Analyzing the business model of HomeDine

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A bit of context

I really like this startup, Homedine, which positions itself as the AirBnB of home-cooked meals.  Having traveled a lot and lived in 12 different countries over the course of my life I still have not found the secret formula for finding lots of like-minded local friends quickly.  Typically you start out with a base of friends that you make either through work or via people that you already knew before moving to the area.  And then you expand this group by going out with those friends and meeting their friends. Then slowly you build your network.  You could also go to networking events, but i’ve generally found that to be a bad way of finding good friends as most people at those events have some kind of agenda.

The task becomes even harder when you are already in a serious relationship.  This is because you go out much less and tend to spend a high percentage of your time with your significant other…  going out mainly with other couples.  And it is often very difficult for couples to meet other like-minded couples that they enjoy spending time with.  That’s why i think I would be an ideal customer for Homedine as i’d find it really interesting to both purchase dinners at the houses of other interesting people, plus we’d be more than happy to host a few ourselves.

homedine

Homedine HQ

The other thing i’ve noticed is that a lot of people have made a business out of renting spare rooms via AirBnB.  Take my father for example..  he rents on AirBnB and has 1-2 guests per week.  But as he is retired he has plenty of time to make other side income from hosting dinners.  So the combination of renting your spare rooms on AirBnB and hosting paid dinners is a very strong fit in my opinion.

Why the Homedine business model is strong:

1) They take a commission on the meals that people sell.  Typically there are 60%+ margins on serving meals.  And so they could comfortably take 10% or so without the host feeling much pain.  Also the ticket prices are fairly high since you could easily collect 5 people for $20 each on a single dinner, ie $100 transaction.

2) Relatively low customer acquisition costs.  SEO should be fairly easy to attain as there is lots of new user-generated content each day and the keywords that they are targeting are probably not that competitive.  Also there should be a very nice viral effect of people telling their friends about the service and inviting their friends to try.

3) High repeat purchase by customers.  This is the type of service that if you enjoy it, you are likely to do it often.

4) Powerful market effects for first movers.  As with AirBnB and most market models typically the leader takes the vast majority of the market because it is too much of a pain to list on several sites and monitor them separately.

5) Low operating costs.  Since users are doing most of the content generation, the technology platform is fairly simple, and the customer support is very little I would think operating costs should be quite low.  Also it is a service and not a product so no need for investing into inventory, logistics, etc.

Voila!!  I predict a great business model that will eventually take off!

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