LYFE Kitchen

To: Professor Hansen, CEO, AMDP

From: Mari Ju

Date: October 22, 2013

Re: Investing in LYFE Kitchen

At first glance, LYFE Kitchen seems like just another restaurant catering their menu to health-conscious hipsters who enjoy taking photos of their food. After all, LYFE stands for Love Your Food Everyday. Writing it off as such, however, would be a mistake. LYFE Kitchen is a lucrative investment opportunity that not only offers extreme profit potential, but also has AMDP’s values weaved into its core.

As always, I will use the following criteria to assess the attractiveness of the investment opportunity as it relates to AMDP:

Triple bottom line: Concept arguing that companies should account for their “three Ps”: profit, people, and planet. Rather than simply analyzing financial success, this framework takes into account the full cost of doing business by measuring their financial, social, and environmental performance.
Corporate social responsibility: Corporate initiative in which a company aims to assess and take responsibility for its impact on the environment. This often involves encouraging actions that positively benefit the community and are beyond the interests of the firm.
Social enterprise: An organization with a primary focus on the common good. Social enterprises are typically large and use commercial practices to maximize improvements to their social or environmental agenda.
Carbon footprint: A measure of the total amount of carbon dioxide and methane emissions caused by a company and its business activities.

LYFE story

The main factor that sets LYFE apart from other restaurants is its leadership team. Mike Roberts, former President and Chief Operating Officer of McDonald’s, came up with the idea for LYFE while still at the Golden Arches after market research showed that mothers (the dominant decision makers when it comes to family meals) are now more focused on healthy meals than ever before (Kaufman). Shortly after leaving McDonald’s, Roberts approached other food industry executives to form a dream team with the potential to revolutionize the industry.

Together, Roberts’ team transformed his concept into a booming business with a clear identity and even clearer business plan. According to its website, LYFE was founded on a simple idea: “We should love our food—love how it tastes, love what it does for our health, and love how it supports a more sustainable planet”. The business is two-fold: the company’s revenue is split between its restaurant and grocery divisions, both of which hold a common promise to deliver healthy food without sacrificing taste. Each item on their menu has fewer than 600 calories, a limit practically unheard of in restaurants (Little).

For any other company, convincing consumers that a new kind of meal — a meal they could truly feel good about eating, a meal low in calories while remaining delicious and filling, a meal sustainably sourced without eating at an entire paycheck — existed would be a nearly impossible feat, but not for Roberts’ dream team. Mike Donahue, former McDonald’s Chief Communications Officer, and Art Smith, celebrity chef to Oprah, synergized as the perfect weapon to take on this task at LYFE.

Restaurant LYFE

LYFE management tested their concept in 2011 with a pilot restaurant in Palo Alto, California. They believed Palo Alto’s health-conscious market would eat up their value proposition — and they thought right. Donahue said the company has been “very pleased” with sales at their Palo Alto and Culver City locations, though he declined to reveal details (Jennings). Since then, the team has launched another successful restaurant in Culver City, California, and three to five others are already in the works. By 2017, the company hopes to have over 250 franchised locations (Kaufman).

Grocery LYFE

After confirming the demand for their meals, management set out to make their products available outside of their two restaurants. In January 2013, LYFE launched their first grocery line of frozen items with all of the same values and benefits found in their restaurants. In fact, management uses their restaurants to gauge consumer demand to different options for their grocery line. Just nine months after its launch, over 6,000 grocery locations already carried LYFE’s frozen meals (Little). In addition to expanding their access into new geographic markets, the grocery division allows LYFE to appeal to a new segment in their market. While over 50% of adults say they eat healthful meals always or most of the time at home, only 25% say they eat healthy foods when they go out to eat (NPD Group). Thus, LYFE’s grocery products may appeal to consumers who view eating out as an indulgence and wouldn’t be a LYFE restaurant customer.

LYFE Values

LYFE is about the power of good food. Management believes that “eating good” means “feeling good” and also “doing good” for the planet and those around us (LYFE).

Doing good for the planet. LYFE keeps sustainability in mind when it comes to all aspects of the business. For its grocery division, LYFE operates under strict packaging standards. All products are produced on 100% recycled paperboard and are printed with soy or waterless inks. Similarly, their restaurants are LEED-accredited and all furniture is made from 100% recycled materials (LYFE). The company also holds strict sourcing practices and only includes sustainability farmed, humanely raised ingredients on its menu. This highlights their dedication to the common good, an essential trait of any social enterprise. By supporting sustainable and ethical suppliers, LYFE invests in the people, farms and communities that produce their ingredients.
Doing good for the people. In addition to offering healthy meal options for its restaurant and grocery customers, LYFE strives to improve the health of those who don’t have access to their meals. In 2013, they teamed up with WhyHunger, a non-profit revolutionizing food banks across the nation. Rather than satiating those in need with as many calories as possible, WhyHunger prioritizes the nutritious value of their meals while also supporting grassroots solutions that inspire community empowerment. Through their partnership, LYFE will provide over 50,000 entrees to those in need in 2013 while also stocking WhyHunger food bank shelves with their healthy pre-packaged meals (WhyHunger).

Future LYFE

Roberts’ dream of spreading responsible food consumption to the mainstream marketplace is just getting started. His goal isn’t to simply develop a healthy and sustainable version of McDonald’s — that would be too easy. He is on a mission to do for sustainable agriculture what McDonald’s did for factory-farmed beef. In an interview with WIRED Magazine, the social entrepreneur said, “I’m dreaming of a place where science, medicine, producers, farmers, and restaurateurs meet to say we are on a journey together”. Even for a seasoned food industry executive like Roberts, this vision could seem like he bit off more than he could chew.

Luckily, Roberts is backed by a team of similar culinary powerhouses (and celebrity ambassadors, too) who add their own unique flavors to the venture. Together, they hold a wealth of industry knowledge that shows in the company’s emphasis on efficiency, technology, and sourcing (Little). For example, Larry Taylor, a 34-year McDonald’s veteran, offered the following approach to maximize the efficiency of the Brussels sprout preparation in LYFE’s pilot kitchen (as told by WIRED’s Frederick Kaufman):

Looking at the initial plans for the Palo Alto pilot restaurant, Taylor realized that whenever LYFE’s line cooks required more sprouts, they would have to careen to the walk-in at the back of the kitchen—a waste of 30 seconds. So he had reach-in coolers installed next to the cook line, only steps away from the sprout station. The extra fridge in just the right spot would save 10 seconds, maybe 15. “It’s a long math equation,” he says. “For every 15 seconds of time we save, we build 1 percent of sales capacity”.

As the excerpt above illustrates, LYFE management is meticulously strategic in every aspect of the business. If any company will be able to replace French fries with Brussels sprouts (as Roberts has stated he plans to do), it’s LYFE. Investing in LYFE is more than an opportunity to get an early stake in a growing company. Investing in LYFE is an investment in our own company values. Roberts’ mission is all about the common good, which is by definition the focus of a social enterprise (Social Enterprise Alliance). LYFE is also a prime example of a corporation operating under the triple bottom line. Their business is certainly already successful and profit potential is nearly infinite given their expansion plans. Beyond profit, investing in LYFE means “doing good” by making it easier for people to live healthier and supporting practices that benefit our planet.

Works Cited

"Green Packaging." LYFE Kitchen. N.p., n.d. Web. 20 Oct. 2013.

Jennings, Lisa. "LYFE Kitchen Unveils Plans for Accelerated Growth." Nation's Restaurant News Home Page. N.p., 24 July 2013. Web. 20 Oct. 2013.

Little, Kate. "Supersize This: McDonald's Alums Big Bet on Healthy Food." CNBC.com. CNBC, 15 July 2013. Web. 18 Oct. 2013.

Kaufman, Frederick. "Former McDonald’s Honchos Take On Sustainable Cuisine." Wired 23 July 2012: n. pag. Print.

"LYFE Nourishes America." LYFE Kitchen. N.p., n.d. Web. 20 Oct. 2013.

NPD Group. "Consumers Make Healthy Choices at Restaurants by Cutting Out or Down, Reports NPD." Consumer Market Research Firm - NPD Group. N.p., 11 June 2013. Web. 19 Oct. 2013.

Social Enterprise Alliance. "The Case for Social Enterprise Alliance." Why We're Here. N.p., n.d. Web. 20 Oct. 2013.

WhyHunger. "What We Do." WhyHunger. N.p., n.d. Web. 20 Oct. 2013. .