How To Start a Food Delivery Business? [7 Easy Steps + Business Models]

What if I tell you that the food delivery services market size is expected to grow at a CAGR rate of 15.4% during the forecast period 2014-2025? It will be a huge market. Isn’t it?

Food Delivery Survey

Source: Grandviewresearch

With such a high growth rate, you must be inspired to start your own food delivery business. But you need to face many challenges like analyzing market situations, startup & operational costs, planning for the food menu and service offerings, performing legal procedures, and even building marketing strategies.

Quite difficult, right? To make it easy for you, we have come up with an article on how to start a food delivery business from scratch.

Different Types of Food Delivery Businesses

A food delivery business involves delivering food to customers. The customers generally place an order either through mobile apps, websites, or even telephone. It involves simple steps:

  • The customer makes an order from the system.
  • The system transfers that order to stores, restaurants, or even third-party applications that prepare food.
  • The delivery boy picks the order from the restaurant and delivers it to the customers.

Restaurant delivery services and meal delivery services are the two types of food delivery services.

  • A restaurant delivery service makes money by charging a commission to the restaurants it works with and charging customers a service/delivery fee.
  • A meal delivery service entails a chef or cook, often working from their home or a rented commercial kitchen, delivering pre-made meals or home meal prep ingredients to homes or many businesses.
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7 Easy Steps To Start a Food Delivery Business

To start a food delivery business, you need to take care of the following steps.

Steps to Start a Food Delivery Business
  1. Research Your Target Market

    Before starting your own food delivery business, you must ask yourself: For whom you are starting your business? The customers who are most likely to buy what you’re selling will be your target market. Generally, there are three familiar target audiences involved in the food delivery business.

    • College students and young adults: The active social and fast-paced lives of college students and young adults, they don’t have time to think about what they will have for lunch or dinner. So, this generation will be a good target audience.
    • Parents: Busy parents and families are target audiences. They are overwhelmed to deal with busy schedules and plan for a meal at the end of the day. It will save them time to visit the grocery store and have more time to spend with their kids.
    • Working professionals: Working professionals, particularly men, are increasingly turning to meal kit delivery services. Working professionals are often busy, but having a meal kit delivery service takes the guesswork of planning and making dinner. What could be better after a long day at the office?

    Along with that, you will have more potential customers in your business by having a good business name, your marketing strategy, and the meals that you offer. 

    Once you know your target audience, the chance of business success will reach another level.

  2. Financial Planning For Your Food Delivery Business

    The next thing that you need to concentrate on is having good funding for starting your new food delivery business. Initially, it would help if you had to predict overall startup costs. You need to spend many upfront costs just before starting it. Some of them are mentioned below:

    A workspace
    • Supports offline navigation
    • Augmented Reality combined with Street View
    • AI-powered virtual assistant
    Technology & infrastructure costs
    • You have to include the cost to purchase a computer, phone system, internet access, and possibly a printer or scanner.
    • You’ll need to purchase a table, kitchen materials, and some cooking items.
    Business license and insurance
    • You’ll need to consider the cost to purchase general liability insurance and a license for your business.
    • You have to buy commercial auto insurance for your delivery vehicles.
    Marketing materials and website
    • To promote your business, you’ll require printed napkins, cutlery, and other ways to provide seamless customer satisfaction.
    • You have to consider the costs of purchasing a paid subscription to social media and a website domain.
    • You also have to consider other tactics like flyers and advertising.
    Business vehicle
    • In your business, you have to consider the transportation costs like vehicle maintenance.
    • The cost for food service bags and food trays designed to maintain freshness and temperature.

    Considering all the factors discussed above, we can say that the startup cost to start a food delivery business can range from $3,000 to $25,000.

  3. Create a Business Plan

    For starting a new food delivery business, having proper planning is of utmost importance. A business plan defines a path to your business success.

    Your food delivery business plan must have information on a target audience, revenue figures, operational cost projections, overhead costs, and even a marketing strategy. In addition, you should describe the target audience’s specifics in your business strategy, especially if you need to target specific customers.

    What are the essential metrics that you must include in your business plan?

    • The complete information of your business (Executive summary and business description).
    • Analyzing market situations and making your business ready to fit into the local economy.
    • Describe how your business is set up, whether you’re the only proprietor or fall into the franchise.
    • Describe the services you’ll provide.
    • Describe how you plan to advertise your services and to whom you plan to market them.
  4. Plan Your Food Menu and Service Offerings

    Once you have identified your target market, you have to make a selection for your food menu.

    One of the best recommendations is to opt for delivery-friendly menus that can fit all your target audiences like busy working moms/dads, seniors, disabled folks, businesses for meetings, and individuals who hate going out to restaurants/stores. You can even create a food menu by including quick meals, easy snacks, lunch, dinner for college students.

    You have to first analyze and consult with local restaurants to see what services they are offering. It will give your overall idea about the services that they lack and you can include in your business.

    If you plan to partner with local restaurants, strategically approach them with your market research and business plan.

  5. Perform Legal Formalities 

    The most important thing you need to perform is to operate your food delivery business legally, and for that, you have to follow the steps mentioned below:

    Form a legal business entity: First of all, you have to decide your business structure. It helps you to protect your assets. You have an option to select any of the following business entities as per your business regulatory requirements:

    • Sole proprietorship: You are the sole business operator and have complete authority over your company’s assets, liabilities, and other management.
    • Partnership: You have the option of forming a strong partnership with another company in the same industry.
    • Corporation: This legal entity is reserved for those with large-scale and well-established businesses. Even in this structure, there are taxable employees.
    • Limited Liability Company (LLC): You can quickly reap the benefits of limited liability by forming an LLC. It means that your business qualifies for tax breaks and exemptions.

    Nowadays, many food delivery businesses are adopting either LLC or a Corporation business type.

    Register for taxes: Taxation is important for your food delivery business. Depending on the structure of your business and service offering, you have to apply for an employer identification number. Check your state and federal tax requirements before opening your doors to ensure that you are registered.

    Open a business bank account: Remember that your personal and business accounts must be separate. By having a business account, you become entirely protected from your personal assets, and it becomes easy for you to file your federal taxes. 

    Get food delivery business license & insurance: Find small business insurance coverage to protect yourself from liability risks and it helps you to reduce expenses.

  6. Provide Faster Deliveries To Keep Your Customers Happy

    The primary goal of any food delivery business owner is to deliver the food packages to the customers on time. And for that, there must be a faster delivery process.

    Nowadays, the demand for same-day delivery is increasing day by day. So, you have to prioritize food deliveries so that customers opting for same-day delivery are scheduled first, then other deliveries on-route are added to the run. 

    To speed up the entire delivery process, you must adopt route optimization software that makes it easy for the delivery driver to take the road trip. Upper Route Planner is one such routing software that supports map-based route optimization and helps delivery drivers deliver more orders in less time. In addition, you have an option to set multiple stops on the driver’s delivery route and support proof of delivery on completion of delivery.

  7. Build Budget-Friendly Marketing Strategies For Your Food Delivery Business

    Now, you are ready to make your food delivery business and services online to the world. One of the most incredible places where you can advertise your business is getting online.

    Nowadays, digital marketing is the platform where you can advertise your business in many ways like brand awareness, leads, search traffic and exposure, social media platforms, and sales. Moreover, it allows you to get to know your audience personally, which may help you build brand loyalty.

    • Create a professional business website.
    • Perform search engine optimization (SEO) to get more customers by using the business website and sharing your business information with Facebook and Instagram accounts.
    • Word-of-mouth allows you to talk with your friends, neighbors, and even perform door-to-door advertisements to share your service details.
    • Using Professional business cards, flyers, signs, or newspaper advertisements.

    These are the standard steps that you need to follow to start your food delivery business from zero.

Plan quickly, deliver faster, delight customers and get home early.

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Working of Online Food Delivery Business

Here’s a quick breakdown of how things work in the online food delivery business:

Working Of Online Food Delivery Business
  • The customers will have to first register to your food delivery company portal.
  • On completion of the registration process, the customers will see the list of nearby restaurants.
  • Now, the customers will have to select the restaurants based on analysis done for restaurant profiles and customer reviews.
  • The customer places an order and is sent to the restaurant owners by looking at the food menu.
  • The restaurant will start preparing the food, and once it is ready, they’ll send an alert notification using a mobile application to the customer and delivery personnel.
  • The delivery personnel will immediately start the trip to collect the food and then to the customer’s location for delivery.
  • Customers pay the amount digitally after receiving the food package, using digital wallets, and even card-based payments.
  • Finally, they hosted the review or feedback about the purchasing experience in the food ordering app itself.

Types of Food Delivery Business Model 

In general, there are three types of food delivery models on the market. Let us go through them all one by one.

The Order Only Model
  • Through your online delivery platform, you’ll act as a link between users and local restaurants.
  • You will facilitate the users and restaurants to connect to place and deliver orders.
  • Restaurants can easily reach out to a large audience.
  • Customers can quickly place an order from their favorite restaurant.
The Order & Delivery Model
  • This model easily handles restaurants, customers, and delivery.
  • It is the common marketplace used by many food delivery businesses.
  • Customers will have to register to the platform, and they are not concerned with the delivery.
  • Restaurants will only be responsible for delivering food to the customers.
The Fully Integrated Model
  • It’s a complete meal delivery business plan.
  • Here, you need to take care of everything, from cooking to delivery.
  • You have an option to cook the meal at your place or can hire a chef for the same.

We’ve just come across the basic information on these business models. You can refer to the article where we have listed the business models of the food delivery business in detail. 

We’ve answered most of the common questions in the next section if you have any questions.

FAQ

If you decide to start a food delivery business, you must be aware of the business risks. Many common delivery service risks can be covered by small business insurance.

  • Third-party injury and medical payments
  • Third-party property damage
  • Personal & advertising injury

Generally, every restaurant is charged as commission for providing the restaurant delivery services. Additionally, most companies include a food delivery service fee, which is paid by the customer.

On average, the profit of restaurant delivery business services is calculated based on location, on-demand food, and overall growth rate. Many expert and busy professionals have reported an annual profit of $25,000 during the first year.

Make Your Food Deliveries Faster With Upper Crew

I hope you are now ready to start your own food delivery business.

You just need to take care of the following aspects:

  • Decide the target market;
  • Offer best food delivery service offerings;
  • Financial management;
  • Food delivery to the customers on time.

Among such factors, you need to concentrate more on providing faster deliveries to your customers. It is made possible by adding multiple stops on the driver’s mobile app, and the good part is that Upper Crew does the same. Upper Crew will help save drivers’ time as it allows them to locate the place easily, spend less time driving, and deliver food to the customers on time.