Introduction:
It’s not hidden! The Internet is helping Americans scratch that dining-out itch by advancing the culture of “Food Delivery Services.”
As we know, the food industry has already undergone a revolutionary transition over the past few years.
Thanks to websites and apps, marketing and order placement for restaurants are one click away now.
According to BusinessofApps, 66 million Americans ordered $8.7 billion in food delivery in 2017. During the lockdown in 2020, the figure nearly tripled, spurring the demand for online food delivery services even more.
Millions of restaurants around the world have seen their productivity grow by leaps and bounds. Even today, nearly 86% of Americans are actively ordering food online.
It makes sense to learn how to start a restaurant delivery service and gain an edge over the competition. If you are also ambitious to get started, this guide is for you.
The article will even cover a breakdown of some vital topics, such as:
- What are the various kinds of food delivery services?
- How to start a Service-Based Restaurant
- What are the most important things to consider during the process?
Without losing a moment, find this article your perfect companion to begin:
Food Delivery Service: Business Plan Types
Food delivery services are also split into the given business models, and it is worth addressing the ideal one that matches your profile:
1. The Order and Delivery Model:
If you wish to bring in extra orders to your business and want to extend your menu’s reach to customers by working on a business segment in addition to the dine-in facility, then the order and delivery model is made for you.
Food delivery apps like DoorDash, UberEats, and App2Food are some of the most appropriate examples to bring this business model into being.
Simply put, the orders and delivery business model is mainly powered by software like App2Food’s online delivery systems.
These software programmes serve as a conduit for placing an order at a restaurant while also providing delivery service to customers.
The app will be in charge of managing the orders as well as deliveries for the restaurants. The delivery process is, however, not connected to restaurants; it is run by these restaurants themselves.
However, some restaurants may prefer their own logistics fleets to those provided by third-party hirers. Partnering with food delivery apps provides some great benefits. The most notable is exposure to a large audience.
Delivery service providers and restaurants jointly work for each other’s business interests. Quick order fulfilment is the primary goal of these apps.
2. The Order-Only Model
Grubhub, JustEat, and a few other good names are the best examples here, representing the overall concept of the order-only business model pretty well.
In the business model, third-party software functions as a platform where all food items are listed by the restaurant itself. Each time a customer places an order, a query is sent directly to the restaurant.
Hereafter, the customer can visit the restaurant to pick up the order. The business model even represents takeaway orders at restaurants. Usually, the main goal of the order-only concept is to enhance a brand’s visibility.
It makes a restaurant accessible to a wider audience and even aids in the timely fulfilment of orders. However, the business model is quite similar to table reservations at restaurants.
But it can also be transformed into an order-and-delivery model if the platforms like GrubHub feature your restaurant’s menu along with contact details on their websites.
For example, you can use the contact information to handle complaints or as a source for customers to contact you and place delivery orders through it.
Simultaneously, you can deliver them food items using your own delivery fleet.
3. The Full Stack Model
The full stack model includes both orders-only and orders-and-delivery-only business models. A restaurant itself is in charge of everything offered.
These platforms can be run and managed by the restaurant itself. You will be managing your restaurant’s online portfolio, managing orders, delivering restaurant orders, and tracking orders—all at the same time.
To begin, full stack modelling is relatively expensive. Full stack models are relatively quite expensive to start. So make sure that your query about how to start a restaurant delivery service business doesn’t mean starting a full-stack business model.
But if you think you have enough investment capital to start your own business venture, including food delivery facilities, you are free to go. However, you can still save $8000 to $25,000 or more on application development.
For example, instead of hiring a developer and having a restaurant application built from scratch, you can use the free Online Ordering System for restaurants. For example, you can use App2Food, where you can get a custom-built mobile app for free.
Still, you will be required to take some fundamental training on how to start a restaurant delivery service, and here’s a walkthrough on it:
How to Start Restaurant Delivery Services: The Complete Guide
Here’s a step-by-step guide on how to start a restaurant delivery service that transforms into a big success. –
1. Make a Plan and a Budget
Planning is an indispensable act. Good plans lead to excellent executions and results. Before starting up a food delivery venture, planning beforehand makes sense.
This vital act can cover thorough market research and a deep understanding of the targeted audience, their tastes, and preferences.
You can even assess risk probabilities and proactively think about the upcoming challenges. Planning is also a key indicator for performance improvement.
By the end of the day, you will have enough time and peace of mind to revise and update your plan for further execution.
A plan can also assist you in identifying your brand’s USP, which you can use to create a hook to attract customers to your food delivery services.
But make sure your plan includes the below-stated considerations to ensure a smooth run of the business. Here’s how:
A Workspace
Restaurants that are entirely operating via their food delivery services need not worry about the workspace. They will, however, require a large workspace where they can set up their kitchen items and carry out their operations with maximum flexibility.
At a certain point, you will receive more than your regular order. Hence, you may be experiencing a heavy demand for working staff at those events. Similarly, it would suffice if your kitchen was not lacking in space from the start.
Technology Costs
Technology has its own significant role to play in the whole process of starting and managing a food delivery business. Multiple software, tools, and features come into play for the timely and effective running of the food delivery services.
As a result, the cost becomes somewhat intimidating. For example, you may be required to set up a POS system, fast internet connectivity, and, of course, a mobile app. After all, you experience more than regular demand at your restaurants sometimes.
You can, however, choose between your private application and third-party platforms that are less expensive. You can also read our other articles on starting a third-party restaurant delivery service.
Business licence and insurance
A business licence for restaurants is issued by the concerned food authority in the US. Certification of incorporation, a health inspection certificate, and a tax identification number are the few legal terms to be fulfilled at any cost.
However, a third-party delivery service provider may not require you to submit the documents. But it is still advisable to stay prepared for anything bad. Insurance is also a must to make certain that a natural crisis or accidental damage does not hamper your business’s productivity.
Marketing Material And A Website.
Less than 40% of independent restaurants have their menus listed on a website. However, they are taking help from Google Business Listing, but in the end, it is a non-professional style.
A website is a medium for building a loyal audience base for your business. It empowers your marketing efforts and makes them goal-oriented in the end. Your plan should even cover marketing material costs.
Delivery-specific investment
If you are partnering with a third-party delivery service provider, it may be an optional consideration or even unnecessary. But if you are attempting to launch your own delivery fleet, a delivery-specific investment must be assessed cautiously.
After all, launching a private delivery fleet would mean that you would have to purchase your own delivery vehicles, bikes, and GPS systems for the delivery tracking as well. The salary of delivery personnel will also fall under this consideration.
2. Working on the Kitchen
Fortunately, how to start a restaurant delivery service is not a difficult question. It only takes a few vital considerations to get things smoothly working in your favor.
Regardless of whether you want to run your restaurant entirely on a “delivery-only business model” or diversify your sales stream, which has made you include “delivery-only service” into your existing “dine-in facility,”
One thing is certain: the area that will remain unchanged in the whole eco-system of your restaurant business is your kitchen.
Right from the start, you should make sure that the kitchen is ready for any challenge. It must be ready for upgrades to tap into new business ventures. Based on the types of venues and active orders, you should select a kitchen with ideal dimensions and equipment.
Here’s what else can be covered when it comes to the kitchen.
Kitchen
The overall infrastructure of a kitchen must be smartly built. Space must be smartly utilized to make certain that delivery isn’t delayed by chefs. If an order takes 10 minutes to prepare, it must not take 20 minutes for another. If it is happening, consider knowing what went wrong. It’s worthwhile to build a responsive kitchen right from the start to fuel swiftness in the workflow.
Staff
Not everyone is born with experience. Hence, it doesn’t make sense that you should always scout for professionals. Indeed, new hires can be more true to their promises if they are dedicated to their job.
So it’s better to keep track of work through tech-enabled channels to ensure every staff member can be trained about their duties and job roles. However, the rule doesn’t apply to chefs, as they must be good enough at their cooking skills.
Accounting
Who’s accountable for the insider activities at your restaurant? Is this your kitchen manager or your chef himself? Or is this your restaurant’s manager? Accountability should be clear to ensure resolution is easier. But in case you can’t afford to hire someone, you can still ensure the effective operation of your food delivery fleet.
3. Working on Logistics
As we are planning to start a restaurant delivery service, it makes sense to strengthen your logistical ecosystem. Right from the start, it must be well defined who will take your order to the customer. For consideration, you basically have two options to choose from:
Outsource delivery services
If you are entirely unclear on the concept of how to start a restaurant delivery business and afraid of hiring people into your business, outsourcing delivery services makes sense. Most third-party platforms in the United States offer food delivery services for a significant fee and commission. You simply assign them this job, and they will be managing and delivering your orders using their tech-enabled networks.
Building Your Own Logistics Fleet
As a strategic move, most restaurants would like to utilize their restaurants’ USP on their logistics fleet. Feel free to launch your own logistical fleet if your budget allows. But make sure you know that the attempt will invite an additional investment in delivery vehicles, and the salary of delivery personnel must be noted as well. Also, a tracking system must be enabled in your business’s work culture.
4. Connecting Food Delivery Menus and Services
As soon as you are done with all the basic selections for the food delivery service, you can start connecting your menu and services together. The task will be accomplished through a web portal.
You need to list down all menu items appropriately, and an “order now” button must be available right on the screen. Ordering food must be a single-click activity.
Other metrics, such as the time within which food is expected to be delivered to the customer, must be available on the order page. Your online portfolio (e.g., website or application) must be linked with your POS system integration.
Your delivery fleet should also receive instant updates regarding the newest orders, but not instantly. There must be no room for obstruction in the smooth interaction between the delivery driver and the restaurant’s manager.
It is best if your delivery fleet is GPS-enabled. It allows customers to track their order live on the screen in real-time.
5. Essential Metrics and KPIs (Key Performance Indicators)
Tracking is the most powerful tool to fuel your business with power and growth. How well is your food delivery service doing, and how long will it last? Everything must be properly scrutinized through KPIs.
KPI refers to key performance indicators, which show the overall win and loss of your business. A restaurant’s KPI can be calculated based on the given metrics.
Platform KPIs
The key performance indicator of the platform refers to an analysis of how smoothly a web portal or a mobile application is performing. For example, a higher bounce rate on a website is a possible indication of errors within the website. It is either not loading faster or customers are struggling to place an order.
Average Number of Deliveries Per Hour
How fast orders have been delivered to customers must be monitored. The KPI will give you an indication of how effectively order fulfilment is done. It can even help you identify your delivery drivers, as some might be intentionally delaying the deliveries. If fewer orders are being delivered per hour, that means more hiring will be necessary. Beyond a surprise, it could be a sign that your business is about to lose customers by a big figure.
Average Profit Per Delivery
One of the most frequently asked questions is how to start a profitable restaurant delivery service. Well, the answer depends on how well you notice the small figures. You may see a lot of potential in the online food delivery industry.
But you might be making a big mistake if you are ignoring these vital KPIs. Average Profit Per Delivery is a highly important metric that reveals how much profit you are making per delivery of orders.
As we all know, no food delivery company will provide special delivery service to customers until a premium subscription plan is purchased. Delivery drivers ensure that their customers’ orders are filled by first completing their previous orders in the row.
However, if required orders are not received, an average of profits per delivery will help you determine whether your business is profitable or not.
Average Order Duration
The KPI is used by most restaurants to identify the average order duration. With so many restaurants in New York, US eaters’ expectations have risen. They know they will receive their orders on time. But if they don’t, it will end up ruining that first impression, which is valuable for almost every business.
Therefore, it is ideal for you to keep the average order duration in mind. When a customer placed an order, when did a chef pack it so it could be delivered? Similarly, when did the delivery person arrive, and how long did it take them to deliver the order?
Keep your eyes on the following time frames. In the end, you will identify the average amount of time it takes for an order to be successfully delivered to the customer.
Total Number of Orders
The total number of orders received by a restaurant as a result of food delivery service must be carefully examined. You can track and compare the total orders received in the current month with the previous month. For this purpose, a POS system or an additional revenue calculator might help. Consider backing up the data and tallying all entries, however.
Customer Churn Rate
Customer churn rate can negatively impact the growth and revenue figures of a business. After all, it is a universal truth that it is often far more expensive to acquire new customers than it is to retain existing ones.
But if your business has a higher churn rate—meaning the ratio of returning customers is lower—it is a negative sign that your restaurant’s health is at severe risk. You should strive to reduce the churn rate of your restaurant and work hard to make your existing customers loyal customers.
You can launch restaurant loyalty programs for them, as it is one of the best-known strategies with lasting results.
Customer Lifetime Value
Customer lifetime value can’t be underestimated. The KPI denotes the total amount of revenue your business is expecting by serving value to customers for a lifetime. In other words, you can even say the expected amount of money a customer is likely to spend on your food items during their lifetime.
You can identify the CLV by multiplying customers’ average purchase value by their average purchase frequency and their average customer lifespan.
To identify the average lifespan of a customer, you can multiply the average value of sales with the number of transactions and the retention time period.
Conclusion
It can’t be difficult to figure out how to start a restaurant delivery service right now. It is a detailed guide on how they got started and how you can start your own new business venture that meets people’s current needs. However, the journey can be a bit expensive as well. But you can keep charges fairly low, if not zero, with an online food delivery system like App2Food.
The article above has already covered much about these alternatives, which can truly help you meet most of your expectations. So, do you want to extend your brand’s reach to the doorsteps of customers by delivering food directly to their homes? Start following this guide today.