photo by Flickr user HannaElise
When you live in South Florida, you feel the pressure to be “beach body ready” all year long. So it is no surprise that services promising to deliver healthy food to our doorsteps have achieved substantial popularity here.
Unfortunately, many busy and health-conscious Floridians have been left angry – and hungry – from the abrupt closure of one such company.
Fresh Diet originated in Miami, though it eventually grew into a national company. Unlike Blue Apron or Plated, which deliver ingredients and recipes for the buyer to cook, Fresh Diet delivered fully prepared meals and snacks that simply required reheating. While the company offered standard plans as weekly or monthly subscriptions, it also ran promotions and other deals that let bargain-hunting customers lock in a low rate in exchange for a longer-term commitment.
Those customers received a rude awakening when Fresh Diet abruptly closed up shop in July. According to a Miami Herald report, the company ceased operation without warning, filing for Florida’s equivalent of bankruptcy. Neither the company’s employees nor its customers knew it was struggling, though the company that had purchased Fresh Diet sold it back to founder Zalmi Duchman this March.
A startup folding is never pleasant, but evidently some of Fresh Diet’s customers were not notified in advance that it was shutting its doors. Many customers had no idea anything was wrong until their meals stopped showing up. According to Duchman’s general counsel, Daniel Gielchinsky, a temporary manager had been assigned to inform employees and clients of the closure. They are now looking into how some of the notices were missed.
Instead of receiving guidance regarding the closure, confused clients found that the company’s phone lines went unanswered and its social media accounts had vanished, leaving them little recourse but to tweet at Duchman directly or take to Yelp to complain that they were owed hundreds or thousands in prepaid food. Gielchinsky told the Herald that the company is “looking into” refunds for customers who prepaid.
I was never a Fresh Diet customer, but I have used a similar service. While I am not interested in switching to these kinds of meals indefinitely, they solve a very particular problem for me: tax season, a time when I am typically far too busy to plan and cook healthy meals at home. Before I signed up with Fresh Meal Plan, the first thing I wanted to understand was how the company handled payments. Since I knew I only needed the service for a finite period of time, I did not want to lock myself in indefinitely.
Fresh Meal Plan offered an option for weekly billing with the ability to cancel at any time. This choice was essential to the company winning my business. As delicious as their meals were, I knew I wanted the option to cancel once tax season ended and my life went back to a calmer pace. Had Fresh Meal Plan unexpectedly gone under, I wouldn’t have had to worry about losing more than a week’s worth of prepaid meals. I did not expect the company to have a problem – Fresh Meal Plan seems to be doing fine – but neither did Fresh Diet’s customers until it was too late.
Meal plan companies are not the only services that offer discounted pricing if you pay farther in advance. Many gyms offer a better rate if you pay for a yearly membership upfront; the same goes for online services like Dropbox or Amazon Prime. Many car dealerships offer prepaid maintenance plans on vehicles that don’t already include scheduled maintenance in the purchase price.
For a service you know you will use for a year, it may seem like a no-brainer to save the money and take the deal. But it can pay to slow down and consider what you are giving up by locking yourself in.
Fresh Diet’s case is extreme, but not unique. Especially for startups, new online services and apps, it is not always possible to judge a company’s health accurately from outside. Even with larger companies, there is always some risk. Will Amazon abruptly fold before you use your year of Prime? Very unlikely – but not totally impossible.
More importantly for many customers, your assessment of how much you will use a product or service can prove overly optimistic. Health-related memberships, such as gyms, yoga classes or meal plans, are a top target for prepayment deals because consumers often want to commit themselves to a healthier lifestyle. Incidentally, that is why you frequently encounter such deals right around New Year’s. A few months in, however, you may find yourself busy, tired and unmotivated, and you stop using the service. This is just fine with the company, since you’ve already paid for it anyway.
When I try a new membership, I make a point to start off buying a small package. Even if the option is more expensive, I know I am not locked in. Once I have established the habit of using the service, I slowly increase the packages I purchase to save money, but only to a point. I would never recommend paying more than six months ahead, unless the company – as well as your habit – is very well-established.
In a worst-case scenario like Fresh Diet, there may not be much you can do if you have paid a substantial amount in advance. If you paid recently and used a credit card, you may be able to take advantage of some limited protection from the card issuer. Similarly, if you prepaid through a deal site like Groupon, the company may offer some level of refund. If the business has filed for bankruptcy, you can also try to track down contact information for the bankruptcy court administering the process to get yourself added to the company’s list of creditors. But even if you succeed, there is no guarantee of getting all – or any – of your money back, since unsecured creditors are among the last to be made whole in a bankruptcy proceeding.
The best option is to minimize your risk in the first place. Paying hundreds or thousands of dollars in advance will almost never be the right option, even if it seems like a great deal in the moment. And any time you prepay, take the time to read the fine print. It may just save you from ending up like the hungry customers Fresh Diet left in its wake.