from CEO Jim Horan's evolved vision of growth for Blue Plate Catering, which started more than 30 years ago with a single employee, a van and a reputation for delicious fare to its current organization of 1,000 employees and multiple brands.
With multiple touch points beyond catering, the launch of RTTH will include the opening of a new and improved headquarters, the introduction of an “intrapreneurial” incubator program and bringing Blue Plate Catering and restaurants (tesori trattoria & bar and Park Grill) together.
Larkin Hall, a state-of-the art facility, will open this fall in Chicago's West Loop, a neighborhood that Blue Plate has called home for over 25 years. The three-story, 80,000-square-foot building, located on Fulton Market, will house all business operations for RTTH and diversify Blue Plate Catering's capabilities and services. The open floor plan will house a production and training facility, test kitchens, tasting rooms and private event spaces as well as plans for a retail space.
"We are excited about this next step in our growth which will translate into new business opportunities, deepening our relationship with Chicago, and an improved facility benefiting our West Loop community, our clients and our employees who all have been critical to our past and future success," Horan says.