Best Food Delivery Business Model

The on-demand food delivery business is on boom in the current COVID 19 crisis. As people fear to step out of their homes, they order the food online. And this gave rise to online food delivery startups. The fact is the food industry is an evergreen business which will remain till humans are present on the earth. Here is a well-known quote for the same.

“Food is a necessary component to life. People can live without Renoir, Mozart, Gaudi, Beckett, but they cannot live without food.” – Grant Achatz

Starting an online delivery business with the perfect food delivery business model can prove to be successful in this crisis. To give you a better idea, we have mentioned a few statistics on the online food ordering business model.

A Few Important Stats on Food Delivery Business Model

  • 60% of US consumers order food online at least twice a week.
  • 57% of millennials want to get food delivered home so they can watch movies and TV shows at home.
  • In COVID 19 crisis, the food delivery market is expected to reach $154.3 billion at 5% CAGR in 2023.
  • 60% of restaurants have agreed to the fact that online order and the delivery thing has resulted in incremental sales.
  • Delivery sales are resulting in the rise of annual average by 20%.
  • Looking at the corona crisis, here is a percentage graph which shows the people planning to increase their food delivery services.

Important Stats on Food Delivery Business Model

So, are you one of those who is looking for a perfect online food delivery business model? In this article, we will be discussing a few types of food delivery business models and their challenges. Let’s proceed.

Types of Food Delivery Business Model

Basically, there are three types of food delivery models present in the market. Let us go through all of them one by one.

1. The Order Only Model

Grubhub, JustEast, and more follow this type of food delivery business plan. In this type of food delivery business ideas, you will act as a bridge between the users and the local restaurants through your online platform. You will facilitate the users and restaurants to connect with each other to place and deliver orders. The main aim of such a food delivery business model is to let the restaurants reach out to the larger audience base. On the other hand, let customers easily order food from their favourite restaurant.

The two-phase of this food app business model works like,

For Order Allocations:

  • Customers can place the order from the website or applications.
  • Restaurants will receive the order through fax, mail or mobile notification.
  • They will confirm the order and send a message to the customers.
  • In some cases, the orders are directly printed into the kitchen with the help of the POS system.

For Delivery:

  • A restaurant delivery boy delivers the order at the customer’s doorstep.
  • In case of any issues, a customer mobile number is made available to the delivery boy.

Order Only Model

Advantage of Order Only Food Delivery Model

In such a type of business model, you being the owner, do not have to face any issues regarding anything related to the food delivery. You can charge flat commission fees from the restaurants on every order placed.

Challenges of Order Only Model

In the beginning, attracting eateries to your platform might be a challenging thing with this delivery business opportunity. Therefore, you need to research what exactly you need to offer to eateries. You need to work more on the marketing of your online platform in order to make your business successful. And the fact is for this food delivery model; your success highly depends on the services that restaurants are giving to its customers.

2. The Order & Delivery Model

This food delivery business model handles restaurants, customers, and delivery. It is one of the most common marketplace solutions used by businesses. Most of the eateries would register themselves with this type of food delivery platforms as they don’t need to deal with the delivery thing. Some of the most popular food delivery apps for this model are UberEats, DoorDash, Zomato, etc. To operate this type of food delivery business, you need more resources than the first one. The working of order and delivery business model goes like,

For Order Allocations:

  • Restaurants can register on your online platform.
  • Customers can place the order from the restaurant through your platform.
  • The orders are received by the restaurant through website or app notifications.
  • The customers can either pay online or cash on delivery as per their choice.

For Delivery:

  • The delivery boy nearest to the restaurant will get the notification to receive the order and deliver it to the customer’s place.
  • A delivery fee will be applicable to the customers based on the distance.
  • Customers can even add instructions for the delivery like don’t ring the doorbell, place an order outside, and more.

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Order & Delivery Model

Advantage of Order and Delivery Model

For this food delivery business model, your success will rely upon user experience that they get from the restaurants and delivery boys. You can charge a flat commission to the restaurants on every order and even charge a delivery fee to the customers if the order is below a certain amount or far from the customer’s delivery location. You can provide a flexible and instant delivery to the customers’ by training delivery boys. This will help you to get the higher ratings for your food delivery business. All you need to do here is keep an eye on activities going around your business and work on any issues if found.

Challenges of Order & Delivery Model

The biggest challenge of this food delivery logistics is to deliver the order on time. The delivery time matters for most customers; therefore, you must look into the ways to deliver food on time. And the order delivery time is crucial, especially for the lunch order due to the working time. Another challenge here is to manage all the resources of your business.

3. The Fully Integrated Model

The third food delivery model revolves around the meal delivery startups, which is quite different from the above two. This model is a complete meal delivery business plan to start your own venture. A few examples of such types of meal delivery startup are RocketFood, Extra Plate, Eat Purely, and more. Here everything starting from cooking on delivery should be taken care of by you being the owner. Either you can cook the meal at your place or can hire a chef for the same. This type of prepared meal service usually partners with the chefs. The working of a fully integrated model goes like,

For Order Allocations:

The order allocation is this type of meal delivery business plan that usually occurs in two ways mentioned below.

  • The first one has zero involvement of the admin i.e; the order will be directly notified to the nearest driver.
  • For the second one, there is some involvement of the admin for the order allocation. When a customer places the order, it will first go to the admin panel, and then the admin will allocate it to the nearest driver.

For Delivery:

  • Food delivery here is done by drivers that a company hires.
  • There can be either a scheduled delivery or an instant delivery as per the customers’ requirements.
  • Every driver is given a set of meals to deliver at the customer’s doorsteps.

Advantage of Fully Integrated Model

Advantage of Fully Integrated Model

The main advantage here is you don’t need to rely on the third party for user experience. As in this type of meal delivery startups, everything is operated by your company. If everything goes right with your meal delivery business plan then you can earn huge and enhance your business.

Challenges of Fully Integrated Model

The biggest challenge faced by this food delivery business model is the operational cost. Many meal delivery startups need to shut their doors because of the operational costs. This happened especially with those who tried to cook their own food. One way to save the business from such failure is to try for multiple deliveries at a time and enhance the user experience.

Editor’s Note: Please do not get confused with all three models, as in the first model restaurant have their own delivery boy whereas for the second model restaurant, delivery boy and owner of the business model all three are separate working individuals. That is, the restaurant will get the order, the delivery boy will deliver it and the owner of a business model i.e application owner will get a commission. For the third model, everything will come under the owner, whether it is a restaurant or delivery boy. From cooking food to delivery everything is to be done by the website owner.

Food Delivery Business Model Canvas

Here is a common food delivery business model canvas that you can have a look for your business too. It will give you a better idea for developing your own business canvas model.

Best Food Delivery Business Model Canvas

Which Food Delivery Business Model To Go For?

Building an online food delivery business will help you in the present as well as the future. As we all know about the present COVID 19 crisis and to let businesses survive in this pandemic, going digital is important.

You can choose any of these three food delivery business model as per your needs. All three food delivery service business model comes with its own pros and cons. Make deep research on your business and choose the one which suits best for your food delivery startup. If you are looking for more guidance on how to start a food delivery business, then we are here to help you out. Our experts will help you to get the best solutions for starting an online food business. So, let’s connect!