How To Start A Food Delivery Service: 8 Steps To Success In 2023
The world of food delivery has exploded since the pandemic, with more and more people wanting to enjoy restaurant-quality meals in the comfort of their own homes. Worldwide, the online food delivery market was estimated to be worth $77 billion in 2022. That’s expected to grow to around $1.4 trillion by 2027, with grocery delivery accounting for around two thirds of the total and meal delivery for one third.
Starting your own online food delivery service can be a great way to tap into this growing market. If you work from home or a central kitchen, you also won't have to deal with many of the expenses and hassles that restaurant owners face, like rents in prime locations.. But where do you start?
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With the right approach, you can make a good living from your passion for food. In this article, we'll show you how to create your own successful food delivery business, from first business plan to the nitty-gritty of managing online food ordering and delivery logistics. Let’s dive right in!
1. Develop a business plan
The first step in starting a food delivery business is to develop a solid business plan. A well-crafted business plan is a roadmap for your business. It will help you raise funding, attract customers, and stay on track as you grow.
Here are some key steps to follow to develop a good business plan for your online food delivery business:
Do your market research
Start by researching your local market to understand the demand for food delivery services, your ideal target demographics and customer base, and your competition.
For example, think about whether to serve consumers or corporate customers. The consumer market for online food delivery is big, but you’ll be dealing with lots of small orders and a large delivery area. A corporate food delivery service means you can complete dozens of orders with a single delivery to a business parks or office building.
The more densely focused the area you serve, the more orders you can deliver per hour. That will decrease your cost per delivery and increase your profitability.
Once you’ve decided which market to serve, you can refine your business idea to develop a unique selling proposition that differentiates you from other food delivery services.
Define your business model
There are many different types of food delivery business model. Do you want to deliver meal prep kits or ready-made meals? Are you looking at more traditional restaurant delivery, catering delivery or grocery delivery? The answer will help determine your business structure and strategy.
You’ll also need to decide whether to operate as a sole proprietorship, limited liability company, partnership or corporation. Your local chamber of commerce is a great place to find advice about what kind of legal entity will be best for your business.
Then, consider details like your pricing strategy, delivery area, and order fulfillment process.
Develop a marketing strategy
How will you promote your business? Think about how to use channels like social media, paid ads, and referral marketing to reach your target audience. You will need to publish content that will resonate with your audience.
Create financial projections
Use financial projections to estimate your revenue and expenses for a certain period of time, which could be a year, three, or more. With this information, you can adjust your pricing and marketing strategies to achieve your revenue goals and stay profitable.
If you need some help getting started, here's a great food delivery business plan template from Upmetrics.
Remember, as an entrepreneur your business plan is a living document you need to revisit and adjust as needed. Set a date with yourself every few weeks to evaluate your progress and update your business strategy.
2. Get necessary licenses and permits
Depending on what kind of food delivery business you want to run, it's important to check what licenses and permits you need to operate legally and safely. Getting this wrong can lead to fines, legal issues, and even the closure of your business.
The requirements will vary depending on your location, so be sure to check with your local government agencies. However, some common licenses you might need include a business license, a food handler's permit, and a home kitchen permit.
You may also need a seller’s permit, which is required in most states to collect sales tax on your food delivery sales.
Finally, though not technically a license or permit, don’t forget insurance! Consider getting auto insurance, property insurance, and general liability insurance to protect yourself in case of accidents or injuries related to your business.
3. Create your menu and pricing strategy
With all your licenses and permits lined up, you can finalize your menu and pricing strategy.
Your food delivery menu should be based on the type of business model you choose and your target market. For example, you could offer a meal delivery service for health-conscious consumers, quick and easy meals for busy professionals, catering for functions, or family-size meal kits for overworked parents. Remember to include specific food options and preferences in your menu, like vegetarian, vegan, gluten-free, and low-calorie options.
For your pricing strategy, consider your startup costs, food prices, delivery fees, overhead expenses, and profit margins. Also account for your ongoing expenses, such as rent, utilities, and delivery vehicle maintenance. By carefully calculating these costs, you'll set a competitive, financially sustainable price point.
4. Set up your kitchen
Setting up the right kitchen space is crucial to any food delivery service. A well-equipped and organized kitchen will allow you to prepare and cook meals efficiently and safely, ensuring your customers receive fresh, delicious meals on time.
Your commercial kitchen space may require some investment in equipment and supplies, such as a stove, oven, refrigerator, food processor, and blender.
You also need to have enough storage space for your ingredients and equipment, and design your kitchen to allow you to move around easily while cooking. Consider investing in shelving units, storage containers, and other organizational tools to help you keep your kitchen neat.
When setting up your kitchen space, it's also important to consider how you will manage your inventory efficiently. You need to keep track of the ingredients and supplies you have on hand, and ensure you always have enough. The best way to do this is by investing in inventory management software.
Finally, consult local government agencies before you set up or build your kitchen to avoid incurring remodeling costs to match health and safety regulations.
5. Build your website or social media presence
Nowadays every business needs a website or social media presence. Your website and social media accounts will be your storefront, allowing customers to browse your menu, learn about your business and order food online.
This can seem overwhelming — you want to make food, not run a marketing agency, after all! Break the task down into steps to make it easier:
- Create a consistent brand identity. This includes an official business name, logo, color scheme and tagline that reflect the style and values of your business. Consistent branding across all online platforms will help customers recognize and remember your business.
- Decide whether you want a website, social media accounts, or both. A website will give you more control over your online presence, and social media accounts can help you effectively connect with your target audience and build a following.
- Make it easy for customers to place delivery orders. Your website or social media accounts should have clear and easy-to-use ordering systems. For instance, you can add food items or meal kits to an Instagram shop.
- Create engaging content to attract customers. Make an online menu that showcases your unique dishes, post high-quality photos and videos of your food, and share stories about your journey as a business owner. For instance, if you want to make money with Instagram, you can share entertaining reels and behind-the-scenes videos of your meal prep and cooking process.
- Make it easy for customers to contact you. Include your email address and phone number on your website and social media pages. You can even add a digital business card with all your contact details on the website.
6. Launch and promote your business
With your business plan, licenses and permits, menu and pricing strategy, kitchen, and website in place, it is time to launch and promote your online food delivery business. Here are some ways to start strong and keep running successfully:
- Advertise your business. Use marketing channels like social media, paid ads, flyers, email marketing, and word of mouth to promote your business to potential customers.
- Offer promotions. Consider offering discounts or free delivery to attract new customers, and set up a loyalty program to encourage repeat orders.
- Partner with other businesses. Partner with other local small businesses, such as grocery stores or local restaurants, to offer bundled deals or cross-promotions to attract more customers. This is a strategy that food delivery apps like Uber Eats and DoorDash have used very successfully.
7. Set up an online ordering system
An efficient online order management system is critical infrastructure for food delivery companies. You want to make it as easy as possible for your customers to choose and pay for their order, and for you to plan and manage your kitchen operation. Here are a some tips for setting up an online ordering system:
Choose an e-commerce platform
When you’re just starting out, it’s especially important to find an e-commerce platform that’s user-friendly. Shopify, Square, and WooCommerce are all popular options. They allow you to create a custom online storefront to showcase your products, while also providing secure payment processing.
A lot of your customers are going to browse your site on their phones or tablets. Make sure your online ordering system is mobile-friendly and responsive so that it works seamlessly across all devices.
Create a simple ordering process
Make online ordering easy for your customers by using clear product descriptions, images, and pricing. Keep the ordering process as streamlined as possible, avoiding unnecessary steps or complex navigation.
This includes offering a variety of payment options, like credit cards, debit cards, PayPal, and Apple Pay. The easier it is to pay, the more likely you are to make the sale!
8. Set up your delivery logistics
The quality of your delivery operations is at least as important as the quality of your food! Food that arrives late, cold or spoiled means lower customer satisfaction, and ultimately a business that may fail to take off.
Worldwide, food that takes too long to arrive is the biggest frustration consumers have with online food delivery, with 34% of people saying this is a problem for them. So, how do you deliver on time? Here are the main things to consider:
Choose your delivery method
Will you make your own deliveries, or use an online food delivery platform like DoorDash, Grubhub or Uber Eats? The answer depends very much on your business model.
If you’re offering a restaurant-style menu that customers will treat essentially as a takeout service, they will probably want their food delivered hot and fresh, in 30 minutes or less. In that case, it makes sense to contract your deliveries out to a gig-economy style delivery service like DoorDash. Depending on where your kitchen is located, you may also want to offer customers the option to pick up their own orders.
On the other hand, if you’re offering catering services, grocery delivery or meal kits, those are all things that can be ordered ahead of time. That gives you the opportunity to schedule and plan efficient delivery routes.
Should you invest in your own delivery fleet, or outsource?
If you choose to make scheduled deliveries, your next question is whether to contract your deliveries out, or use your own vehicles and drivers. It’s a big investment, but there are some benefits. The biggest advantage is that having your own delivery drivers means you can ensure products get to your customers just the way you want them to — at the right time, and in the right way.
In the long run, as your food delivery service grows and your delivery volumes increase, having your own fleet could actually be cheaper than hiring a third party logistics provider. Many couriers charge based on the number of deliveries they make.
If you’re a food delivery service with your own in-house delivery fleet, you have the freedom to decide exactly how to differentiate yourself in this crowded market. For example, you can set your own delivery time windows, so customers know when to expect their delivery – not just which day, but which hour.
Decide your cut-off times and delivery time windows
Scheduling deliveries means you can increase the number of deliveries you make per driver. Compared to on-demand delivery, it is more efficient and more profitable.
To make scheduled deliveries work, your customers will need to order their food well in advance. This gives you time to plan, prep, and deliver your product as fresh as possible. Think about what cut-off time will work best for you: when is the latest that the customer can place their order? Will you plan all your delivery routes a few days before, or on the morning of the delivery run?
Then, decide your delivery time windows. Will you offer one-hour windows, or can the customer select an exact time with a 10-minute buffer on either side? From a customer’s perspective, the tighter the time window the better — but that makes things much harder for you. So give yourself enough flexibility to balance customer satisfaction against delivery efficiency.
One useful tactic is to incentivize customers to select wider time windows, for example by charging a higher delivery fee for very tight windows.
Plan and optimize your delivery routes
This is where it all comes together! You have a list of orders, delivery addresses and time window preferences, and your product is ready to go. Now it’s time to crank up your delivery management software for the last part of the process. You’ll need to:
- Upload your list of stops, or import it directly from your order management system.
- Create optimized routes. Route optimization should automatically plan routes that will complete all your orders most efficiently.
- Dispatch routes to your drivers. Nowadays, this is mostly done by sending the routes straight to a driver’s mobile app.
- Inform your customers that their deliveries are on the way. Your delivery management software should automatically send notifications about ETAs and completed deliveries.
- Track your delivery success through the day. Route planning software like Routific shows the real-time location of your drivers, updates as each stop is completed and allows you to add or change stops if needed.
Starting and running your own food delivery business from home can be a rewarding and profitable venture, but it requires careful planning and execution.
To get it right, as we’ve discussed in our comprehensive guide on how to start a food delivery business from home, begin by developing a solid business plan. Then, obtain the necessary licenses and permits, create a menu and pricing strategy, set up a kitchen, develop an online presence, and finally launch and promote your business on various channels.
By following these steps, your food delivery startup can become a favorite option in your community for providing delicious meals and convenience. Good luck!