Revenue in the online food-delivery segment is expected to show an annual growth rate of 7.5% in 2020-2024, resulting in a market volume of US$164,002m by 2024. This is because food-delivery startups bring about convenience in customers’ lives. Uber for food delivery startups in the on-demand economy have the same psychological interest – all food delivery startups promise to save time and effort of people for ordering food.
In fact, many food startups have entered the on-demand marketplace since Uber technologies, among which some are doing well in the food industry. They deliver convenience to its customer base. And, their convenience research has identified many opportunities for their customers to save time and effort.
Uber’s food-delivery division Uber Eats app has recently made an acquisition as it acquired Ando – a food-delivery startup launched by chef David Chang. And, since launching in 2016, has been working with Uber Eats app and a few other delivery services as a partner for delivering orders.
Currently, the competitors of Uber Eats app– Deliveroo and Amazon are getting involved in producing food themselves and this deal by Uber Eats app will see the company also making more of its product for the customers.
The acquisition comes at a right time for Uber technologies as it has started growing the food-delivery business.
According to a TechCrunch report, Uber CEO Dara Khosrowshahi said, “We’ll be the largest food-delivery company in the world this year,”.
If you are planning something similar, you might wanna check out a guide for food-delivery startups that has all the information one needs to build food-startup. Let’s move on to find how such startups have grown so much.
How these food-startups have made it big?
- Food startups have made it easy to make a decision fast and easily. For example, on Foodpanda and similar food delivery apps, you can view ratings and reviews before ordering from the restaurant menu.
- Furthermore, they also made the payment process fast and easy to pay. For instance, a food delivery app like uber lets users pay with cards or from wallets like Apple pay.
- In these times of Coronavirus outbreak or COVID-19, such food-startups provide contactless deliveries so people are able to maintain social distancing and not break their quarantine.
- In fact, food startups have made it easy to re-purchase as well. For example, once you make an order, you can bookmark your favorite dishes/restaurants, and save a delivery address, payment details, etc to make it easy to re-order within minutes.
- Moreover, the on-demand economy of this industry has disrupted many traditional markets through a full-cycle approach to three basic components of the food ordering process. Ordering, Cooking, and Delivering.
Based on these three components, there are two successful business models that proved to work for food-delivery startups. They are as follow:
This model is adopted by food-delivery services like Delivery Hero, JustEat, etc., and act as a pure software for the ordering of independent restaurant. The main selling point of this online food-delivery business model is to bring a lot of new customers through an optimized web as well as a mobile platform.
Food Ordering Process
The flow of food ordering process of order-only food startups model work like this:
- Customers first place an order on the website/mobile application.
- The restaurant then receives the order by either fax or email.
- The restaurant notifies that order was received through an email or automated phone call.
The process has one of the following two scenarios.
- A delivery person employed by the restaurant.
- Delivery personnel employed by a delivery service.
Benefits of This Model
Online Food-delivery startups with this model will have to worry about neither cooking nor delivering it. Such startups for food-delivery services tend to charge 10-15%. And, being a pure software business, there is a high possibility to scale and have a remarkable growth.
Limitations of This Model
On-demand food-delivery startups with this model are limited in their service offering in terms of price and cuisines. Such Uber for food app startups are mainly associated with customers with relatively low-key takeaway orders such as burgers, sushi, Chinese, and so on. Moreover, a food startup with this model cannot control and/or optimize the quality and speed of food-delivery services.
Order and Delivery Model
The new food-delivery app startups such as Deliveroo, Doordash, Uber Eats and Caviar concentrate on first and third components – Ordering and Delivery.
They bring orders and requests from customers to the restaurants and manage the deliveries by themself. For deliveries, they generally tie-up with several independent courier service providers who are connected by an app like Uber for both getting orders through customers, and sharing information with courier providers.
Food Ordering Process
The orders are received in the app or website where menus of different restaurants are uploaded. When an order is received by the restaurant from the food-delivery app, the restaurant then notifies the courier provider with the estimated delivery time to pick up the parcel and destination address.
Although, to help restaurants pay the commission fee of service, they markup the price of food items of the restaurant. The customers are also charged a pre-defined flat fee for every restaurant they place their order.
The courier persons who are on duty are logged into the mobile application which tracks their locations. After receiving an order, the courier decides whether they’ll take the job or not. If the first courier rejects the job, then it is sent out to other couriers. The first courier to claim the job gets the job.
Benefits of This Model
The benefit of approaching through this model is that you can charge a higher commission up to 25-30% from restaurants on average. And, you can offer a range of price as well as restaurant options that the pure software food-delivery business model cannot.
However, the Entrepreneur may have to struggle a bit to compete against optimized networks of couriers and restaurants. But, once the startup reaches a certain maturity, and once the orders start coming in regularly, it’ll be highly likely to witness remarkable growth.
Limitations of This Model
Food ordering startups with the second model are generally software as well as logistics companies that have a notable amount of work to do such as hiring couriers, training them, maintenance, shift planning, and so on.
Therefore, it becomes a bit difficult for a food startup with this model to scale up compared to the pure-software business model.
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How do food-ordering apps make money?
A food-ordering application primarily makes money through the following monetization strategies:
- Commissions: These apps charge their partners on every meal order. They have a predetermined commission cut for every amount.
- Delivery fee: Most food-ordering apps levy a fee from their customers. Some part of this delivery-fee goes to the app revenue while most of it if for the delivery people.
- Paid listings: Restaurants pay money to get listed on the apps. This gets them the needed visibility and customers.
- Sponsored ads: As your application becomes popular, you may also get running ads from networks like Google Adwords and Facebook Ads that bring revenue.
How do food-delivery apps work?
Food-delivery apps allow customers to order from a nearby place at their convenience. The customers can get their order delivered, they can pick it up themselves or they can dine in. The restaurants receive the order on the restaurant-app and prepare the meal. The delivery-guy picks the order from the restaurant and drops it to the dropping location.
How much does it cost to make a food-delivery application?
The meal delivery application cost depends upon functionalities and features that you want to integrate into your application. The time consumed to integrate features in your application also depends on the complexity of the features. The hourly rate of the developer is obviously a factor that needs to be taken into account, all this combined decides the cost of the development process. With the help of this simple formula you can calculate the cost:
Development time X Cost per hour = Total app development cost.
Entrepreneurs are trying out the different business models to establish a good business in the food industry. In fact, a survey held in the US found that 20 percent of people use food-delivery services at least once a week.
Nevertheless, they are also startups that crowdsource the cooking process by employing home chefs. And, the startup then also employ people to pick up an order from the chef’s place and deliver it to customers.
However, if you wish to enter the online food-delivery industry with your startup idea, it’s advisable to first make sure you know about your competitors and the type of services they offer. You can take help from experts or talk to an on-demand app development company about your startup idea for building your own food-delivery app like Uber Eats.
This page was last edited on May 26th, 2020, at 4:03.