In today’s guide, we’re going to show you how to start a successful food delivery business from scratch, step by step.
This is the same process our clients have used to:
Get a food delivery off the ground.
Increase sales and order volumes.
Raise the value of their business.
(While lowering operational costs.)
So if you want to build a successful food delivery business, you’ll love the actionable steps in this guide.
Let’s get started.
You may be thinking:
Is it worth it to start a food delivery business?
That’s why before the first step, we want to remove any doubt from your mind.
In this part, we’ll answer any questions you might have.
And to show you the actual value of food delivery in 2021.
Here’s what you need to know:
Food delivery refers to food pickup and delivery services of prepared meals to consumers from diners, bars, restaurants, kitchens, catering, and other meal prep businesses.
Typically, customers used to do this over the phone, by calling or texting restaurants.
Today, online food delivery is booming. It’s common for people to place orders using apps, websites, and dedicated food delivery platforms.
Traditionally food delivery was seen as a non-essential service. But over the past few years, food delivery services have become an integral part of the food and beverage industry.
Both as B2B and B2C services, especially following the impact of COVID-19 on last-mile delivery.
YES! It absolutely is. And even more so in the last couple of years.
In fact, 1,231.9 million people were using food delivery services in 2020.
And in 2025, forecasts suggest that the number of platform-to-consumer and restaurant-to-consumer deliveries will reach 2,114.3 million each.
Three food delivery trends contribute greatly to this boom of in the industry:
Ordering food online combines easy access to delicious meals with the convenience of eating them at home or in the office.
This has given rise to new ways of ordering food, such as using food delivery apps, dedicated platforms, and white glove delivery.
And this trend will only continue as the world gets more connected and new users gain access to the Internet.
In 2020, there were an estimated 4 billion internet users in the world. Of those, 3 billion live in developing countries. That also means there are 3 billion people who are yet to become active internet consumers.
As these 6 billion people get connected or gain access to food delivery apps, it’s a matter of when (not if) they’ll start ordering their meals online.
In fact, statistics say that the 18-44 age group (Gen X and Gen Z) are the most frequent online food delivery users. With 81.75% ordering meals online at least once per week.
Head to head, the digitally native Gen Z is already overtaking millennials (63%>50%). And as their purchasing power increases, this number will only grow.
This means that these new consumers will see food delivery services as part of the everyday eating experience.
In the future, as Generation Alpha starts coming of age, restaurants and businesses that don’t offer delivery and online ordering will be quickly left behind.
If you’re unsure about the truth of the previous statistics, here’s a sobering fact:
The number of online food orders and deliveries has tripled during the pandemic.
On average, there has been a rise of 48.3% in food deliveries in Europe and North America in 2020. The biggest jump came from the Netherlands (6%>48%) and Spain (12%>53%).
Most of these users are new. They have either never ordered food online, or they did it in a limited capacity.
The takeaway here is that most, if not all of them, will remain users and continue ordering meals beyond the COVID-19 pandemic.
So if you’re looking to add food delivery to your regular service offer, or build a food delivery startup from scratch, now is the perfect time to do it.
Yes, and no. How easy it is to start a food delivery depends on your ability to build and organize it in line with your budget and business model.
Most people think that a delivery requires you to raise capital to buy vehicles, onboard staff, and invest in tools and equipment. This isn’t the case.
Most food deliveries rely on internal vs. external delivery fleets. So if you lack the resources to build a fleet, you can outsource those services to a 3PL or couriers.
You can also use crowdsourced delivery, and hire freelance drivers or couriers to work on a delivery-by-delivery basis.
In all of these cases, you’ll still need to use driver tracking. This ensures you retain control over the delivery and stay on top of order fulfillment.
This doesn’t mean that you won’t need to onboard people to support your delivery.
If you own a restaurant, it can be difficult to rely on front staff to manage both table bookings and delivery orders.
Finally, you’ll have to make it convenient for customers to order prepared meals from you.
Initially, customers can use phone calls and direct messaging to request deliveries. That’s the easy part.
But at some point, you should make it available for them to order online. (Either via existing food delivery platforms like GrubHub, Doordash, or Uber Eats or through your website.)
Food delivery is a lucrative venture. (Especially if you own an online food delivery business.)
How much money you’ll earn from delivery depends on a lot of factors.
For example, you’ll make more money from delivery in urban areas than in rural settings. You’ll also get more profit if you target businesses rather than residential zones.
But all local and online meal delivery services make money in one of two ways: charging a delivery fee, or offering free delivery.
Charging a delivery fee is pretty straightforward. A customer pays for the delivery service, as well as the cost of the food.
When it comes to free food delivery, it’s a little more complex.
You may think that offering free delivery is a waste of money. It’s a cost, not a way to generate income, right?
Wrong. Allowing customers to order food and delivering it for free is a great way to boost sales. And it doesn’t have to be a burden on your pocket.
You can choose to integrate the cost of delivery into the pricings on your menu. But this can make you less competitive due to the higher prices.
Or you can optimize the delivery and lower your overhead. By raising the stop density on routes and offering only local food delivery, you can reduce the cost of delivering food to your customers.
Mind you, the cost will still be there. But the increase in demand and larger order volumes will more than make up for it.
The story is quite different if you want to start an online food delivery platform. Or use an existing platform to deliver your food to customers instead of you.
Here, online restaurant delivery will charge both you and the customer. And there are several ways food delivery companies like Glovo, Postmates, and others do this:
You pay a fee to the food delivery platform to feature your offer on their app or website, and to deliver your food instead of you. Typically, the more you pay and the more people order from your restaurant, the higher your position on the platform.
The food delivery platform will typically take 20-30% from every meal order. Usually, this means that they’ll put a price limit that allows people to qualify for delivery.
Here, the customer covers the cost of delivery. You relinquish all control over the price to the food platform. It will set the price of delivery and take all the proceeds. In most cases, you’ll also have to pay a fee to get featured on their app.
With this model, the online food ordering platform raises profit from advertising. They can choose to charge you or the customer a delivery fee. But they don’t have to because their main revenue stream comes from ads on their app or website.
Today, there are many different forms of food delivery businesses. They vary from platforms that work with restaurants to fully incorporated businesses where both food production and delivery are kept in-house.
Here are the most common examples of businesses that offer food delivery services:
This refers to all restaurants that both serve food on premis and deliver it to consumers. Think big chains such as McDonald’s, Burger King, Domino’s, and Olive Garden. But also the local restaurant that delivers food to you.
With a restaurant-to-consumer model, customers can order food offline and online by calling, texting, or using websites, apps, or delivery platforms.
In the platform-to-consumer model, customers use dedicated third-party delivery providers to order their food. Think, Uber Eats, Deliveroo, and GrubHub.
The providers only handle orders and delivery. They list restaurants and menus on their food ordering apps or websites.
Consumers use these listings to order meals from restaurants, the restaurants prepare the meals, while the platform’s dedicated delivery fleet brings the food to the consumer.
Typically, the platform gets a 20-30% cut from the order value. Platform-to-consumer food delivery is the leading business model in the industry today.
Dark kitchens, also known as ghost, cloud, or virtual kitchens, are professional kitchens that make food that is then delivered to customers.
The difference between restaurants and dark kitchens is that they don’t have a physical location where they serve food to restaurants. But it isn’t a typical takeaway either.
Unlike takeaway restaurants, you can only place orders online via the company website or food delivery app.
Once a customer orders a meal, the company then typically uses outside courier services to bring the food to them.
This is a cheaper food delivery startup model because it doesn’t require a large investment. It has relatively lower overhead and operational costs compared to those of a restaurant.
A full-stack food delivery model means everything is done in-house: cooking the food, developing an app or website, handling orders, and delivering it to customers using an in-house fleet.
The disadvantage of this model is that it requires significant investments to launch the business.
The advantage is that full-stack food delivery businesses usually earn more money, as they control every step of the process.
To start a food delivery business, you’ll need more than your love of preparing great dishes.
You’ll also need to know business strategy: budgeting, marketing, and onboarding. But logistics as well: supply chain management, delivery and route planning, scheduling, and fulfillment.
But that’s why you’re here.
In this part of the article, we’ll show you how to start a food delivery business, step by step.
(Regardless of the food delivery business you want to create.)
So whether you’re just starting out or you want to add delivery as part of your offer, you’ll love the seven actionable steps we outline below.
We’ve already mentioned what type of food delivery there is. So your first step is to choose which one works best for you based on your budget, goals, and the food you serve.
This can be a daunting task, but there are simple steps you can take to make it easier on yourself:
As with any business, you have to start with the products that you’ll sell to consumers. So focus on the food you make first.
If you offer good, tasty food, made from quality ingredients, it will be easier to market your menu, sell it, and deliver it to your customers.
After all, that’s why you’re getting into the food and restaurant business in the first place.
Explore local farms and farmer’s markets, and locally-sourced ingredients. They’ll be the base for everything you’ll cook.
People want to eat healthy these days. And the better quality ingredients, the better your food will taste, and the healthier it will be.
It will also help you establish a supply chain. So when you launch your business, you know exactly where your ingredients will come from.
But don’t lock in your menu just yet. First…
A successful food delivery is a blend of two things: cooking quality meals and finding lucrative business opportunities.
And there are a lot of opportunities for you out there, since the food delivery service market is expected to grow to $154.34 billion by 2023.
Start by researching the local market. This will help you create the menu for your restaurant. And bring together your love for food and a way to generate profit.
Do you want to deliver home cooked meals? Try to focus your delivery on the business district.
Do you want to open a pizzeria? It may be difficult to compete against existing restaurants, if there’s too many of them already in your area.
Are you thinking about cooking fast food? Bring a new cuisine to your neighborhood like TexMex. Or put your own mark on Chinese takeaway.
Try talking to existing restaurants and local couriers, as well. See how much and how often people really order food and use home delivery services.
Focus your research on these five things:
If you already have a restaurant, your target audience should be your existing customers.
If you’re setting up a startup, choose a delivery area where you’ll have the biggest impact.
The menu should reflect your own signature style of cooking, but also the demand and desire of your target audience.
Families and office workers, for example, prefer healthy food options. University students typically want cheaper meals in line with their limited budgets.
Platform-to-consumer (Uber Eats) and restaurant chains (McDonald’s, Dominos) dominate the meal delivery business.
Study their pricing models, delivery menus, and strategies so you can compete with them.
As in retail, it’s enough to co-exist with them to succeed. That’s the secret retailers use to compete with Amazon delivery, for example.
So if you offer healthier meals at a similar price to Big Mac, consumers will pick you over McDonald’s.
Conduct a SWOT analysis (strength, weakness, opportunity, and threat) to compare your business plan with that of your competitors.
That way you can use your strengths to overcome any weaknesses and potential threats. And take advantage of opportunities in the market, whenever they present themselves.
Check out if there are fewer businesses that deliver to a particular area or serve a specific type of cuisine.
It can be a serious challenge to open a pizza delivery business, if there are already five pizzerias in that particular neighbourhood.
But if you can offer delivery services to unattended customers, you can make more profit.
Successful restaurants rely on partnerships.
Be it third-party platforms, local food producers, beverage distributors, or courier companies, establishing partnerships can help you reduce costs in and out of the kitchen.
It can also help you to market your new food delivery business faster. And reach more people with your menu.
The key to defining your business is to stand out from the crowd with your food.
Create a menu people will love, and use your research to find niche opportunities that will help your food delivery business to grow.
Standing out can be as simple as offering lower prices. Something emotionally charged, like an interesting back story that inspires customers. Or a unique service, like sustainability that’s based on green logistics.
Now that you know what kind of food delivery service you want to build, it’s time to formulate a business plan.
Here we’ll focus on three things:
Let’s take a look:
Building an agile delivery relies on four things: structure, people, processes, and technology.
These things form the core of your logistics.
The type of food delivery service you build will determine the size and complexity of your operations.
But to make it work in any scenario, you’ll have to focus on these four essential elements:
Whether you plan to open a restaurant, catering business, or pizza delivery, you’ll need a place to cook the food.
The kitchen is where you prepare food. But it’s also where delivery drivers and couriers will come to pick up ready-to-deliver meals.
For food delivery, the kitchen will serve as a supply depot. So it’s important to choose a good location for your restaurant or kitchen, just like single or multi-depot planning in retail.
The kitchen has to be close to your target audience to minimize transportation costs and improve delivery speed.
The location should also be easily accessible by motorcycle, car or van. So drivers can pick up orders from the kitchen, or drop off ingredients and supplies.
If you’re opening a restaurant, you should also pick an attractive location where customers will want to spend time eating.
And it goes without saying that the kitchen itself should be functional with enough space for the cooking staff.
Once you have an idea for the location of your restaurant or kitchen, you’ll have to map out your delivery area.
According to delivery statistics, only two-thirds of customers (or 66%) don’t want to wait more than 40 minutes for their food to arrive. More than that, and you risk a drop in your rating.
So when mapping out a delivery area don’t cover a territory larger than 3.5 to 5 kilometers.
This is a wide enough area to contain enough potential customers. But small enough to fulfill all orders within that 40-minute margin.
If you want to cover a larger area, consider opening a second kitchen and divide the whole territory into delivery zones.
You have two options when choosing a delivery fleet:
You can choose to build an in-house fleet. Or outsource the delivery service to a third-party provider.
Again, this will depend on the type of food delivery business you want to build. But it will also depend on the amount of capital you have to spend, as well as your logistics experience.
If you’re operating on a limited budget, then it’s best to outsource the delivery to an external fleet.
You still may want to invest in route optimization software. As this enables you to track the fleet in real-time, gain visibility over operations, and view estimated times of arrival (ETAs).
If you have capital on hand, then it’s a good idea to build an internal fleet. This gives you more operational control and can be a good opportunity to brand your new delivery service.
In doing so, you can raise brand awareness through the delivery, especially in the local community.
Reverse logistics and e-commerce returns work well together. But sustainable food delivery services use reverse logistics, as well.
Here, reverse logistics refers to picking up used packaging, reusable food containers, plastic and glass bottles, and other items that can be reused or recycled.
Relying on this sustainable form of delivery can be a great way for your business to stand out with a unique service offer.
But it’s also a way to get extra funding from green government initiatives and recycling.
So, by this part, you understand market dynamics and you’ve planned your delivery logistics.
Now you can proceed - formulate a budget, and do the revenue and demand forecasting.
You should estimate:
Calculate what your revenue should be.
With projected earnings, you will be able to determine risks, when your business will recover expenses, and how much money you can invest.
Calculate all of your expenses – both upfront and those you will have in the first three years of starting the business (cost of supplies, vehicles,..).
Also include payroll expenses, licensing fees, maintenance, and taxes.
When you are starting a new food delivery business, you have to register it with the local authority.
If you have a restaurant you also have food service licenses.
You should check if you need to get any additional licenses for restaurant food delivery.
The next step in the process is purchasing the right equipment.
Take your time when you’re choosing and buying equipment for your business.
Here are a couple of things to consider:
Packaging and presentation of food are really important to customers.
Recyclable or biodegradable packaging could be a good choice since more and more customers prefer eco-friendly packaging.
But, the most important thing when it comes to packaging is that it represents your brand.
Delivery vehicles should be properly equipped.
A routing software will provide you everything you need.
Real-time tracking equipment and driver apps that route optimization software brings to the table will make your delivery business much more efficient.
If you want to be ahead of competitors and they will provide a superior customer experience – you must take advantage of technology.
Route optimization software is what you need.
It’s a must-have in food delivery businesses.
Also, it’s very important to have your own website or mobile app.
As a new business, it’s important to hire and assemble the right delivery team.
This is crucial for any startup, as you’ll be working closely with each employee.
That’s why you should focus on hiring people who share your vision for the company.
Keep in mind that food delivery is a customer-oriented service. So make sure that each individual you hire is friendly, open to learning, and has solid communication skills.
In fact, according to a customer experience survey, a friendly and knowledgeable service is just as important as convenience, and more valued than the price.
Don’t forget that drivers are the only ones customers meet in person.
Make sure you hire drivers with great communication and people skills.
And keep in mind that happy employees that enjoy their work are more productive.
A simple way of knowing whether everything works is to test your food delivery.
Open your food delivery for a week and a limited number of customers.
This will give you a large enough sample to work out any problems in the workflow.
It will also help your delivery teams practice their roles and get to know your system of routing and scheduling deliveries.
Here, the key is to get as much information as you can.
So make sure to collect, measure, and analyze key metrics in delivery logistics, such as the average time and cost per delivery.
For tracking KPIs, you can use delivery management software. The tool has a built-in analytics module that lets you monitor and compare performance automatically and in real-time.
And for the best delivery experience, make sure to collect feedback from customers.
Their input and insight will help you to adjust prices and service features. But also add new food and delivery options your customers may wish to have.
Once you’re confident about the quality of the food and service, it’s time to launch your food delivery business.
To get customers booking orders, you’ll have to get the word out.
Make a big deal out of the launch. Promote it in the local community and among local businesses.
And it doesn’t have to cost you money:
As the word gets out, you’ll start to see more business coming in. And then it’s time to think about expanding your delivery…
As the word about your business travels, the number of meals you prep and deliver will grow. But so will the demand for the food you make. How do you keep up with it?
You expand your operations.
The key to growing your business is optimization. Optimization is how you expand capacity, raise revenue, reinvest it, and scale your delivery.
Running at peak efficiency makes it clear how much money, time, and staff you’ll need to scale and implement new delivery tactics to grow operations.
Whether you’re thinking of opening a catering or meal-prep business, starting a grocery delivery, or offering food delivery from your restaurant, growth can happen fast.
We have everything you need to help scale your delivery.
Here are the nine free guides that will show you exactly what we do to optimize the last mile and dominate delivery logistics.
1. Dominate the last mile with food delivery management software for restaurants
2. Alcohol Delivery: Use these 5 steps to optimize it to perfection
3. Grocery Delivery Software: Everything you wanted to know (and MORE)
5. Last-mile delivery challenges and the secret to overcoming them
6. Transportation Costs: Full breakdown of delivery expenses
7. Answered: What customers value in last-mile delivery?
8. Route Optimization Using Google Maps: Is it that good for your business?
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