How to Kick-Start a Food Delivery Business in 2023?
The food delivery business is one of the fastest-growing businesses of this time. You might already know how fruitful this investment is. If you are already on this blog, you might be running a restaurant business or thinking of kick-starting one. An online expansion is what your business needs after a physical setup. It might seem like a difficult task to start a food delivery business from scratch but with appropriate planning, skilled teams, and dedication to making this happen, you can always ensure the proper execution of your business.
Being an experienced company in the food industry, we know that you have to deal with multiple business factors including technological resources, revenue model, business model, food delivery app, social media, and more. We’ve got so many details in this blog to cover all your doubts and queries that will surely help you out in establishing a successful food delivery business.
Why You Should Invest in a Food Delivery Business?
Since you are planning to invest your money into the food delivery business, it is necessary for you to understand if this is worth the hard work. Is food delivery business profitable? Let me make you realize some astonishing facts about the business so that you can decide it all by yourself.
a. 57% of millennials prefer online food ordering to enjoy their time watching movies and TV shows at home.
b. 60% of restaurant owners noticed a growth in sales and food orders when they started food delivery services.
c. The US online food delivery app market is projected to reach $42.6 billion by 2027 keeping up a CAGR of 10.5%.
d. Statista report shows that the platform-to-consumer segment is expected to reach $291.10 billion by 2027 continuing at a CAGR of 8.24%.
e. 75% of Millennial and Gen Z make online food ordering happen at least once a week.
The statistics have seen tremendous growth after the pandemic hit the food industry. The reason that it is one of the fastest growing industries is that people are now habitual to the convenience of ordering food from home. If you look closer at the demographics, you will realize that millennials and gen Z are the ones who make the statistics rise. Keeping this in mind, you need to create an application that is supposed to target this generation.
Online food ordering helps restaurants in automating the process of order booking. Restaurant staff can save plenty of time by accepting food orders on their smartphones, and not wasting time on the traditional way of order booking by calls. The online food delivery system reduces the chances of errors and is tend to provide a flawless customer experience.
Entrepreneurs also get the benefit of proper management of sales and inventory, business reports and analytics, and online promotion.
It’s a win-win situation for both, customers and businesses. That is a considerable factor to justify your investment in the food delivery business. Now, let’s look at the various food business models.
Online Food Delivery Business Models
Before you invest, you should know all the food delivery business models precisely so that you can act according to your budget and business preference. All business models vary on the services they offer.
1. Aggregator Business Model:
The aggregator business model is a network notion that connects multiple restaurants to a single major platform with a unique corporate image. The sole purpose of this business model is to connect multiple restaurants with their customer but under the impression of a particular firm.
Perfect examples of this business model type are- Swiggy, Zomato, Talabat, and Uber Eats.
So, what they basically do is that they allow restaurants to register on their platform and then operate it as a single service. Customers do order the food under the name of the aggregator. It works like a bridge between customers and restaurants. Since many restaurants want wide exposure to their dishes and services, they look for aggregators. This makes the growth and demand exponential for such platforms.
As a startup, you need to figure out the business needs, targeted audience, customer demands, and features that you will be offering in your aggregator. Also, you need to take care of the funding part too, since you will be investing a huge amount at the start. Subscription models, delivery charges, or any additional plan will help you plan the financing.
2. The Order and Delivery Model:
The order and delivery model involves the collaboration of third-party food delivery service providers with food business owners. Here, a restaurant owner collaborates with a logistics company or aggregators to complete food deliveries quickly and efficiently. The delivery partner is responsible for all the deliveries as the company is in charge of the delivery.
This model will suit your business if you do not want to invest in a delivery fleet. Aggregators like Dunzo, Zomato, and Swiggy act like third-party delivery service providers and can manage the food deliveries for you.
One downside of this model is that you may not have proper coordination with the delivery agents. You can train and connect with the agents who work directly under your firm but it may not work well sometimes when you have delivery agents from another firm.
3. Order-Only Model:
The platforms that fall under the order-only model allow food ordering only and not delivery services. The food business owners can easily increase food sales via this model by increasing their customer base.
Here a customer searches for a nearby restaurant and orders the food online via the web or mobile app, but once the food is prepared, the customer has to take the order at their own convenience. The restaurant does not hold the responsibility to deliver orders and allows takeaways only.
4. Cloud Kitchen:
This food business model is best suited for those who want to start food delivery services at a minimum cost. Cloud kitchens do not have any physical existence but they allow customers to order their dishes from website/app. Such restaurants do not allow takeaways and dine-in, and obviously do not have to décor the setup for customers.
Anyone can run a cloud kitchen, even from home with minimum operational cost.
Once you are absolutely clear with the business model, you can start a food delivery business. Here are some of the detailed steps that you will need to perform during the whole business.
Steps to Operate a Food Ordering & Delivery Business
Mouth-watering food is an essential factor to make a food business successful, but that’s not enough. You need a thoughtful business plan, budget plan, market research, technical research, and much more to make your business a huge success.
Let me explain a few factors or steps to start a food business.
1. Food Type & Quality:
Once you decide to step into the food business, ensure that your business’s top priority is to serve delicious food made from quality ingredients. People would only order food from your restaurant if they know you prioritize food quality. You need to find a trusty source to deliver fresh vegetables and fruits on a regular basis. To key to ensuring the quality of the food is to find a reliable source to deliver quality ingredients.
2. Know Your Audience:
It’s not necessary that you will always try to target the audience that other food businesses are targeting. If you have certain plans in your mind, then you need to realize what audience you will be serving. It is crucial to take care of your customers’ needs to ensure you get repetitive customers. Ask yourself:
a. Is your target audience large enough to give you estimated orders?
b. Are they capable enough to pay the prices you are asking?
c. Do they demand the same food that you are offering?
The target audience is also dependent on the location where you want to provide the food delivery service. Again, the audience impacts directly the meals that you are offering and vice versa. You need to conduct a deep analysis of the area and the audience.
3. Know Your Competitors:
It’s very common that you will meet your competitors in the same area where you are trying to establish your restaurant. Know them deeply. Know the menu they are offering and realize if the audience is happy with what is being offered. Know their strengths and flaws, and never try to copy the same strategies they are following. Try to offer something to your audience that your competitors are lacking and you will surely get the number of orders that you have planned.
4. Plan for The Food Menu:
Now that you are all set with the target audience and competitor analysis, you have gained enough data to introduce the food menu to your customers. Include dishes that can attract immediate attention. Offer customized menus as well and try to prepare everything the same way your customer wants.
5. Get the Required Licenses:
If you are new to the business, you should ask local officials what licenses you need to run a food delivery business. Each state has different regulatory requirements and your information on the license may not be enough, so it’s better to keep everything ready. If you are already in the business, you should confirm with officials if the license or documents you have are sufficient.
6. The Right Delivery Platform:
Logistics is an elemental part of running a successful food delivery business. You need to ensure that each order is delivered at the right time without any spillage or packaging issues. You can hire third-party delivery companies for making on-time order delivers. These companies will charge a specific commission on each delivery. If you do not want to give them the commission, then you can manage the delivery process by yourself. Hire a few delivery partners, train them, and deliver orders efficiently.
7. Promote Your Business:
Never settle for anything less. Once you have launched your business, start paid and unpaid promotions to increase your sales. Digital promotion is one such thing that can boost your business in a short time. Be it your personal application or website for your business or you have just registered your business on aggregator models, you can always opt for campaigns that will bring ample customer visits to your menu.
8. Test Your Business:
It is improper if your business has some flaws in it. It will negatively impact your customers and you may even miss the targeted sales. To test your business, try offering the services to limited customers only and collect their feedback. Analyze and find patterns if there are certain flaws that will hit your sales. Work on improving services and the menu based on the feedback. Once you are sure, make it available for everyone.
Market Price to Start a Food Delivery Business
Now that you have an idea to plan for your startup, it’s time to know the rough estimation of the price where you will be spending to get it all done.
If you are starting fresh, you need a physical space to set up the restaurant. It will need kitchen equipment, interiors, flooring, ceiling, AC, decoration, and lights, etc. Cloud kitchen is also an option for you if you are not planning for a restaurant where dine-in and takeaways are possible. Cloud kitchens can be started from home and can save a huge inventory cost.
2. Technology Cost:
Based on the business model you have selected, you may need to build a mobile application from scratch. A full-fledged mobile app development will cost you from $30K to $60K. You can hire any mobile app development company for building an app with maximum proficiency. The cost may vary depending on several factors including app complexity, development team location, development team experience, and other factors. Read our guide on cost breakdown to understand how much this can cost you to develop an app.
3. Business License and Insurance:
While you are working on adding the cost to start the food delivery business, add the expenditure to get a business license and insurance. Depending on the state’s law, you may need to invest in getting liability insurance, worker’s compensation insurance, commercial auto insurance, etc.
4. Marketing Cost:
Marketing and promotional costs are two factors that most businesses don’t consider and end up messing with the budgeting plan. Always know how much you can invest to let everyone know about your business. Digital promotion and offline promotion are two ways you can promote which include social media ads, email marketing, banner ads, etc.
The last one is to understand the cost that you will be spending on delivering orders. It again depends on the way how you’d do it. By hiring a third-party delivery company or you will manage the deliveries yourself by hiring delivery agents.
In this blog, I have tried to discuss almost everything that you would need to own a food delivery business, but still if there is anything left, let me know in the comments. Also, if you have inquiries about app/website development or digital promotion, you can drop us an email at firstname.lastname@example.org. We will help you build an on-demand food delivery app with customized features and functionalities.