Business

Eat My Lunch returns serve

The social enterprise, Eat My Lunch, has come under fire from charities and academics who believe it should be more open about its finances. Mark Jennings talks to the company’s founders about the criticism and what a social enterprise actually is.

It's 6.30am and in a grungy sidestreet near Auckland’s K Road precinct the headquarters of Eat My Lunch is buzzing with industry.

Volunteers wearing hair nets and gloves work on small production lines turning out hundreds of meals – flash salads for office workers and nutritional sandwiches for hungry school kids.

Dire Straits’ Walk of Life is playing over the sound system. Everyone seems to be enjoying the work.

I am here because Lisa King, CEO and founder of EML has made a decision. She wants to be more open and transparent about the business, “and it is a business not a charity”.

EML, which operates on a 'buy-one give-one model', has been a target of criticism recently for not disclosing the salaries of its owners and for using volunteers as a way of boosting its profits.

In a recent article on news website Stuff, the CEO of the KidsCan charity, Julie Chapman, called for more detail on how much of the money EML makes from selling lunches is going toward food for kids.

EML also made the news when it had to retract a claim made in its marketing material that 290,000 kids were going to school every day without lunch.

The figure is thought to be closer to 50,000. They blamed it on a typo.

Before I talk to King, renowned chef Michael Meredith comes over for a chat.

Meredith is an 8 percent shareholder in the business and works there two days a week. He tells me he is paid $500 a week.

“I worked for free for six months when we first started. I would come in here at 4.30 in the morning and go to my restaurant after Lisa and I had delivered the lunches to schools.

“In the beginning we had six schools and we now have more than 90, we have grown at a massive pace in the last three years.”

Meredith says he understands the criticism but tells me people have the wrong idea about the company.

“They think we are a charity because we are doing charity work. We are a business that does business, but what we do also has a social good.”

He says he is not in it for the money but because something needs to be done to help hungry kids.

“I feel in my heart this issue needs to be addressed. When you ask people about it they say ‘That’s not my problem' but it has to be somebody’s problem.”

King arrives and we head upstairs to a mezzanine floor where EML’s admin staff work. EML has the equivalent of 45 full-time staff. A good proportion of those work in marketing, logistics and finance.

There is plenty of technology in the business – a screen on the wall displays in real time where EML’s couriers are in Auckland and how many schools they still have to deliver to.

Most of it has been paid for from capital raised by two rounds of crowd funding.

In the last round, EML offered $800,000 of social bonds on the PledgeMe platform.

Investors were offered a 12 percent interest rate. Six percent is returned in a cash dividend and 6 percent goes to buying lunches for kids.

Twenty-four percent of subscribers elected to put all their interest payments into paying for lunches.

Foodstuffs, the giant co-operative that owns New World and Pak'nSave supermarkets has invested in the company, taking a 26 percent stake.

How much did it pay? King says it was in the low millions.

The money has been used to build or expand EML’s kitchens in Auckland and Wellington.

“Foodstuffs have invested because they want to be part of the social impact and don’t really expect a return, but they wanted to know that there was a sound commercial model around our business,” says King.

When questioned by other media about her salary King has refused to divulge details and still defends that decision.

“We are not a charity and no one has the right to know what I earn.”

But EML is a business that depends on people’s goodwill and King, a former marketing executive who worked for multinationals including Unilever, Cadbury and Fonterra is aware that murkiness around these issues can be highly damaging.

When I agree not to reveal the exact figures she shows me what she says she has earned in the last three years.

Starting from a low base, her salary has risen to roughly what a senior journalist or a middle manager would earn.

King suggests it is well below what she could command in a corporate job.

It is certainly lower than what a CEO of a high-profile charity would be earning.

King also says she has “after-hours use" of a late model Mini as part of a deal with the car company. The car, which has ‘Eat My Lunch’ emblazoned on the side of it, is used during the day for delivering lunches.

What about the claims that the company is profiting from the work of volunteers?

“EML is yet to make a profit or pay a dividend but we are targeting the end of this year to be at break-even and I think we will go close,” says King.

“We have modelled the business to be viable without volunteers but I know they get a lot out of it. We have a two-month waiting list and the volunteers, I think, see it as an opportunity to give something back.

“A lot of big companies are now giving staff time off to volunteer so there is quite a demand for work of this type. The Australian companies like OzHarvest (a food rescue company) actually charge people to do volunteer work.”

New Zealand has about 27,000 registered charities but just a handful of social enterprises and, according to King, this is part of the problem.

“People don’t understand what social enterprises are. They provide a social good but they are enterprises. Without the business model the social part wouldn’t be sustainable.”

King points to EML’s recent bail-out of Christchurch operation, Fill Their Lunchbox, as an example of why a sustainable business model is required.

The Christchurch initiative, which had been delivering 450 lunches a week to schools, was about to shut its doors due to what founder, local chef Ben Atkinson, called “financial pressures”.

The business will now be run out of New World’s commercial kitchen in Christchurch and will benefit from EML’s bulk buying power and supply chain knowledge.

King says if she was starting over she would focus harder on “impact tracking”.

“We are only really now starting to get that data from schools on the impact the lunches are having.”

She gives the example of a school in Onehunga that has a roll of just over 200 - mostly Pacific Island children.

“There was a big problem with kids not attending because their parents were too embarrassed to send them without a lunch. We now supply 60 lunches a day and they all come to school. The lunches we provide have just become a normal part of school life for these kids.”

King admits to being personally stung by the criticism but says it’s balanced by job satisfaction.

“I am a solo mother with two kids and I live in a very modest house on the edge of Grey Lynn. I have poured my heart into this job and work 60 plus hours a week. I had a much easier life when I was working for the big corporates but I would never want to go back to that world now.”

Eat My Lunch will soon produce its one millionth lunch. The software which has tracked the number from day one displays the current running total – 964,585 as of yesterday morning.

It makes and distributes 2830 lunches a day to schools in Auckland, Hamilton, Wellington and Christchurch, but King wants to expand into the regions and increase output to 25,000 lunches a day.

“Yes, that is 10 times what we are doing now and it will require a lot more investment but it is what I believe is needed.”