Do you know the global food delivery market will value at $182.3 billion by 2024?
Believe it or not, the food delivery industry is witnessing phenomenal growth, particularly post-COVID crisis. Given the health concerns and social distancing guidelines, people prefer to stay indoors. The trend is not just restricted to developed nations but also seen in developing countries.
This has created a great opportunity for entrepreneurs to foray into this industry and start their delivery businesses. However, it is difficult for these startups to survive and scale with increased competition.
So, if you plan to start your own food delivery business and create an app, this blog has everything to make it a big hit in the market. Curious to explore more including the food delivery business model? Here you go!
Table of Contents
Different Types of Food Delivery Business Models
|Food Delivery Business Model||Description|
|Aggregator Business Model||This business model for delivery service contracts with restaurants to provide delivery services|
|Order and Delivery Business Model||Three main entities are involved in this business model: restaurant owners, the admin or platform owner, and a delivery service provider.|
|Integrated Business Model||In this model, both restaurants and the admin can take care of delivery.|
|Inventory Business Model||There are two main types of inventory business models for food delivery businesses: central kitchen model, virtual kitchen model|
It’s fair to say that two major food delivery business models dominate the online food ordering and delivery industry. Many top-performing food delivery startups operate following one of these models. Let’s know them in detail
Aggregator Business Model
This business model for delivery service contracts with restaurants to provide delivery services. The aggregator generally does not own any restaurant locations or employ any drivers. Instead, they contract third-party delivery services to pick up and deliver orders from their contracted restaurants. One advantage of the aggregator model is that it requires less capital than other food delivery models.
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The Order and Delivery Business Model
Three main entities are involved in this business model: restaurant owners, the admin or platform owner, and a delivery service provider. Here, food delivery is handled by a third party.
The delivery partner is generally a courier or logistics firm that cooperates with the platform proprietor to deliver food to the consumers.
Integrated Business Model
This is the most sought-after and flexible business model in the industry. In this model, both restaurants and the admin can take care of delivery.
Many restaurants want an online platform to make their food ordering more efficient. Online ordering platforms can help with this by catering to the needs of these establishments.
Inventory Business Model
The second food delivery business model is the inventory business model. There are two main types of inventory business models for food delivery businesses: the first is a central kitchen model, in which all of the food is prepared in one central location and then delivered to customers; the second is a virtual kitchen model, in which individual restaurants prepare their own food and then it is delivered to customers.
The central kitchen model is more common for larger food delivery businesses, as it allows for more efficient production and distribution of food.
Tips for Creating a Food Delivery Mobile App
Identify the Problem
Before hiring mobile app developers for a food delivery app, it’s essential to identify your niche and target audience. There are two main types of food delivery businesses:
- Restaurant-to-consumer (R2C)
- Food aggregators.
Restaurant-to-consumer (R2C) businesses focus on delivering meals from restaurants to consumers. Food aggregators, on the other hand, partner with restaurants and deliver them with an online platform to reach more customers.
You only achieve your food delivery app goals if that is efficiently marketed to reach potential prospects. You might be looking for someone who loves fresh produce, or maybe a busy parent is more likely to download your application.
Knowing your prospects before hiring a mobile app development company ensures your application is relevant to your users. It also allows you to establish marketing goals and business models better later in the process.
Define Who You Are
Defining your identity is an essential part of starting any business. Think about what you want your brand image to be and whether it should play into your overall food delivery business model. Also, research how other brands use their identities and create something original and appropriate for your niche.
While some brands don’t reflect any real identity in their products or services, many consider themselves champions of particular causes or categories. For example, Ben & Jerry’s (the ice cream company), created as a B Corp, adheres to high social & environmental performance standards, accountability, and transparency. Similarly, TOMS Shoes donates one pair of shoes for every pair purchased—helping millions across several countries since 2006.
When choosing your food delivery business model (and developing your identity), consider the legacy you want to leave behind.
- Is there any cause that needs support?
- Is there a category you feel needs championing?
- What can your brand do to make a difference in people’s lives?
Whatever you choose, remember that your identity impacts every aspect of your food delivery business model. So before getting started with anything else, take time to define who you are—it will save time down the road.
Decide What to Sell
To create a food delivery app, you must decide what to sell. This may seem like a no-brainer, but there are actually a lot of factors to consider when choosing what food to sell. For example, you need to consider what type of food is popular in your area, what type of food is easy to transport, and what type will appeal to your target market.
Once you’ve decided what to sell, you need to figure out how to get it to your customers. This means figuring out the logistics of food delivery, such as finding a reliable supplier and developing a system for packaging and delivering the food. You also need to ensure that your food is fresh and of high quality so that your customers will keep coming back for more.
Partnering with restaurants is one of the most crucial parts of starting any food delivery business. Restaurants, for their part, want to grow their customer base and gain access to additional delivery services without doing much.
Marketing a food delivery service is challenging. Therefore, partnering with restaurants that already have customers and a system for ordering food can significantly help you.
Also, restaurant partnerships are vital to developing your customer base, but that’s time-consuming. You may waste valuable time driving around town delivering food or collecting money from unreliable customers if you aren’t careful while establishing restaurant partners.
Set Up Shop
The first question is whether or not you should set up a shop. Though running a physical shop requires more upfront costs, it creates a tangible presence for customers who prefer visiting a restaurant over an app or website.
If you decide to set up a shop, choose a convenient location from a business point of view before starting a food delivery business. Here are a couple of other good-to-know points:
- An average fast-food restaurant has 2,400 square feet (220 square meters) of space, while sit-down restaurants require roughly 5,000 square feet (465 square meters).
- Decide the type of cuisine you want to serve: if it involves cooking on-site or heating up pre-cooked, then more space is needed for storage and preparation.
- Since most food delivery businesses offer carryout service only, consider items like packaged snacks, beverages, and meals that don’t require refrigeration or reheating.
Another factor when deciding what products to sell at your store is proximity. If people have access to other stores selling similar items nearby, they might skip visiting yours.
Determine Costs and Structure of Operations
How do you decide the costs and the structure of setting up a food delivery business? In our research, we’ve seen estimates of between $6,000 and $50,000 for creating an app.
Using an already popular third-party app like UberEats or Postmates can significantly reduce your startup costs. What’s important is getting customers on board—the more people who download your app, use it, and order from restaurant partners, the more valuable your business becomes.
When structuring your operation as a startup, you should consider all aspects of food delivery: vehicles, staff pay/benefits/training requirements, kitchen safety compliance rules for employees who prepare food (mainly if you deliver hot meals), etc.
Develop a Marketing Strategy
Before you even start thinking about designing your food delivery app, you need to have a clear marketing strategy in place. This will help you determine your target audience, what kind of message you need to use, and what platforms will work best for promoting your app. To develop a successful marketing strategy for your food delivery app, start by answering the following questions:
- Who is your target audience?
- What are their needs and wants?
- What are your key marketing messages?
- What platforms will you use to reach your target audience?
- What kind of budget do you have for marketing?
Once you have answers to these questions, you can start developing your marketing strategy. If you need help getting started, plenty of resources are available online, including templates and examples of successful marketing plans.
Develop Mobile App
After you have spotted the challenges that may occur, devise a plan to tackle them, market your food delivery startup, and arrange funds – hire an independent mobile app developer or outsource the task to a company. Here are the points you should remember while hiring app developers for your food delivery business model:
- Check references and get quotes from at least a few mobile app development companies before finalizing one.
- Outline what you want in your app and include as much information as possible for your developer to create something that fits your needs.
- Approach a mobile app development company that offers consulting services if you are occupied with other tasks.
Developing a mobile app may be the most expensive part of your business setup after setting up a shop. Ensure you leave no stone unturned to make your food delivery venture successful.
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Launch Your App!
Once you’ve developed your app and integrated it with food delivery service providers in your city, the next step is to launch your food delivery app.
There are different ways to launch your app:
- Market directly to restaurants
- Approach relevant local events and sell at their event
- Find an existing online food ordering platform that could use additional services like yours
Launching an app is just the beginning. You also need efficient customer support, other essential operations, and legal guidance on contracts and licensing.
To launch your food delivery app successfully, provide value beyond facilitating orders between customers and restaurants. For example, you can offer real-time traffic updates via live maps integration or suggest interesting local dishes based on where users are located.
It’s also helpful to consider integrating loyalty programs or coupons into your app and credit card processing for quicker transactions. While some restaurant owners may be hesitant to invest in technology solutions when they already rely on third parties such as GrubHub and Seamless, others will see benefits from leveraging technology available through startups.
When you’re starting a business, it can be conducive to outlining your plan.
A business model gives you an overview of how your startup grows, what customers it serves, and other essential details. When building a food delivery app, businesses will want to go with a food delivery business model that defines how they operate their service and answer questions like who is their customer base and how they’ll reach them. How do they intend to get food from restaurants to customers?
Also, as technology influences the online food delivery industry, we recommend you choose an established mobile app development company to meet your consumers’ customized demands and changing preferences.
Frequently Asked Questions
Q1- What is the future of the food delivery industry?
The future of the food delivery industry looks promising, with continued growth in both the number of companies offering delivery services and the demand from customers for convenient food options. As more restaurants offer delivery and mobile ordering becomes more popular, the food delivery industry is expected to grow.
There are a few key trends shaping the future of this industry. The industry is fragmented, with several players vying for market share. But eventually, a few big players will emerge as the clear winners. Some mergers and acquisitions may happen between companies to gain scale and market share.
Q2- How does a food delivery business make money?
Food delivery businesses charge delivery fees. Customers who order from a restaurant pay a delivery fee in addition to the cost of their meal. This fee usually goes to the food delivery business, not the restaurant.
Food delivery businesses make money through commission fees as well. Customers who order food from a restaurant take a percentage of the total bill as a commission. This fee helps cover the business’s costs, such as paying drivers and delivering the food to customers’ homes or offices.
Finally, some food delivery businesses make money through advertising revenues. They may sell advertising space on their website or app to restaurants, food manufacturers, or other businesses. This is a great way to generate additional income and help promote businesses using the food delivery service.
Q3- What are some challenges that a food delivery business may face?
Some common challenges that a food delivery business may face include:
- Competition from other food delivery businesses and online ordering platforms
- The need for a large fleet of delivery vehicles
- High labor costs associated with hiring drivers and managing orders
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