Food delivery startup Sprig certainly knows how to cause a stir. Last December, it launched with a headliner of sorts, announcing Nate Keller–former executive chef at Google who helped feed the company’s growing appetite–was heading Sprig’s kitchen. Then tapping the network of Keller and pastry chef Jessica Entzel (formerly of Morimoto Napa, Gordon Ramsay, and Wolfgang Puck), the startup recruited some of San Francisco’s most renowned culinary talents, including Stuart Brioza of the James Beard Award-winning State Bird Provisions, to serve as one-off celebrity chefs. The move drummed up such a frenzy in this foodie town that Sprig sold out of Brioza’s menu in 11 minutes.
Having built this fervent base, the company says it now has a few members in its “century club” for ordering 100 meals or more. Sprig also boasts a healthy returning customer rate, with 60% of its base ordering at least once last month, though it declined to provide specific user numbers.
Now, as it inches toward its first birthday, it’s clear the startup’s done some growing up and self-reflection. A backlash against fast-food culture, Sprig’s aim is to make it simple for everyone to eat well, a phrase that rolls off CEO Gagan Biyani’s tongue these days. This week, it’ll hit a new milestone, delivering 200,000 meals in San Francisco. But in order to achieve the scale it envisions–every city in the world, including every suburb in America–it needed to make some changes to its revenue strategy.
Starting Wednesday this week, Sprig will implement two new pricing changes for customers. The company, which last week expanded its delivery range to the rest of San Francisco and dinner service to every weeknight, will institute dynamic pricing for its deliveries. In addition, Sprig will no longer absorb the California state tax, so customers will have to tack on an additional 8.75% to their meals, plus a delivery charge that can range between zero and and close to the order’s cost (the fee will not surpass the cost of the meal, the startup says).
“[The delivery fee] will go lower and higher depending on the situation,” says Biyani. For now, the factors that affect pricing include distance and time of day, though he notes other variables could inform the cost as well. The company will test the response in the next couple of months, and the hope is the extra revenue reaped from these changes could make it possible to scale Sprig’s model to the rest of the world.
Biyani and cofounder Morgan Springer say these changes are needed to address costs without turning to conventional food sourcing from factory farms. California is experiencing a rise in food prices due to the ongoing drought, and the company wanted to better compensate delivery drivers (and cyclists). Drivers are currently paid a guaranteed minimum of $16 per hour when on the clock, plus an additional fee per delivery.
Though surge pricing is now a mainstay of Uber’s service during peak demand, Sprig is hoping to avoid its fumbles. Uber implemented surge pricing late in 2010, but the feature continues to surprise–and outrage–users, with the total costing up to 9.25 times the fare’s regular value.
Sprig hopes transparency can avoid some of that wrath–it worked for Uber when the company included an update in February that lets users know when surge pricing has ended–especially given the Silicon Valley discount, where millions in venture capital often offset consumer costs for the sake of user acquisition. (Case in point: In an attempt to break a Guinness World Record for the largest dinner party, competitor SpoonRocket discounted dinners to $1 apiece for two days this July.) Sprig’s app will feature a splashy image during dinner rush, giving users the option to order now at a higher price or to get notified when the service has dipped. If users choose to swallow the extra cost, they’ll see the delivery charge highlighted in green (bottom left for the iOS app and up top for the Android version) if it costs $2 (the old standard delivery fee) or less, or in red if it’s higher.
“One of our goals over time in San Francisco is to create a sustainable model that we can use outside the city,” says Biyani. “One of those things involves economics, and we want everyone to have Sprig, and we want them to have it in six months, a year, five years.”
That said, Biyani didn’t cite any specific markets, nor a timeline for expanding into the greater Bay Area. It’s likely expansion will take longer than his ambitious goals. Fellow competitor Munchery has talked about expansion since 2012, but it was only this summer that it opened its doors in Seattle.
Not to mention, Sprig finally moved into its own office and kitchen this month after being cooped up in a coworking space in the SOMA neighborhood and two shared industrial kitchen spaces in Potrero Hill. Ironically, it’s taken up residence in the location of a former Chevys Fresh Mex near the San Francisco Civic Center, across the street from a drab McDonald’s.
Biyani admits there’s still plenty to be done to the new space, but the company’s poured all its early efforts into renovating the kitchen without a break in service. “I have very spartan needs when it comes to the workplace,” he says. “I don’t care that much in terms of design aesthetics,” he added, noting it’s unlikely Sprig would ever splurge on something like a ping-pong table. Eventually, it plans to create a modern, inviting space.
Though the Chevys provided much of the bones for Sprig–a functional kitchen, eat-in space for employees during lunch–the startup ripped out all the deep fryers (very little oil is used in meals, says Biyani), got rid of the freezers (what need is there for one when there are fresh produce shipments delivered daily?), and added some heavy-duty industrial machinery of its own. A pair of commercial combi ovens, for example, can be programmed to use steam, convection, and humidity–all variables that can be adjusted independently and over time–to perform precision cooking at scale. The high-tech ovens, which also feature a hidden USB port, are designed so entire racks of food can be carted in and out of them quickly. Next to one of the ovens sit two behemoths: a tilt skillet (used to grill and braise tens of gallons of food) and a steam kettle to prepare sauces at volume.
Given the extreme demand for commercial real estate in San Francisco, securing a kitchen and office under one roof is already a major victory.
“Sprig was started in just one neighborhood for just dinner four days a week,” Gagan recalls of the startup’s humble beginnings, when it began testing dinner service in SOMA last November. “Since then, we’ve served 200,000 meals, expanded to every neighborhood, and we’ve added lunch. That’s just the beginning.”