- Aggregator business model
- Order and delivery model
- Full-service business model
- How to start an online food delivery business?
- Determine your cost and budget
- Sort out your licenses
- Set up order-receiving channels
- Set up delivery methods
- Promote your brand
- Monetize your food delivery business through different channels
- Restaurant's fee
- Commission from each order
- Delivery fee by customers
You might be running a restaurant already or in the process of starting one, but shifting online would help you expand better. And even though it might seem like a task to start a food delivery business from scratch, you only need a brilliant idea, the appropriate systems, and the motivation to make it happen.
While we are sure you might have the drive to ensure the proper execution of the plan, all you need is some guidance and instructions because the better your idea, the better it is for your business.
You need to take care of multiple things, including your technological resources, business model, revenue model, delivery app, and more. So, whether you are a beginner or have some experience in the industry, this article will help you start a food delivery business.
Is it worthwhile investing in a food delivery business?
The food delivery business is one of the fastest flourishing businesses of our time, so there’s no doubt it will be a blooming investment. Statista annual reports show a project market volume of $291.10 billion for the platform-to-consumer segment by 2027. It is growing at a CAGR of 8.24%. The user penetration is expected to reach 19.1% by the same year.
More specifically, the US online food delivery app market is estimated to reach $42.6 billion by 2027, continuing at a CAGR of 10.5% between 2021-27. These numbers have significantly increased after the pandemic. The reason could be that people are now accustomed to the convenience of ordering food from home.
Looking at the demographics of the people who use food delivery apps the most, you will realize that Millennials and Gen Z make the most of them. They are people between the age of 23 and 38. As per the reports, 81.75% of Millennials and Gen Z order food online at least once a week.
Keeping all of these points in mind, it is safe to say that if you are planning to open a delivery food business, the future will likely be bright.
Food delivery business models to choose from
Before you begin to create a food delivery app, you must decide on a food delivery app business model that best suits your business type. Here are a few that you can take a look at:
Aggregator business model
This online food delivery business model provides a platform that acts as a bridge between restaurants and customers. It does that by associating multiple food outlets with its platform. The customers can then explore several different restaurants in one place itself.
As a food delivery startup, you can start with a subscription model to let customers and restaurants subscribe to your platform. This will be a safer option for ensuring returns from your business.
The successful applications that are built on this specific business model are JustEat, Delivery Hero, Talabat, and many more.
Order and delivery model
In this food delivery business model, the food business owners hire a delivery service provider for quick and efficient deliveries. The third-party delivery provider sets the delivery fees for food orders because they are in charge of the delivery.
This business model is suitable for you if you are a food business owner who does not want to invest in a delivery fleet but wants the food to reach your customers at home. You can collaborate with logistics providers like Swiggy, Zomato, etc., to manage the delivery. However, it is important to ensure and track the delivery partner to ensure your services are at par with the commitments made to the customers.
Full-service business model
As the name suggests, you do everything from cooking the food to delivering it. Everything will be done in-house, and so will require a huge investment. But because you will control every step of the process in this model, you are likely to earn much more. Some of the successful examples of this model are Domino’s and McDonald’s.
How to start an online food delivery business?
Once deciding on the business model, you would like to opt for, you can be double-sure that building an application for food delivery is an idea that has a high probability of success. However, it is always wise to understand the market, competitors, and challenges that you might face in this development journey. Taking a methodical approach will help you achieve the end results successfully. Here are the steps you can follow when starting a food delivery business:
Research the market
Start by doing thorough food delivery market research. You can use this to construct your restaurant’s menu and combine your passion for eating with a means of making money. Build an appropriate entry strategy by concentrating on knowing market dynamics. Here are some important factors to think about:
Platform-to-consumer and restaurant-to-consumer operators who have their own delivery logistics control a major portion of the market for food delivery services. Research their pricing practices, online menus, and marketing techniques to position your company favorably in comparison to these competitors’ offerings.
Opportunities and threats
Conduct a strengths, weaknesses, opportunities, and threats (SWOT) analysis in order to compare important aspects of your operation to those of your rivals. You may take advantage of your strengths, evaluate your deficiencies, seize fresh possibilities, and spot threats with the aid of the analysis.
You need to know what customers you are targeting. If you already own a restaurant, your existing clientele will be your target audience. But if you’re starting a business, pick a market you can influence the most.
The menu should showcase your unique cooking style and the preferences and needs of your intended clientele.
Determine your cost and budget
According to business owners, a food delivery startup’s costs are usually between $3,000 and $25,000, with monthly overheads reaching $600 to $10,000. Let’s discuss some major costs associated with starting and maintaining a food delivery service:
In the case of a brand-new restaurant, you will need a location, kitchenware, interior decor, flooring, etc. However, a cloud or virtual kitchen is a good idea if you only want to get started with a small investment. You can significantly reduce your inventory costs.
It will cost you around $30K to $60K to create a food delivery service from scratch. The price is determined by the complexity, functionality, development team, location, and other elements of the app. But you can reduce the cost by partnering with a food delivery app developer.
Business license and insurance
The price of acquiring a suitable business license and insurance increases the startup costs of a meal delivery service. As an illustration, consider liability insurance and commercial auto insurance. Additionally, several states mandate that employers carry worker’s compensation insurance. Keep a check on these requirements that continually keep changing.
Cost of marketing
The price of marketing and advertising also affects how much it will cost to launch a meal delivery service. Advertising your business to millions of online users will help with advertising on social media, in banners, by email, etc.
Starting a food delivery service will be more expensive due to the expense of logistics. You will have to invest in cars and the wages of the drivers if you intend to own the fleet for your food delivery business.
If not, you can request food deliveries from third-party delivery service providers in exchange for a 20%–30% commission.
Sort out your licenses
If you operate a restaurant, you likely already possess all appropriate licenses. But if you are just starting, check with your town or city clerk’s office to see what licenses you need. You can find comprehensive information on state licenses and permits on the U.S. Small Business Administration (SBA) website since regulatory requirements differ from state to state.
Set up order-receiving channels
There are plenty of channels where you can accept orders – over the phone, via text, WhatsApp, email, websites, apps, and even social media.
Your social media accounts can act as a multipurpose medium, assisting you in both order collection and business promotion.
Use food delivery software to build your website, take orders, and handle deliveries all in one. GPS tracking and POS integration should both be features of the software. Some applications that deliver food impose flat rates per order or a percentage of overall sales. You can also try such models.
Set up delivery methods
Before even considering starting a food delivery business, you must choose a shipping method. You must set up a shipping system and choose the best time to start a food delivery service. What time is ideal for food delivery? When does your food delivery service operate most effectively?
Think about the delivery area you want to cover. You must choose which regions of the city or country you wish to serve and if you’re going to deliver food in the city or across the nation. After that, you can choose what day of the week and when to serve food. Another thing to consider is whether you want the food delivered in the middle of the night.
It’s wise to consider the weather when choosing the best time for food delivery. A party might be going on, and the weather is chilly. You don’t want to deliver food when it’s too cold outside. Additionally, it might be too hot outside. You should also consider what is going on in your neighborhood. You must ensure that the day of the week best suits your food delivery to customers.
Promote your brand
Once everything is in place, you must inform your clients that you are starting a food delivery business. Use different media to promote your app and market your brand.
Utilize social media marketing tools to post promotional messages and analytics tools to develop appropriate engagement methods. To alert clients about the deal of the day, the chef’s special, discounts, and more, you can also execute SMS or WhatsApp campaigns.
Digital marketing strategies, including push notifications, SMS, loyalty programs, and email marketing templates, are provided without charge by food delivery companies because of how effective they are.
Communicate with your customers about your food preparation methods so they know how well you keep your place sanitized and how you care for hygiene.
Additionally, the good behavior of the delivery staff is crucial and should be followed and monitored diligently. Their punctuality and customer-friendly conduct can help to advertise your company.
Monetize your food delivery business through different channels
If you want to start a food delivery business in 2023, you will want to finalize revenue channels that give you enough returns to compensate for your investment and gain profits. This is how revenue generation generally happens for delivery food businesses:
You will charge restaurants and outlets for featuring their ad or menus on your platform. The more they pay, the higher they will be positioned on the list. In turn, you will deliver the food for them and feature them on your app.
Commission from each order
Every meal order is normally subject to a 20–30% commission which goes to the food delivery service. This means you will transfer a set portion of every order to your business.
Delivery fee by customers
The consumer mostly covers the cost of delivery. They pay for the food that is delivered to them. The amount is determined by the location where the order has to be delivered.
This is a common way of earning revenue. Brands and businesses choose to show their advertisement on the app, and for showcasing that ad, they are required to pay some amount to the platform.
How can Appinventiv help in launching your food delivery business?
Your on-demand food delivery business development will start by partnering with an app development company like Appinventiv that is ready to build the best solution for your business. Our aim has always been to curate custom-made solutions for every client that brings wanted outcomes and even more. Appinventiv has worked with multiple international brands to provide them with digital solutions for their apps and websites.
One such client we worked with was KFC. Their app needed an extension in the UAE for a better global presence. Their immediate requirement was to improve QR functionality, facilitate multiple order modes, and initiate advanced analytics. Appinventiv was able to curate solutions for better customer experience, which increased the conversion rate by 28%. It began by conceptualizing, designing, and deploying the right digital solutions.
Appinventiv can be the food delivery app development company you are looking for to launch your food delivery business. The experts will guide you through the entire development process and help take your business to the next level. So, get in touch with us.
Q. How long does it take to develop a food delivery app?
A. While this mainly depends on the complexity of the app and the feature requirements, it usually takes about 2 to 4 weeks to complete an on-demand food delivery app development.
Q. How should I price items in my food delivery startup?
A. A straightforward formula for pricing any product is to add up your variable costs, fixed costs, and profit margin. Additionally, it’s crucial to consider who your target market is. Know how much they are willing to spend on their food, especially food ordered online. Use the average market price as a benchmark when comparing your products to those of your competitors.
Q. What features should my online food delivery app have?
A. While some features in your app will be similar to those found in any delivery app, ensure to include certain specific features. Some of these include menu options, home page customization, app feature integrations, geolocation services, customer rating and review options, multiple payment options, and more.