How to Start a Successful Food Delivery Business: A Beginner’s Guide

The pandemic has brought about a significant change in customers’ food ordering habits. Most people see online food delivery services as an easy way to get restaurant-quality meals delivered right to their doorstep.

Do you know the online food delivery market is forecast to generate revenues reaching $1.85 trillion by 2029?

That’s more than a convincing stat, right? So, if you are looking to start a food delivery business, you are in luck, as there is a huge growth opportunity in this industry.

However, starting a food delivery service is not as easy as it looks, especially in today’s market ruled by big players like UberEats and DoorDash. 

There’s a lot on hand to manage – food quality, operational expenses, delivery execution, and customers’ expectations. 

Worry not, as we’ve got this blog that gives you a step-by-step guide on how to start a food delivery business.

So, stay tuned.

Different Types of Food Delivery Businesses

A food delivery business involves delivering food to customers. Local connections can help create a competitive advantage with more appealing commissions. Customers generally place an order either through mobile applications, websites, or even phone calls.

There are two main types of food delivery services: restaurant delivery and meal delivery.

Restaurant delivery service: You can partner with nearby restaurants and charge a commission fee. When you deliver their food to customers, you can charge customers a delivery service fee.

Meal delivery service: You are generally the chef or cook in this type of service. You can work from home or rent a commercial kitchen to prepare and deliver quality meals or ready-to-cook meal kits to homes or many businesses.

Food delivery business models to consider

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

We’ve just come across the basic information on these food delivery business models.

Let’s dive into steps on how to start your own food delivery business.

9 Steps to Launch Your Own Food Delivery Service

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

Step 1: Create a comprehensive business plan

Before starting your own food delivery company, you must ask yourself: For whom are you starting your business? It is for the customers who are likely to buy what you’re selling, and it will be your target market.

Generally, there are three familiar target audiences involved in the food delivery business.

• College students and young adults: In the socially active 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 the 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 from visiting grocery stores and give them more time to spend with their kids.
• Working professionals: Working professionals are increasingly preferring meal kit delivery services. Working professionals choose meal kit delivery because they are busy and do not require much guesswork for a meal. What could be better after a long day at the office?‌

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

Step 2: Plan your financing and investment

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

Considering all the factors discussed above, we can say that the startup cost to start a food delivery business can range from $15,000 to $25,000.

Step 3: Choose an impactful business name

One of the most crucial steps of the delivery business is choosing the right name for the company. It is one of the ways to grab customers’ attention and promote your food delivery business. 

Also, the company name should be catchy and justify your food delivery services. For instance, Uber Eats has a unique name that signifies that it is a food delivery business name. Uber Eats is a global food delivery business that provides food service to multiple locations. 

Step 4: Establish standard operating procedures

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

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

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

• The complete delivery information of your business (executive summary and business description).
• Analyzing market dynamics and making your business ready to fit into the local food delivery service market.
• Describe how your business is set up, whether you’re the sole proprietor or fall into the franchise.
• Describe the food options, order value, and cost of delivery you will charge.
• Describe how you plan to advertise your food delivery startup and to whom you plan to market

Step 5: Decide your service offerings

Once you have identified your target market, include a design of the menu in your food delivery business plan. Decide what dishes you will be serving, especially your signature dish. Also, consider including basic dishes in your menu.

One of the best recommendations is to opt for delivery-friendly menus that can fit all your target audiences, like busy working professionals, senior citizens, 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, and dinner for college students.

You have to first analyze and consult with local restaurants and other food businesses to see what services they are offering. It will give an overall idea about the services that they lack, and you can include them in your business. Take a look at food delivery trends in the restaurant industry. It will give you some great ideas to have happy customers.

If you plan to have restaurant partners, strategically approach them with your market research and business plan.

Step 6: Ensure legal compliance

The most important thing you need to perform is to operate your food delivery business legally, with proper permits and licenses.  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. A distinct business entity helps you protect your assets and liabilities. You have the 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 food and beverage 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 sales tax breaks and exemptions.

Having a formal business entity helps to simplify paperwork like tax filing and bookkeeping. Nowadays, many food delivery businesses are adopting either LLC or a Corporation business type.

• Register for taxes: Taxation is important for your 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 assets, and it becomes easy for you to file your federal taxes.
• Get a food delivery business license & insurance: Find the type of business insurance coverage to protect yourself from liability risks and help you reduce payroll expenses. In addition, you must check with ‌local and state governments for the necessary food-handling permits.

The insurance costs like general liability insurance may vary based on what is the business strategy and how large is the delivery company you want to start.

Step 7: Set up your delivery logistics

While some customers may want quick deliveries, others may be looking for scheduled meal kit deliveries. So, you must prioritize orders accordingly. Ideally, you must first focus on same-day and express deliveries and then scheduled ones.

Tip: You can also group nearby orders so drivers don’t have to make multiple trips to reach addresses lying in proximity. It saves time and fuel and ensures there are no delays.  Then comes the part of optimizing routes.

It is where you can rely on a route optimization tool like Upper instead of guesswork and manual approaches.  The reason is simple – an advanced software system can create routes based on multiple aspects, including:

• Time windows
• Driver availability  
• Traffic patterns

Plus, you don’t have to worry about manual errors and inaccuracies.  

Another area is choosing between in-house and third-party delivery services. While managing an in-house fleet provides full control over delivery operations and food quality, it can be expensive. It’s because you have to invest in vehicles, drivers, and logistics.

Recommendation: If you can afford to spend some extra bucks to build a brand and offer a premium delivery experience, in-house delivery can be a great choice.

You can also outsource your delivery logistics to 3PL companies to get rid of the headache of managing it all yourself. However, these 3PL may charge high commission fees which may eat into your profits. And you may not have that much control over your delivery times and operations. 

Tip: You can use a hybrid model. In that, you can utilize 3PL services for on-demand orders and in-house logistics for scheduled orders.

Humans have limits, and so do delivery drivers. So, you must set cut-off times every day beyond which you won’t offer same-day delivery. 

Another thing is prioritizing when customers want their order. For that, you should enable them to choose a time slot that lies within your operational hours and cut-off time for same-day deliveries. 

Then comes the dispatching part. The world is moving to automation- and so should you. Look for a tool to create and dispatch routes to drivers on their mobile devices so there is no need for a long paper-based list of addresses. 

The customer is the king, and you must make them feel like one. By keeping them informed on delivery progress through real-time tracking and automated notifications.

It helps in two ways:

• Your customers don’t make calls to know their order statuses. 
• It builds trust and loyalty as customers appreciate your transparency.

Step 8: Market 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 to advertise your food delivery business is ‌on the internet.

Nowadays, digital marketing is the platform where you can advertise your business in many ways including brand awareness, leads, search traffic and exposure, social media accounts, and sales. Moreover, it allows you to get to know your audience‌, 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 or neighbors, and even perform door-to-door advertisements to share your delivery details.
• Use professional business cards, flyers, signs, or newspaper advertisements.

Step 9: Set competitive pricing

Pricing is the make-or-break point in the food delivery business. In the food delivery business, customers compare the prices of foods. So, like every other business, you need to keep a minimal price to attract customers, but not less to suffer a loss.

For example, if company A is providing a $20 meal with $40 delivery charges and another company B is charging a $30 meal with $10 delivery charges, customers will choose company B. Because in the end, no one wants to pay extra for the delivery charges. 

So, ensure that you are providing affordable costs to attract customers. 

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

Benefits of Starting a Food Delivery Business

Starting up a food delivery business has many perks, as mentioned below. 

1. Increased number of repetitive food buyers

Owning a food service restaurant for dining purposes may attract fewer customers. Instead, if you opt for a food delivery business, you can expect large numbers of food consumers. There are also high chances that you can maintain existing customers with exceptional delivery services.  

2. Higher profit margins

Starting food delivery services can help you achieve the desired profit. If you operate delivery services with the help of a route planner like Upper, your food delivery process will be cost-effective. And if your timely service sends across good word-of-mouth from your customers, you are sure to gain new customers. And voila, your business revenue is sure to go up really fast!

3. Scalability

A food delivery business is a challenging but scalable business operation. In this business, you can implement a plan and expect the results you have thought of. 

Moreover, you don’t have to invest too much money to start that business. Also, it will give you an opportunity to grow and rectify mistakes easily. 

4. Cost-effective

You will require a few resources and can expand them as your business grows. So, you don’t have to worry all the time about what it is; take one step at a time, and you will achieve your desired result. 

Even though you are a startup company or a large enterprise, starting a food delivery service is not tough.

Is Starting a Food Delivery Business a Good Idea?

Absolutely yes. It’s because recent food delivery trends have contributed to the growth of the food delivery sector. 

First of all, people are increasingly using the internet to order food online. It, thus, has paved the way for new ways to order food, such as using delivery apps and dedicated platforms.

Then there are millennials and GenZ consumer base who frequently deliver orders online more than previous generations. In fact, 39.2% of Gen Zers in the US order food online at least once per week. And millennials are not much behind at 38.7%. 

These numbers clearly show that delivery services have become a daily thing for these generations. And Generation Alpha is finally here, who would seek online food delivery services even more. 

So, one thing is sure – you won’t regret opening a food delivery business. All that you need alongside is a proper plan and execution.

Leveraging Upper to Optimize Your Food Delivery Scheduling and Routing

As a food delivery business owner, delivering hot meals to the customer’s doorstep is your priority. And how to make it possible? Simply, by finding the best routes with the Upper Route Planner.

Upper helps you achieve delivery targets in a minimum time with the help of optimized routes. Hence, you don’t have to manually check things during the delivery process. In addition, the route planner has multiple benefits to offer, as stated below.  

• It helps you find the fastest and most cost-effective routes in a few clicks based on time windows and drivers’ availability and schedule their dispatch ahead of time. It prevents last-minute scheduling chaos and errors.
• Upper helps you manage your delivery teams by showing the availability of drivers with details. 
• Moreover, you do not have to assign drivers manually, as they will be assigned with the auto-assigning feature. 
• It helps you to generate reports for weekly or monthly analysis to view delivery statistics. 
• The route planner allows you to fetch the exact address of the location along with the street view.
• Schedule your delivery routes in advance regardless of your number of purchased orders.
• It keeps customers in the loop by sending them customized automated notifications.
• Following the successful food delivery, it lets the delivery person capture the delivery proof.

Conclusion: Key Takeaways for Aspiring Food Delivery Entrepreneurs

Starting a food delivery business is easier said than done,  indeed, but by following the above-mentioned points, you can easily start a food delivery service. Additionally, if you adopt route planning software like Upper, you will have a secret ingredient that will make your business successful.  

Now, you do not have to make customers wait or deal with angry customers about the food delivery. Upper helps you to find the fastest routes and deliver food on time. So, if you are planning to start a new food delivery business, then why not include Upper?   

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