Any online food delivery application is the elemental app on our mobile phones. Reason? It is "The" application that will quench the thirst of our taste buds. We have gone through a few facts & statistics in order to come up with the conclusion that off-premise dining is becoming extremely popular.
The Covid 19 crisis induced a major turning point in food delivery statistics. If we believe the statistics, 45 million people in the US used online food delivery apps last year. The GrubHub customer base grew by 35% in 2020. Almost two in five restaurants initiated an online food delivery service in 2020.
This proves that the online food delivery market's prediction to hit $137 billion by 2023 is going to be true. So if you are inching to make a move into this industry in the coming years, we suggest that you grab a complete understanding of its business model. Learning about the food delivery business model in depth will help you in making smart decisions and increase your odds of success. In this blog, we have discussed various food delivery app business models, their pros and cons, and ways in which you can generate revenue from it.
To begin with,
Introduction to food delivery application:
Online food delivery deals with the delivery of food and other cooked items to the customer's doorstep. The customer can place orders using a mobile app or a web app. The convenience and ease of delivery it provides to the customers allures them to use the application more frequently.
The quick swipe for adding items to the cart and a great user experience is something that users look up to when it comes to food delivery app solutions.
The online food delivery business model makes it handy and accessible for users to reach out to restaurants. Users do not have to wait for their turn. Instead, they can sit back at home, watch their favorite TV shows, and have their food at the doorsteps. Almost 70% of users would go for an online food menu over a physical one because it saves a lot of time.
Additionally, food ordering becomes a convenient way to order food due to its customer-centric approach, features, and design.
Food delivery apps allow users to pay the amount using various payment methods. Users love the personalized menus and content they receive over the food delivery applications.
In and all, customers have embraced the food delivery application's offerings. The hard work done behind designing the app by a food delivery app development company is worth the praise. Well, you can also hire on-demand app developers to develop your classic-looking food delivery app.
Now, let's continue with the types of food delivery business models topic.
Order only model:
In this business model for a food delivery app, the application acts as a rope between the customer and the restaurant. Here, you will collaborate and enlist a pool of food chains and restaurants in the application. The customers can access a variety of menus and order food at their convenience.
Many famous online food delivery apps like GrubHub, Seamless work on this business model. This food delivery business model in 2021 is often referred to as a Platform to Consumer model.
Some of the advantages of this business model are:
Since you do not own a restaurant, you are not responsible for preparing food;
This business model doesn't need an upfront cost;
You can grow your restaurant's base slowly and gradually.
Disadvantages of this business model are:
The first one that serves as an advantage can be a disadvantage as well. Meaning, you have to offer limited menu items that are available with the associated restaurants.
You can charge a fixed fee from the restaurant for the orders placed, but can not charge more than what is decided.
You can not be sure of the food quality & packing the restaurant has to offer to its customers.
What are the challenges of the Order-only/P2C business model?
The competition in this industry is fierce, and it might become a real challenge for you to add new restaurants to the list. You can not compromise with the application's popularity by onboarding some less famous eateries
You need to draft a strong sales pitch for convincing restaurant chains to come & join your application. Your sales pitch will be your silver bullet to win over their trust and, in return, also capture their established customer base.
For attracting the restaurant owners, you need to have your USP defined. How will you stand out from the competition, and what features do you offer? All these attractive offerings should be decided at the Lean Canvassing stage and Prototyping stage.
Earning money with the order-only model:
First, you can either opt for a commission-based model where you fix a fee amount for restaurant owners and charge them on every order placed using the app.
Second, you can go for a feature-listing model, where you charge from restaurants for showing their restaurant labels in the top-feature list. The second one is a gradual process, which you can start once you have enough restaurants on board.
Order & delivery model:
In this business model for food delivery application, the platform owner(you) is responsible for taking care of the deliveries. Restaurant owners prefer to register with the apps working on this delivery model because they do not have to worry about the logistics.
UberEats, Zomato are some of the popular names functioning with this business model. As you can check for yourself, popular restaurants collaborate with this model so that they can focus only on providing quality food. However, you will need to make some upfront investment to set up your logistics, unlike the previous one.
Order & delivery business model set up courier points (location-specific) so that whenever the order is placed, the delivery executive can quickly visit the restaurant.
Some of the advantages of this business model are:
You (platform owner) can earn more commission;
You can set your own prices without being concerned about the restaurant prices;
You can easily attract more restaurants by comforting them with logistics.
Disadvantages of this model are:
You will need to invest time and money in setting up your own team of delivery executives.
There are already so many big players functioning in this business model, so you might have to face intense competition.
What are the challenges of the order & delivery business model?
As mentioned above, it becomes quite taxing for you to find resources and set up your own team for logistics. If you go wrong with this, you might hire some incompetent executives, who might miss upon the delivery speed.
Missing the promised delivery time affects the brand image. Hence, this is the primary and main challenge that you might face while opting for this business model.
Earning money with the order & delivery model:
Just like the above food delivery business model, you can charge some percentage of commission from the restaurants registered with the application.
Second, you can add on the delivery charges as your fees and charge it from customers on every order placed using the app.
Third, you can launch a subscription model where you offer subscriptions for free delivery & offers to the customers. While you can offer feature listing deals with the restaurants.
Fully integrated food delivery business model:
In this business model, the platform is responsible for handling the kitchen and logistics. Suppose you have any plans to start your own restaurant chain. In that case, you can think of getting into this full-stack food delivery business model.
In this business model type, you need to pay utmost attention to the mobile app design process because it is where you can go wrong. EatPurely, ExtraPlate are some of the examples that have adopted this business model.
Let's go into the details with this delivery model. You will be required to hire a chef (unless you are the one) and also the delivery executives fleet. Another option is, just like a ghostwriter, one who writes on someone else's behalf, you can hire a ghost kitchen. But again, that comes for a considerable amount of money. To conclude, you will require a surplus amount of money to start this business in full-fledge.
Some of the advantages of this delivery business model are:
You have complete control over the quality of food you provide to your customers.
You can keep up with the promised delivery time.
You can skip the dine-in facility.
Disadvantages of this delivery model are:
You need to convince your audience to divert their interest in your app from their favorite eatery.
Hiring resources for managing the kitchen and logistics can turn out to be a costly affair.
If you miss upon any of the quality or delivery standards, it may turn out against you.
What are the challenges of the full-stack delivery model?
It is quite difficult for you to capture investors for starting up your business. If you do not have an upfront amount as a startup, you might fail drastically.
It would be extremely challenging for you to attract users to the application. You would have to make a strong marketing campaign to make your food delivery application a success.
Earning money with a full-stack delivery model:
You can decide your fee for delivery as per your business model. You can decide how much profit margin you want to keep with the restaurant owners as well as the customers.
You can release special features for your customers to attract your users and engage them over the application.
Which food delivery business model should you choose?
Online food delivery is a very lucrative business, but only when it is done right. You can connect with us to discuss your food delivery business idea. We will help you select the business model. We also offer full-fledged app development for you to start with.
All of the above-mentioned food delivery business models have their offerings and cons. Be smart enough while you make the final decision. We wish that you be the next trendsetting application in the industry. All the best!