How to Start an Online Food Delivery Business: Tips and Strategies

• By Arun Andiselvam
• 13-04-2023
• Mobile App Development

Consumer eating habit keeps changed dramatically over the decade. Till a few decades back, food delivery items were restricted to Pizza and burgers. Today, the food delivery business is making remarkable growth and shares a global market with more than $150 billion.

The advent of budget-friendly apps, and tech-enabled driver networks, along with the change in customers’ food expectations has escalated the online food delivery business to new heights. The recent pandemic ad lockdown period has boosted the food delivery business.

The rise in digital technology has reshaped the food delivery market. Convenience is the real gateway for the success of the online food delivery business. Let us take a deep look at statistical reports that narrate the growth of this industry along with its benefits.

This article is going to be an ultimate guide where you will understand more about building an online food delivery business, its supporting revenue models, crucial features, ways of monetizing the platform, and many more in detail.

If you are planning to build an online food delivery business, then it is very essential to know all these basic details. First, we will need to know how profitable and popular is this industry in the global market.

Is the online food delivery business profitable?

Let us analyze some general statistics about the food delivery business that will give you more confidence in getting into the business.

• The total number of online users of food ordering apps is expected to reach 2650 million by the end of 2026 (Statista report).
• Customers spend 3 times more on digital food ordering than they spend while eating in the restaurant (Upserve report).
• China has the largest number of consumers for online food ordering with a spending of $158000 million in 2022 (Statista report).
• 40% of total restaurant sales is achieved through online food ordering systems (Zippia report).
• 63% of consumers have admitted that convenience is the main reason for them to order food online (Upserve report).
• More than 45 million Americans ordered food through the food ordering app in 2020 (SevenRooms report).
• Around 55% of restaurants have stated that they have included food delivery options in their business just to get adapted to the current scenario (FinancesOnline report).
• Cashless payments have increased by more than 240% between 2020 to 2023 and consumers have used QR codes for paying their food delivery bills (FinancesOnline report).
• 75% of online food orders are made from smartphones and have touched $38 billion in 2020. (HotelTechReport).
• By 2030, Ghost Kitchen is expected to witness tremendous growth and will reach a trillion-dollar business market (Euromonitor report).

Benefits of starting an online food delivery business

Hope all the above-mentioned statistics are quite impressive and you may have a clear vision of starting the online food delivery business and getting assured and better ROI. In addition to the stats, it will be more motivating to understand the benefits of online food delivery systems.

• Increase in sales – more than 21% of consumers prefer ordering food online to visiting the restaurant and dining. This shows that by having a perfect and user-friendly food-ordering app, you can get more sales orders that will simultaneously increase your revenue.
• Better customer and order management – with an effective admin panel, users can manage their food delivery orders in a hassle-free way. With prompt delivery, users can satisfy customers and can gain credibility.
• Reach more audience – by having an excellent marketing strategy, you can reach your target audience easily. More marketing and promotion opportunities are gained through online food delivery platforms.
• Offer personalized services – having an efficient food ordering app, you can collect customer data and can analyze them to know their preferences. By knowing their interest, you can recommend food items that will make them feel more comfortable in ordering food with your app.
• Reduces manual food order errors - whenever an error occurs while taking food orders, it will lead to food wastage. Also, your reputation gets spoiled and you may get negative feedback from your customers. But by having a reliable online food delivery app, you can easily avoid these human errors as most tasks are automated through the platform.
• Advanced analytics and insights – online food ordering platform can store all user data and order details. You can get reports on the number of orders, the amount earned, delivered orders, canceled orders, and many more. This will let you know how well your online food delivery business is performing.
• Better customer retention – the online food delivery platform can support owners by offering special discounts and coupons that will facilitate customers to buy food at the best price. When more offers and discounts along with genuine loyalty programs are provided, this will impress your customers and will make them stay with your platform.

Tips and strategies to start an online food delivery business

You should be more eager to get to this session. Here we will guide you with crucial tips that will help you to build your dream online food delivery business. Have a close look at all steps and build a flawless food delivery business.

1. Understand your market demand

You may be curious to start a food delivery business as you have noted that this business has a brighter future scope and is expected to reach $153 billion by the end of 2024. But the fact is food delivery business has low-margin profit and also the market competition is high. To overcome this challenge you need to have a perfect market understanding.

Tips to understanding the market

• Know about your competitors. As you are new to this business, there are already several food delivery platforms available in the market.
• Search for partnerships and start your delivery services with any of the partners. Here you may need to pay a commission on each delivery but still, this is a good option to build your business.
• Identify the challenges of running an online food delivery business and get to know its solution. This will make you strong in your business and will help you to beat the competition easily.

2. Identify your target audience

For any business, focus the right audience is the basic aspect and if you fail to address your audience properly you may lose your market. Every year, more than $37 billion is wasted on spending ads that do not cover the target audience. To make use of your marketing expenses, first, you need to identify who is your target audience for your online food delivery business.

Tips to identify your target audience

• Conduct extensive market research and know more about the food delivery industry trends.
• Creating personas will help you to segment your audience by general demographics, buying behaviors, and needs.
• Utilize Google Analytics and find out more about the visitors who visit your food delivery platform. With the available data, you can take reports gender-wise, age-wise, preference-wise, and many more.

3. Cost estimation

This is the most crucial part that any entrepreneur needs to pay attention to. The entire business relies on the spending you make and on the investment you do. The start-up cost for building an online food delivery business may vary according to the feature requirement and many other aspects. You need to identify each expense that is involved in the development process and plan your budget accordingly.

Common expenses that are to be considered in advance

• Website or mobile app development cost is the main expense that should be calculated before starting the food delivery business.
• If you are a startup then it is recommended to go with any reliable clone script that is very cost-effective.
• Additional software purchases may be needed to run the food delivery business. You may need a POS for collecting online payments, A GPS tracking app to offer real-time tracking for customers. You may either need to purchase the software or go for a subscription.
• As you are starting a delivery business, you need to plan your logistic costs. Initially, you can partner with logistic providers and once you grow your business you can plan about buying your vehicle for delivery.
• Marketing and promotional expenses are to be planned. You need to choose the channel through which you are going to promote your brand. It can be offline or online, paid or free ads, and many more.

4. Hold proper license

When you are involved with a food delivery business you need to get a proper license. Without a license, it is not possible to get into this industry. Check with your country’s laws and get to know about the licensing procedure. Go through the procedure and get the license on time. This will support you in having a legal food delivery business.

Mandatory license for food delivery business in India

• A shop act license is needed for running a fin-dinning restaurant, food on wheels, or even online food delivery services. You need to apply for this license within 30 days of business commencement.
• A health trade license is another license you need to get if your product or services have a direct impact on consumers’ health.
• FSSAI license is very crucial as it assures the safety and quality of food that is being delivered to the customer.
• Trademark registration is compulsory just to protect your logo and brand identity. Being in the eCommerce industry you need to hold Trademark registration.
• Any eCommerce business needs to get GST registration irrespective of their annual turnover.

5. Build a perfect Food delivery website or application

The entire online food delivery business relies on the platform you are going to use. This will determine your success rate in the market. You need to keep in mind that you are not the early bird in this business and more competitors have more powerful customer-centric platforms and you are going to compete with them. Have a perfect platform or an application that will make your food delivery business dream come true.

Tips to build the right food delivery platform

• Make sure you build a mobile responsive platform as 75% of consumers use their smartphones for ordering food.
• Have a simple user interface as it can attract more visitors to your platform and also retains them easily.
• Integrate with secured payment gateways that will let customers confidently transfer payment through the app.
• Build the platform with all essential features (as mentioned below) and make it more user-friendly.

6. Promote your service

Now you are all set with the elements that are needed to start your online food delivery business. The next process is launching the platform or the app and promoting them to reach your audience. Hire a reliable hosting service provider and deploy your platform and go live. Just being available online will not going to get you business.

Tips to market your service

• Make use of social media channels where all your target audience is actively present. Use paid campaigns and reach your audience easily.
• You can also go for Google Ads which will let your platform be listed on top of the search engine result page and you may get visitors instantly.
• Search engines optimize your platform and work more to get organic traffic to your platform.
• You can also use other digital marketing strategies like affiliate marketing, content marketing, social media marketing, and many more to attract more audiences.

Essential features of an online food delivery app

All your competitors are having a food delivery app. You need to be unique to stay ahead of your competitors. This can be achieved only by offering unique and advanced features in your platform. Let us check out the cool features that are mandatory for your online food delivery business.

Easy platform setup for admin

• In-built themes and layout – this is very essential to beautify your platform and you can have a theme that will suit your business.
• No-code knowledge is needed – the admin should be able to manage the platform on his own without any technical knowledge.
• Multi-lingual support – if you are aiming global audience, your platform should support multiple languages and also multiple currencies.

Searching and listings

• Advanced search – this feature will simplify the searching part for any consumer as they can easily spot the food item with just a few clicks.
• Geo-fencing – customers should be able to view their nearby restaurants as they may seek fast delivery. Just by letting them know their location, the platform should be able to list the nearby restaurants.
• Filtering searches – customers should be able to filter their search by filtering areas, types of restaurants, prices, and many more.
• Ratings and reviews – customers should be allowed to share their opinion and give their feedback through the platform.
• Save favorite restaurant- customers may like any particular restaurant’s food and they should be allowed to bookmark that restaurant for future ordering.

Restaurant management

• Categorize the food items – restaurants that are members of the platform should be able to segment their food which will let customers find them easily.
• Catalog management – multiple food items can be served in a restaurant and they need to arrange their catalog accordingly.
• Provide food recommendations – while ordering any particular food the platform should offer some add-ons that will go well with the ordered food. This will enhance the user experience with the platform.
• Order scheduling – this is one of the crucial features that have to be in your platform that will let restaurants handle all orders without confusion.
• Inventory management – restaurants always need to manage their inventory so that they will never run out of stock while preparing the ordered food item. The platform needs to provide a better inventory management system.

Delivery management

• Real-time tracking – customers and also the restaurant should be able to track their food orders in real time. This is an essential feature in an online food delivery system.
• Push notification – periodic updates need to be given to customers through the push notification feature. This will let customers be informed of all updates that happen within the platform.
• Route optimization – this feature will let the driver optimize the route and will make multiple deliveries possible and also supports faster delivery.
• Delivery allocation – the platform should be able to allocate delivery partners for orders automatically without manual intervention. This will increase productivity and also you can have a flawless delivery process.

Marketing and promotion

• SEO-friendly – while developing the food ordering app or platform, you need to be assured that it is SEO-friendly. This will help you to get organic page ranking and organic visitors to your platform.
• Social logins and sharing – customers should be allowed to log in through their social media account credentials and should be able to share their experience on their social page. This will promote your brand without spending much.
• Discounts and coupons – this feature will help you to boost your sales and revenue as it will attract your customers to buy more using coupons and discounts.
• Loyalty points – this has become a trendy marketing strategy that will help you in retaining your customers. On each purchase, you can reward your customers through loyalty points and later they can use those points and can order food at less price.
• Promotional banners – your platform should have space to place promotional banners that will be visible to all your visitors. This will help them to know any new offers or events that your platform is running currently.

Payments and Checkouts

• Multiple payment gateways – the platform should be integrated with multiple and secured payment gateways that will let customers pay through the platform.
• Multiple delivery modes – home delivery, takeaways, and many delivery modes should be supported.
• Cancellation and refund – customers should be allowed to cancel their food orders and should be able to get their refunds.

Customer support

Multiple communication channels – customers should be able to communicate with the restaurant owners through multiple channels like live chat, emails, messengers, and many more. This will help customers to communicate what they want to the restaurant and will also reduce cancellation of orders.

How to monetize the food delivery business?

We all want to run a business mainly to make a profit and earn well. Likewise while planning to start an online food delivery business, you would have the same thought of making a good profit through the business. We will let you know the possible ways of monetizing your food delivery platform and assure you to make good money.

Delivery charges

On each order, you can charge delivery charges to your customers. You can calculate the cost by calculating the distance between the restaurant and the customer’s delivery point. It is a proven successful revenue channel. One of the leading delivery companies, Deliveroo has earned £129 million per year just by charging £2.50 on each order.

Commission percentage

This is one of the common revenue models that has been quite successful for several decades. You can enter a contract with the restaurant and can charge a commission on each order that the restaurant gets through your platform. The commission can be set according to the value of the order. Leading food delivery app, JustEats charges commission on restaurants and today the company serves more than 15 countries and holds a capital of $3.5 billion.

Advertising

You can let restaurants have their ads on your platform. You can charge restaurants for placing their ads. This is a good source of income and restaurants also will be interested to place their ads on your platform as they will get more orders through your platform. Swiggy has tried this method and has succeeded in its strategy. For featuring the restaurant’s food items, the company charges the restaurant additionally.

White-labeling

This revenue model is new to the market and has become trendy nowadays. You can get products from restaurants and can sell them to customers under your brand name. Many ghost kitchens are entering the market and this will let them find their customers easily. You and the restaurant will be mutually benefited. Swiggy and Uber Eats have already set an example by white-labeling and selling brands on their brand name.

Daily deals

This is also a common revenue source that is quite getting popular in recent days. Just tie up with the restaurants and offer deals on a particular dish and you can promote that dish on your platform. Restaurants that are tied up with this deal will be featured on your home page and will let customers easily find the dish and order them instantly. You can get the amount on each sale they make.

Peak hours

You can charge customers who order during peak hours. Usually, you will charge a delivery charge and if the order is on peak hours then you can levy the delivery charge and get more from your customers. Your customers will understand as they need to get deliveries on time even during peak hours. Uber Eats follows this method and it will limit its menu and also location. If needed then the customer should pay extra.

Conclusion

By analyzing the current market conditions, starting an online food delivery business will be beneficial to any entrepreneur. The returns after a proper marketing strategy are highly guaranteed. All you need is a perfect food delivery website or an application. Find the best on demand app development company and build your platform that will be accepted easily by your audience and start getting orders.

FAQs

1) Is it good to build a food delivery platform from scratch?

It depends on your requirement. If you have enough budget and time you can start building your food delivery platform from scratch, else you can buy a readymade app that will have the same features. Readymade food delivery clone scripts can be more cost-effective and time-saving as you can launch them instantly.

2) How long it will take to develop a food delivery app?

Normally it will take 4 to 8 months to develop a food delivery app from scratch. If you cannot spare that much time you can go for food delivery clone apps that will just a few days to launch the platform.

3) How much will it cost to build an online food delivery platform?

The cost estimation cannot randomly be given as multiple aspects influence the pricing. You need to share your requirement in detail. You need to be more specific on the features you need to have, the number of users who planned, the type of hosting you prefer, and many more.