how to start a food delivery service

How to start online food ordering app business - A complete guide

by Kaartik Iyer

Over a decade back, it was difficult to connect food and the reach that mobile telephony or internet provided. As a matter of fact, there appeared to be little that technology could do beyond providing exotic recipes to you.

The rapid rise in the use of smartphones, and the associated rise in mobile apps, led to a number of major changes in the way people traveled, worked and ate.

Enter food ordering apps.

Feel like eating the most savory cakes in town? Wish to sample the yummiest food in the neighborhood? May be a busy day in the office left you no time to cook?

No worries. Simply pick up your phone, open any an app like Uber eats ordering app and order. Then sit back and relax, waiting for your favorite dish to reach you soon.

That’s the power of food ordering apps. Whether it’s Chinese on demand food delivery or pizza delivery, food ordering apps have been successful in a big way because of a variety of reasons. To begin with, it satisfies one of humans’ most fundamental needs, namely hunger.

But there’s a lot, lot more than that.

A food ordering app is a win-win situation the way it makes everyone in the loop happy.

The customer who orders food is happy because she gets food home-delivered. The restaurateur is happy because she serves more guests without using her own premises. And of course, the app company is happy because they get to earn from commissions and other associated income, without building manufacturing facilities.

# So you’re thinking of building a food ordering app?

That’s a great idea!

Food distribution businesses have grown huge: Sysco, for instance, today has 197 distribution facilities and employs about 51,700 employees. That speaks volumes of the potential of the distribution industry, once you reach the critical mass.

Just like any other business, you’ll need to research on how a food ordering app for restaurants works, what is the food delivery business model, what sort of teams you’ll need to build the app and so on.

Of course researching will take a good deal of time.

To help you save time, we’ve put together this guide. It contains everything – hopefully – that you should know about food ordering apps. More importantly, the guide prepares you for the next phase, since you will be better prepared after reading this guide.

If you like to use technology to profitably help people eat great food, this guide will help you take the plunge.

Should you invest in a food delivery app?

There are many established players like Postmates, Doordash, FoodPanda, Zomato, Dished and so on, currently operating. Surely some of them are already operative in the region where you are considering entering.

So the question is: Is it a good idea?

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Consider this: The restaurant industry sales in the US alone grew from US$ 586.7 billion in 2010 to US$ 798.7 billion in 2017. That’s a 36% increase. Most economies have seen a similar, healthy growth in the business, considering that people are working longer, traveling more to work and are left with less time than ever before to cook. Effectively, people are always searching for answers to questions like “take out near me”.

Some businesses are expanding using the acquisition model – for example, Amazon acquired Whole Foods in 2017. And when you see companies like Amazon stepping in, you know the delivery business is the right place to be. Besides, most experts agree the food delivery market is under-served, as of today.

So the answer is yes, you should invest in a food delivery app.

If you build the right technology, are committed to serve better and carry a mission of making sure people have access to good food, investing in an app makes a lot of sense.

How does a food ordering app work?

The working of a food ordering app is rather simple.

A customer opens the app in her mobile phone. From the list of restaurants that the app partners with, the customer chooses the restaurant and selects the food she would like to order. She keys in some details like her name, delivery address and so on. If she’s a regular customer, most details would already be saved inside the system from previous orders.

After she confirms the order and makes the payment through the payment integration, the restaurant receives the details of the order. The restaurant prepares the food as per the order and informs the delivery staff once the food is ready.

The delivery personnel are mostly freelancers and not employees of the app company. Upon receiving the confirmation from the restaurant, the delivery personnel pick up the package (i.e. food) from the restaurant and deliver it to the customer.

What are the types of food ordering apps?

While there is no formal classification, we can normally classify food ordering apps as follows:

  • Apps that partner with various local restaurants or food trucks who prepare the food. That’s how DoorDash works.
  • Brand-exclusive apps that work only with a particular brand (think Domino’s apps)
  • Apps that source groceries (e.g. GroceryPal)
  • Apps that source you fruit, veggies or dairy products, often from a specific location (e.g. an app that offers Florida oranges or the New Zealand Kiwi fruit)
  • Apps that partner with home-businesses, each of whom specializes in only a couple of dishes. An app to sell homemade food, ike a single mother who bakes apple pies to die for or a war veteran who flips burgers like nobody’s business.
  • Apps that offer meal kits, which deliver ingredients for specific recipes based on which the customer cooks the food herself (think BlueApron or Plated)
  • Apps that source exotic food items (e.g. Simba Kea strawberries or square watermelons)
  • A white label food delivery app for your restaurant. Easy to set up and personalize.

How does a food ordering app earn money?

The food ordering app has primarily three sources of revenue:

  1. Commissions from partnering restaurants: Depending upon a number of things, your app can get you between 10% and 25% of your order size in commissions. These margins are bigger for exotic food items.
  2. Listing fees: The number of restaurants listed in your app will quickly grow. Then you will have a listing of all restaurants, wherein sponsored listings will go right at the top (or are highlighted). These sponsored listings are essentially paid listings, so that’s another major source of revenue.
  3. Delivery charges: You may ask the customer to pay delivery charges, if the location is remote or the order value is low. These charges are normally pegged to expected costs and don’t really contribute to profit.

However, there are additional channels by way of which the food ordering app can generate additional or higher revenue:

  1. Food festivals: Encourage partner restaurants to arrange in food festivals that would be highlighted in listings. Given the right promotion and the right food, sales will see a periodic rise.
  2. Co-promotions with listings: Beverage brands can be sold independent of the restaurant chosen by the customers. That means no matter what cuisine or what restaurant your customer chooses, you can still tie-up with and promote Tropicana.
  3. Subscription-based models: This is more common with grocery apps and meal kits, where customers would like to receive items without having to place orders daily.
  4. Apps that source exotic food items (e.g. Simba Kea strawberries or square watermelons)

Costs associated with a food ordering app

The principal costs associated with the app are as follows:

  1. Development costs: If you develop the app in-house, you pay salary to your teams. If you outsource the app, you pay a fee to the app developer company.
  2. Payments to the delivery teams: How much does food delivery cost depends on mostly local factors. You will be paying the delivery charges yourself. You may charge some delivery fees, especially if the order value is below a certain number.
  3. Maintenance costs: You will be maintaining, supporting and troubleshooting the app over time. There are costs associated with that. Alternatively, you may outsource this activity if your own technical bandwidth falls short or proves too expensive.

What is the business model of a food ordering app?

The business model of a food ordering app is a typical ‘access economy’ business model.

On the other hand, there are customers who place orders. The app offers the technological backbone. Finally, there are the delivery personnel who collect the order and make the physical delivery at the address requested by the customer.

Alternately, apps may have an option of a pickup, where the customer herself pickups the order from a designated outlet.

Promotions of such apps is very important. When people google “restaurants that deliver near me”, you should be towards the top of the search results.

Benefits to the Food Ordering App company

  • The app provides the technology platform and makes money from it.
  • For every new restaurant added to the app, the incremental costs are marginal while revenue generation is higher.
  • The app company typically hires the delivery staff on a per delivery basis, so there is minimal fixed cost.
  • The app doesn’t own any kitchens, yet profits from the food delivery business.

Benefits to the Restaurant

  • Restaurants can increase sales with the wider exposure the app provides
  • They can serve customers outside of their own locality.
  • They don’t need to have their own logistics arrangements and become delivery restaurants themselves.
  • They don’t need the sitting space to serve these customers.

Benefits to the customer

  • The customer gets food delivered at the location of her choice, with a couple of taps on her mobile screen.
  • The customer saves a lot of time that would otherwise be spent in traveling and waiting at restaurants.
  • The customer can benefit from various promotional offers associated with the app.

Benefits to the delivery personnel

  • The delivery personnel are freelancers, so they can choose their own working hours.
  • It can potentially be a good source of income.
  • Depending upon the terms of the app, the delivery personnel may get to keep the tip, in full or in part, that customers award.
  • Their earning would in direct proportion of the number of deliveries they make, so more deliveries mean more money earned.

What are the things to consider while building a food delivery app?

At the end of the day, your food delivery service is going to be a business platform. So naturally, you want to make money to stay profitable, reward to your teams and keep adding value to the business.

As a result, there are a few things you must consider when you invest in a food delivery app. Here is a small list of things you must consider:

  1. Technology: Believe it or not, your app is arguably the most significant component in the success of your venture. If the app isn’t designed keeping convenience to the customer in mind, it will likely fail, no matter how good your partner restaurants are.
    You will need a sound tech team with a lot of experience in building apps, if you’re considering building the app yourself. Alternatively, you can outsource it to a company that’s skilled in building apps. The second option makes a great deal more sense because you’re bringing in someone whose core competence is building mobile apps, something different from yours.
  2. People: Your delivery partners are your resources. You don’t need to employ them on a full-time basis; it will be a freelance arrangement. When you begin, you must know the kind of training you’ll need to impart to your delivery partners. After all, you’re going to be in the service business, so your service will decide your success.
  3. Partners Restaurants: What do you look for in a partner restaurant? Hygiene and taste will be the top two criteria. Next, you’ll want to check the range of foods available, as also the preparation times required for each. Finally, you’ll have to understand their pricing policies and the kind of commissions will be available for you.
  4. Features: The easier you make it to order, the faster your food ordering app grows. Make sure there are enough, but not too many, features in the app. Ease of use is the most important, so keep that as the top priority.
  5. Other areas: Meal-kit suppliers must take care of the right packaging. Recipes, if includes, must be simple enough to follow. For instance, BusinessInsider clearly disliked the packaging of Chef’d as well as the accompanying cooking instructions.

Researching you potential customers for your food ordering app

As noted earlier, we live in an access economy. People continue to struggle with time for preparing food on their own. An app to find delivery food solves this problem by eliminating the need to prepare food at home

In that context, your target customers are those looking for on demand food delivery. These include:

  • Busy executives
  • Commuters with hectic traveling schedules
  • Startup entrepreneurs
  • Young and upwardly mobile segment that’s willing to adopt technology
  • Foodies and food lovers who love to keep trying a variety of food frequently
  • Students not living with parents
  • Senior citizens who are constrained from frequently visiting restaurants but are capable of and willing to pay for the same food delivered at home

Technical features of your food ordering app

The following are the most critical technical aspects of your ordering app:

  • Robust: The app must be sturdy and free from bugs. It should not crash under heavy traffic.
  • Secure: A lot of personal data of your customers will be stored in your app database. That means your app should be secure at all times.
  • Payment integration and security: Customers make payments in your app. That means you should have high-security payment integration
  • Database: The app carries details of restaurants, foods, order placed and so on.
  • Access features: Restaurant may be given access to parts of the app, where they view, confirm and maintain history of orders accepted and executed.
  • Platform: Your app will available on popular app platforms. Accordingly, you may decide to build the app for Android, iOS or hybrid platforms.
  • Coding language: What you want in your app will decide the coding language. Popular coding languages include Java, PHP, Python, Ruby on rails and so on.
  • Revenue sharing: Your app can also be integrated with your bank. When a customer makes a payment, the backend automatically calculates the correct commission and credits the remaining amount in the account of the restaurants.
  • Mobile and computer: While an app is primarily mobile-based, there would also be a parallel version that runs on computers.
  • CRM: Identify the kind of CRM (Customer Relationship Management) software do you wish to integrate with the app.
  • Social: Give customers the freedom to order through their favorite social media channel.
  • Notifications: Your customers receive text messages regarding the status of their order.

User features of your food ordering app

Don’t forget to extensively study the features in the current apps of competitors before you decide what you want in your food ordering app. The following are the important features your customers would like to have in the food ordering app:

  • Great UI/ UX: Make ordering food not only convenient but a joyful, pleasant experience.
  • Simplicity: Keep it simple, free from distractions.
  • Decent menu layout: Attractively laid out menus that are clean delight and encourage customers to buy more.
  • Search options: Let your customers conduct searches fast and using the filters they want: restaurants, cuisines, nearby locations, pricing, offers, food festivals, ratings.
  • Geo-location: This feature lets your customers search for restaurants that are closest to the place where they want the order to be delivered.
  • Security: Your customers must be able to trust you with their data, including their credit card details.
  • Tracking: Customers should be able to track their orders. Waiting for food is often fun, but not if you have no idea when your order will reach you.
  • History of previous orders: Most customers have a favorite dish or a preferred restaurant. Storing their preferences shortens the ordering time and builds loyalty.
  • Loyalty points: Make sure you have some kind of loyalty program. In the long run, customers should feel rewarded for having been with you.
  • Facility to tip: Allow your customers to tip the delivery personnel.
  • Ratings: Make it easy for your customers to leave their ratings for restaurants and delivery personnel. That way you as well as other customers know who all are the rockstars in your channel.
  • Sharing: Let your customers show their love for your app on social media. That turns them into your ambassadors.
  • Payment options: Consider payments alternatives like e-wallet, PayPal and Cash On Delivery (COD), in addition to credit or debit cards.

Should you build your food ordering app or should you outsource it?

To answer this question, you must first answer another question: What is your core competence?

What is the one thing that you do really, really well?

If you (and your team) are extremely good at writing clean code, creating great designs and understanding the smallest aspects of UI/UX, you should build the food ordering app yourself.

If, on the other hand, you see yourself as an entrepreneur who’s skilled at marketing, building relationships with vendors and maintaining and motivating teams, both own as well as freelance, you should outsource building the app.

To give context to the answer, here’s a list of people you’ll need when you build an app yourself:

  • Between 2 and 4 developers
  • 1 or 2 UI/UX designers with a sound understanding of how minor changes impact sales
  • 1 Admin panel developer
  • 1 developer who understand payment and social media integrations (optional)
  • 1 Testing and quality verifying engineer
  • A project lead or project manager

If you don’t have a team that looks like this, it’s pointless trying to build the app yourself.

Cost of a food ordering app

Once you decide to outsource building the app, the next question is: How much would a food ordering app cost?

Pricing for an app for food delivery service depends mainly upon two things:

  1. Location: Getting an app developed within the US or most of European countries is far more expensive than getting an app developed in India.
  2. Features: It’s obvious that the more feature-rich your app, the higher will be the ticket size.

Based on the features, you could classify the apps in three categories.

  1. Entry-level or basic apps: The features are basic. UI/UX are simple, and often not customized. It’s a great idea if you don’t expect your business to grow.
  2. Mid-level apps: Customized UI/UX, structured payment integrations, social media integrations, and advanced search features come with mid-level apps.
  3. High-end, high-functionality apps: These apps leave out nothing – think Doordash or Postmates. A variety of third-party API integrations, great UI/UX, audio and video processing, stronger and bigger database management tools, extensive personalization for every user etc. are available in such apps. The budget for such apps begin from US $xyz

The cheapest food delivery app can cost in the range of US $10000 to 15000$ when you try building it yourself without prior experience.

However with our ready made solution, you would be able to launch the app and be market ready in less than half the time & cost.

Final words

On demand food delivery is in its rapid-growth stage. Entrepreneurs are grabbing opportunities and building solutions that can scale quickly.

Every piece of criticism and feedback is carefully evaluated and fed back into the system. Venture capital funds are excited too. We don’t want you to miss this wonderful opportunity!

With all that, you’d surely want to know what an amazing food delivery app development company can do for you. The right outsourcing partner will not only have great technical bandwidth but also deep experience from which you can draw the best advice.

Restaurant mobile app developers will be the right sounding board on which to explore your idea. From developing the concept to creating a food delivery app like Uber to submitting the app in Google Play Store or App Store, the partner will be the key to your success.

Why don’t you get in touch with us with your questions? We’ll be happy to discuss whatever you have in mind.

We’ll gladly put all our skills and experience to use in helping you take the idea to the next level.