Uber For Food: Successful Business Models For Food Delivery Startups

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Uber For Food: Successful Business Models For Food Delivery Startups
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Uber for food 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, among which some are doing well in the food industry. They deliver convenience to their customer-base. And, their convenience research has identified many opportunities for their customers to save time and effort.

Uber’s food delivery division UberEats has recently made an acquisition as it acquired Ando – a food delivery ‘restaurant’ launched by chef David Chang. Ando, since launched in 2016, has been working with UberEats and a few other delivery services as a partner for delivering food.

Currently, the competitors of UberEats – Deliveroo and Amazon are getting involved in producing food themselves and this deal by UberEats will see the company also making more of its product for the customers.

The acquisition comes at a right time for Uber as it has started growing the food delivery business. According to TechCrunch report, Uber CEO Dara Khosrowshahi said, “We’ll be the largest food delivery company in the world this year,”.

Food startups have made it easy to make decision fast and easy. For example, on Foodpanda and similar food delivery startups, you can view ratings and reviews before ordering food from the restaurant.

Furthermore, they also made the payment process fast and easy to pay. For instance, food delivery app like uber lets users to pay with cards or from wallets like Apple pay.

In fact, food startups have made it easy to re-purchase as well. For example, once you order food from restaurant, you can bookmark your favourite dishes/restaurants, and save address, payment details, etc to make it easy to re-order within minutes.

Moreover, the on demand economy of food industry has disrupted many traditional markets through a full cycle approach to a three basic components of food ordering process. Ordering, Cooking, and Delivering.

Based on this three components, there are two successful business models that proved to work for food delivery startups. They are as follow:

Order-Only Model

This model is adopted by food delivery services like Delivery Hero, JustEat, etc., and act as a pure software for ordering of independent restaurant. The main selling point of this business model is to bring a lot of new customers through an optimized web as well as 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 app.
  • Restaurant then receive the order by either fax or email.
  • Restaurant notify that order was received through an email or automated phone call.

Delivery Process

The delivery process has one of the following two scenarios.

  • A delivery person employed by the restaurant.
  • A delivery person employed by restaurant delivery service.

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 in customers with relatively low-key takeaway food such as burgers, sushi, Chinese, and so on. Moreover, food startup with this model cannot control and/or optimize the quality and speed of food delivery services.

Benefits of This Model

Food delivery startups with this model won’t 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, they are high possibility to scale and have a remarkable growth.

Order and Delivery Model

The new food delivery app startups such as Deliveroo, Doordash, and Caviar concentrate on first and third component – Ordering and Delivery.

They bring orders and requests from customers to the restaurants, and manage the delivery by themself. For delivery, 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 delivery 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 restaurant from food delivery app, the restaurant then notifies the courier provider with the time to pick up parcel and destination address.

Although, to help restaurants pay the commission fee of delivery service, they markup the price of items of the restaurant. The customers are also charged a pre-defined flat fee for every restaurant they place their order.

Delivery Process

The courier persons who are on duty are logged into the mobile app 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 send out to other couriers. The first courier to claim the job, gets the job.

Limitations of This Model

Food ordering startups with second model are generally a software as well as logistics companies which has notable amount of work to do such as hiring couriers, training them, maintenance, shift planning, and so on.

Therefore, it becomes bit difficult for a food startup with this model to scale up compared to the pure-software business model.

Benefits of This Model

The benefit of approaching through this model is that you can charge 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 to a maturity, and once the orders start coming in regularly, it’ll be highly likely to witness a remarkable growth.

Summary

The Entrepreneurs are trying out the different business models to establish a good business in food industry. In fact, a survey held in 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 food from chef’s place and deliver it to customers.

However, if you wish to enter the food 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 thought leaders about your startup idea for building your own food delivery app like Uber.

 
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