Entrepreneurship Zone: 19 December 2024: Building a food delivery business in Nigeria: An entrepreneur’s journey

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Entrepreneurship Zone: 19 December 2024: Building a food delivery business
in Nigeria: An entrepreneur’s journey

 


 

 


 <https://www.firstcapitalbank.co.zw/> 

 


 

 


 

 

 



Henry Nneji

Interview with Henry Nneji
CO-FOUNDER and CEO, FOODCOURT

Lives in: Nigeria

  _____  

FoodCourt is redefining the traditional food delivery model in Nigeria. The
company operates over a dozen in-house, delivery-only restaurant brands –
including Jollof & Co. (everyday Nigerian cuisine), Wrap City (shawarmas and
wraps), and Good Greens (healthy meals) – with all dishes prepared in a
single, centralised kitchen.

How we made it in Africa editor-in-chief Jaco Maritz speaks with FoodCourt
co-founder and CEO Henry Nneji about his journey building the business.

Topics discussed during the interview include:

·         Why his previous startup, Fashion Map, didn’t succeed

·         How his mother’s experience running a Chicken Republic franchise
influenced the creation of FoodCourt

·         The advantages of FoodCourt’s centralised dark kitchen business
model

·         The circumstances that forced the company to vacate one of its
early commercial kitchen locations and the resulting financial challenges

·         Raising funding and securing investors

·         The impact of Nigeria’s high inflation on FoodCourt’s operations

Watch the full interview below (only available here on
howwemadeitinafrica.com)


Interview summary


Nigeria’s food delivery sector has grown rapidly in recent years, with the
market projected to more than double to $2.4bn within the next eight years,
according to research group IMARC. However, the industry has proven
challenging for many players. Bolt Food, the food delivery division of the
Estonian ride-hailing service Bolt, exited the market in 2023, as did Jumia
Food, part of the New York-listed e-commerce group.

FoodCourt, a company launched in 2021, has reimagined the traditional food
delivery model. Rather than positioning itself as a conventional delivery
service or restaurant chain, the startup operates as what co-founder and CEO
Henry Nneji describes as a “virtual restaurant company”. It offers multiple
in-house, delivery-only restaurant brands, with all meals prepared in a
single, centralised kitchen and available for purchase through its app.

“The traditional food delivery model is something that’s … been on the
decline, not just in Nigeria but in international markets as well,” says
Nneji. “Despite the explosive growth in traditional food delivery, we’re
still seeing a massive amount of unprofitability in the industry. And that’s
mainly because at the end of the day, most of the money goes back to the
restaurants. So for us being both the restaurant and the platform, it puts
us in a very unique position.”

FoodCourt’s centralised dark kitchen model enables operational
efficiencies. “It allows us to cross-utilise our inventory, our raw
materials, our labour, our equipment, and obviously ultimately the real
estate as well. And this has allowed us to significantly produce more output
while keeping costs comparable to a traditional restaurant. So imagine
having the cost of a single traditional restaurant but having the output of
about 12 to 15 restaurants.”

FoodCourt processes over 32,000 orders each month and, according to Nneji,
has reached profitability – a rarity in the industry.


Laying the groundwork


Nneji says the early months of FoodCourt were devoted mostly to research.
During this phase, the company learned that customers “weren’t particular
about the big brand names or the big chains. What they just wanted was
localised food that was affordable and could be delivered quickly.”

Once the research was complete, Nneji turned to building a team. His first
priority was to develop the platform’s technology, which led him to search
for a chief technology officer (CTO). After securing a CTO, he began hiring
team members for the culinary side of the business.

FoodCourt’s operations began in a modest space – a small kitchen within an
existing restaurant. Growth was deliberately slow at first, as the team
worked to refine its processes. “[We] started with maybe about 12 orders a
day, moved to 20 orders a day, 30 orders a day. Sometimes it [went] back to
about 25,” says Nneji. “And we did this intentionally because we wanted to
make sure that nothing would break too early. And we were just testing out
our operations, testing out our technology because everything was still
pretty much brand new.”

>From the outset, the company focused on quality rather than competing on
price. “We never positioned ourselves as the cheapest or the most affordable
and never said we would give you the best prices,” Nneji explains. “But the
promise that we always gave to customers was that it was going to be good
food. It was going to be high quality and it was going to be something
memorable.”


Early setbacks


The company received its first investment from American angel investor Rob
Solomon, the former CEO of crowdfunding platform GoFundMe. “I got the
introduction from a friend of mine,” says Nneji. Solomon provided a cheque
for $25,000, which the company used to secure a new kitchen space in Lagos.

However, their move to the new location quickly turned problematic. A
neighbour, who also happened to be a lawyer, objected to the operation of a
commercial kitchen on the premises. He started rumours that the company was
running a nightclub and creating excessive noise, prompting the Lagos State
Government to seal off the property.

The landlord, under pressure from the situation, asked FoodCourt to vacate,
though he allowed some time to find an alternative location. While the
landlord agreed to refund the rent, the costs of renovating the space were
non-recoverable.

“Just imagine at the time: we had just raised about $25,000 from an angel.
We had poured all that money into renovating. And then all of a sudden,
you’re telling us that you can refund us the rent – which was really a
bargain – but you can’t refund us on the renovation. So we were like kind of
all the way back to square one,” Nneji explains.

Desperate for additional funding, Nneji turned again to Solomon. “He drove
a pretty hard bargain at the time but Rob was able to help us out with an
extra $25,000.”

Even with the additional funds, challenges remained. “We now understood the
complexities of finding a location. It wasn’t just finding a suitable place,
but finding a place where all our neighbours and the surrounding people
would be okay with the levels of production that we’re doing. We needed to
find something commercial. So the budgets that we were looking at were
pretty big. And the capital that we had in the bank at the time was only
able to pay our rent but wouldn’t give us enough money to renovate and set
it up in the way we wanted to.”

Facing mounting pressures and an impending move-out date, Nneji and his
team took things one day at a time. “I hadn’t really revealed all the
information on how tight things were to our investor,” he admits. “But for
some reason I just had faith that something was gonna happen at the end of
the day.”

Their breakthrough came unexpectedly from his COO’s father. “His dad was
looking at purchasing a property not too far from where we were … He’s big
on property investing, but he wasn’t the kind of guy that would just be
like, ‘Oh let me just buy something for my son and just give it to him.’ But
it was strange because that was exactly what he did. And he bought this
building – it was like a five-bedroom duplex in Lekki Phase 1 – and he
basically handed it over to his son and was just like, ‘Do whatever you need
to do with it.’”

“That was like a lifeline for us,” says Nneji. “It was really helpful
because we didn’t have to pay for the rent. And then we [could] use the
money that we were going to pay for the rent to now fix up the place, do all
the renovations and so on.”


Navigating growth and expansion


Operating from their new location, FoodCourt scaled up rapidly, growing its
daily orders from around 100 to over 700. However, the team soon reached
capacity at this site as well and began searching for a larger space for its
kitchen.

During this period, the company was accepted into Y Combinator, the
renowned US-based startup accelerator. Admission into the programme included
a US$500,000 investment. Confident in this funding, the team secured a new
property and began construction, anticipating the cheque would cover the
associated costs. However, delays arose because the funds could only be
accessed once the company’s US entity was formally linked to its Nigerian
operations – a process that took longer than expected.

Without immediate access to the funds, FoodCourt had to extend the
construction timeline and fund it gradually using revenue from operations.
The team allocated a portion of their daily income to complete the
renovations. “I’ve never really told anyone this story,” says Nneji, “but
when we did our opening for the location we’re currently in, we had only a
few hundred dollars in our account at the time.”

Soon after the launch, FoodCourt completed the registration process and
received the Y Combinator funding. “We were also able to put some of our
traction out on LinkedIn and we were able to get a lot of attention from
investors as well. We were able to raise even more money from that,” Nneji
notes.


Economic headwinds


“Entrepreneurship is never really a straight line, right?” says Nneji,
reflecting on the challenges FoodCourt has faced. Among them are Nigeria’s
economic difficulties, with its currency, the naira, hitting a record low of
over 1,680 to the US dollar in November and annual inflation surpassing 34%
in the same month.

Food inflation, in particular, has impacted the company. “That has come
with us having to adjust prices. It’s come with us having to adjust
processes as well and so on and so forth.”

In addition, the company also had to deal with a dramatic slow-down in
venture capital (VC) funding. However, this pushed the team to focus on
running the business in a sustainable manner. “I would always say that it
was a blessing and a curse because it got us to really, really double down
on our unit economics, our contribution margins, and just making sure that
we’re actually running a sustainable business and not just a business that
just burns VC dollars,” says the CEO.


Future ambitions


Looking ahead, FoodCourt will open a new location in Nigeria’s capital,
Abuja, in the coming months. Nneji also hints at potential expansion into
other West African markets. “The culinary side of things is something that
can be adapted in different markets,” he says. “And as we look towards
expanding, we don’t feel like there’s any borders with food. And we also
believe that with our business model, we’re able to really understand what
consumers want in different markets and hyper-localise our offerings in
order to let us easily penetrate into virtually any market.”

·         —Howwemadeitinafrica

 

 


 


 


 

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