Moving Home to Expand the Family Business

Justin Gagnon quit a secure IT job, moved in with his parents, and turned their catering business into a $4 million provider of healthy school lunches

Caption: Gagnon and his friends, Ryan Mariotti and Keith Cosbey, each invested $6,250 into launching Children's Choice. STEVE EPSTEIN

Gagnon's 90 employees prepare an average of 10,000 lunches a day for 122 schools throughout California. SAM SARGENT

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STEVE EPSTEIN

Entrepreneur: Justin Gagnon, 31

Background: After graduating from the University of Notre Dame in 2000 with a bachelor's degree in business administration, Gagnon worked for Level 3 Communications (LVLT) in Broomfield, Colo., building order-entry systems. During a short visit home to Danville, Calif., in 2003, to help his father build a Web site for the family catering business, Gagnon came up with the idea of transforming it into a full-time provider of healthy lunches delivered to local schools. He quit his job, moved home, and recruited two college buddies to help him build the business.

The Company: Gagnon and his friends, Ryan Mariotti and Keith Cosbey, each invested $6,250 into launching Children's Choice; Gagnon's parents put in an additional $6,250 and took a 25% ownership stake. In 2003, its first year, the fledgling business served about 550 lunches a day to eight schools in the San Francisco Bay Area and took in $400,000 in revenue. Today, its 90 employees prepare an average of 10,000 lunches a day for 122 schools throughout California.

Revenue: $3.9 million in 2008

His journal: If it wasn't for my dad continually pestering me to come to California with a couple of friends and "build a Web site" for his school lunch business, I might have never taken the leap. But it was his pushing that made me curious about what was going on in his industry. I found that there was no one really focusing on school lunch. Everyone in foodservice did something else first—a restaurant, a deli, a caterer—and none of them had the resources or the dedication to truly focus on school lunch the way I thought it needed to be done.

When it comes to school lunches there are three distinct stakeholders: schools, parents, and kids. Schools want hands-off administration, no capital investment, and happy parents. Parents want convenient ordering, nutritional meals at a relative value, and happy kids. Kids are happy when they are given a say in what they're eating and when what they're eating flat-out tastes good. I knew that building a company positioned to exceed all of these expectations would be a huge undertaking. I also knew I couldn't do it by myself.

I asked Ryan Mariotti and Keith Cosbey, two of my best friends from college, to help me refine the idea. In 2003 we flew to California and pitched my parents on spinning off the school lunch portion of their small catering company into an enterprise focused on serving healthful, kid-friendly lunches to schools that lacked the infrastructure and expertise to do it themselves. After sitting speechless for two straight hours during our pitch, my parents eventually realized we were serious about leaving our secure jobs as IT professionals to learn kid catering from the ground up. They agreed to teach us everything they knew.

We started off with eight schools that my parents already serviced but the cash flow didn't even come close to sustaining three new partners, let alone retaining earnings for future growth. We all moved in with my parents and spent the first couple of years barely paying ourselves enough to warrant the paper the checks were printed on. We would drag ourselves into the kitchen at 5 a.m. to prep and cook food, visit school sites during the lunch hour, and eventually end our days in our "office" [a room that adjoined Keith's bedroom]. There we built our IT systems and discussed every aspect of the business until midnight or later. The next day we got up and did it all over again.

As a startup, we experienced one of our most deflating lessons after discovering that no matter how hard we tried to build accurate assumptions into our business model, the truth always seemed to be far from our speculations. For starters, we thought that with greater volume came more purchasing power, and with more purchasing power came lower prices.

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