With food costs soaring, more people are looking for ways to save on groceries. The pain to consumers’ wallets has meant big growth for a Toronto-based startup that connects consumers with discounted, soon-to-be spoiled food, diverting it from landfills.

Founded in 2016, Flashfood’s app shows users fresh food at nearby partner grocery stores that is close to its best-before date. Customers can purchase meat, fruit, vegetables and other items at up to half off their regular price and pick them up from the store. 

Flashfood launched with a pilot at a London, Ont., grocery store in early 2017 and has since grown to more than 1,700 locations in North America with over 2.9 million users. Loblaw signed on as a partner in 2019, and near the end of last year the two companies announced they’d diverted 40 million pounds of food from landfills since then. 

The startup is now in its growth phase, said founder and CEO Josh Domingues. In February 2022, it raised $12.3 million in a Series A to help fund its ongoing expansion in the United States, where it is looking beyond the northeast and Midwest. Domingues recently spoke with The Logic about Flashfood’s quick growth, and its ambition to reach farther than North America and the grocery sector.

This interview has been edited and condensed for length and clarity.

Why did you start Flashfood?

My younger sister was a chef. She called me after an event and said, “I just threw out $4,000 worth of food.” That led me to read about the problem. Retailers throw out thousands of dollars worth of food and consumers reach in the back for whatever has a long shelf life.

That led to us building Flashfood. We took the discount food rack, made it look cool and put it on your cellphone.

How did you build the app?

I started off in finance. I tried to start a robo-adviser in Canada. I had no idea what I was doing. The whole thing crashed and burned. Wealthsimple sprouted around the same time and they built an incredible business. In the back of my mind, I’m like, “If there’s ever something that becomes as obvious to me as what Wealthsimple has done in that market, I’m just going to quit everything and do it.”

I actually quit my job and hired people, got the mockups done and got the first version of the app built. We got our first store pilot up and running and it was luckily successful enough to allow us to go back and rebuild the app from scratch.

How did grocers react when you tried to get them to pilot the app in stores?

It was basically impossible. I joke that I had this idea and then I spent two years getting my face kicked in trying to convince a grocer to give us a chance. It was difficult to get in. The grocery industry, especially in Canada, is oligopolistic, similar to other industries. There are so few companies to partner with.

Why were the grocers saying no?

Running a retail grocery chain is really, really difficult to do. You have a lot of constraints on your time. It was less about, “What feature or what thing could we do differently?” and more about the prioritization challenges that big companies live with.

Once you get in and you check a whole bunch of the boxes, you actually start to slide into [their list of] strategic priorities. When that happens, you have the opposite result, where things move really fast. You just kind of have to hold on and not let them break.

Who gave you the first opportunity?

Jeff York, then co-CEO of Farm Boy. He gave us a one-store pilot in London, Ont. From there, we just proved metrics: we’re selling over 75 per cent of all the food made available; and the average shopper spends about $10 to $15 [per purchase] through Flashfood, and they’ll spend more money while they’re in store. All the metrics work for the grocer.

I got connected to a Loblaw executive. She put us into three or four stores in London. We hit similar metrics. She was the one who made the decision. And I was like, “Alright, we’re rolling this out, chain-wide, to all of the discount division.” That’s really what took off and our growth has just been tremendous since then. [Flashfood is now also available at some Loblaws, Dominion and other stores.]

What opportunities and challenges did COVID-19 bring for the company?

Right at the beginning of COVID, grocery stores shut off all of their initiatives in-store that required excess touches, like the buffets. In some of our stores, because Flashfood requires a grocery-store employee to move products around, we were paused at the onset. That didn’t last very long, but it was really impactful.

Since then, people stopped going out to eat. It created tremendous tailwinds for us as we’ve continued to scale.

We’ve gone remote-first as a company. We’ve got folks all across North America and the world now. Our head office is still in Toronto, but the team is remote first.

How has sky-high inflation, especially for food, boosted demand?

In terms of actual usage on the app, obviously numbers are growing. We’re adding more partners. Shoppers are buying nearly all the food. It’s driven by inflation and the cost of food probably more than anything else. But we’ve also built an incredible business to be able to provide people with affordable food. It’s hard to quantify what inflation has done to the business because we’ve been scaling independent of it, and I think that we would have regardless.

But the media coverage, TikTok videos and Instagram stories telling the story of what Flashfood is doing have scaled tremendously, predominantly because of the cost of food going up.

How does Flashfood make its revenue?

A revenue-share model. We only make money when our grocery partners make money.

You last raised over a year ago. Are you fundraising now?

We’re not actively fundraising right now. We’ve actually recently turned down investment offers. We’ve been building in a way that’s been cash efficient because it was so difficult to raise money initially. There weren’t a lot of investors lining up to give money to a business-to-business-to-consumer company selling into the grocery sector.

Is the company profitable yet?

We’re cash-flow positive and have been for quite a while. We’re making investments now because we have a lot of big partners that are coming on.

Do you have an exit strategy—IPO or M&A—in mind, or are you hoping to remain private?

When you take in venture capital, then there’s a path to investors requiring a return on their capital. Whatever that looks like, in the future, who knows. We are looking at building out and being the best business in the world at what we’re doing.

What’s next for the company?

The continued U.S. expansion to become national would be the first, which is in the works.

We’re looking at how we partner to create some sort of mechanism—maybe a dark store—where shoppers can order food delivered to their house at the same discounts that they’re seeing when they go to pick up at the Flashfood storefront. How that looks publicly is still to be determined.