Food Delivery App Business Model for Delivery Businesses  

The online food delivery business revenue is projected to reach US$1.20 tn in 2024. Using food delivery apps to get groceries and other meals has become a daily necessity. Therefore, now is the ideal time for business owners to set foot in this market and start their own food delivery business with a good food delivery app business model.

However, before starting your food delivery business, you must understand significant things that help you succeed in this industry. You should know about the top food delivery business model, its pros, cons, and some other things that effectively impact the success of your business. 

Therefore, for your help, we have gathered some information about various business models of food delivery apps that will help you make an informed decision for your business. 

Stats on the Food Delivery Business Model

Below are some vital stats on the food delivery apps business model.

• The number of people ordering meal delivery online is projected to reach 2,691.0 million by 2026.
• 60% of US customers place an order online twice a week.
• According to Statista, 2018-2022, the online food delivery market was 33.2 billion USD.
• In 2020, between February and March, the search for food delivery software increased by 179%.
• By 2022, grocery and restaurant delivery dollar volume reach $99 billion. 

Types of Food Delivery App Business Model

The food delivery business model has different types. We discuss the most popular ones that dominate the online food ordering and delivery market.

1. Order Only Model

Customers connect to the local restaurants in this food delivery business model. It performs exceptionally well for the initial generation of on-demand meal delivery services.

With this business model for food delivery, the online ordering platform connects customers to local restaurants. This model also makes it easy for customers to place orders, and the restaurants deliver orders easily.

These platforms typically charge restaurants a commission fee of 7 to 15 percent for each successful order placed through their platform. 

Just Eat, UberEats, and Delivery Hero are a few big names that have adopted this model in the food delivery industry. You can also use the UberEats business model for your business by analyzing it in detail and making sure it aligns with your business requirements.

Working of Order Only Model  

The order-only model in a food delivery business focuses primarily on taking customer orders without handling the food preparation or delivery logistics. 

Here is the workflow of this model. 

1. Platform Setup

Website/App: A digital platform (website or mobile app) is created for customers to browse menus and place orders.

Partnerships: The service partners with local restaurants or food vendors who prepare the food.

2. Customer Interaction

Menu Display: Customers can view a variety of restaurant menus on the platform.

Order Placement: Customers place orders through the platform, selecting items and providing delivery details.

3. Order Processing

Notification to Restaurant: Once an order is placed, the platform notifies the relevant restaurant to prepare the food.

Order Confirmation: Customers receive confirmation of their order, including estimated preparation and delivery times.

4. Delivery Management

Third-Party Delivery: The model often relies on third-party delivery services (like Uber Eats or DoorDash) to handle the logistics. Alternatively, the platform may employ its delivery staff.

Tracking: Customers can usually track their orders in real time through the app.

5. Payment Handling

Payment Processing: The platform processes payments, typically taking a commission from the restaurant for each order.

Revenue Model: Revenue is generated through delivery fees, service charges, and commissions from partner restaurants.

Pros	Cons
No need to face any issues related to food delivery	Limited menu items
Highly scalable	Charge a fixed delivery fee
Increased visibility	High commission fees
No upfront costs

Challenges of Order Only Model and How to Overcome Them

Here are some challenges associated with an order-only model and potential ways to overcome them:

Customer Dissatisfaction

Customers expect their orders to be fulfilled promptly and accurately. If an order-only model fails to deliver on these expectations, it can lead to customer dissatisfaction and negative reviews, damaging the reputation of the business. 

Solution: To overcome this, it is important to establish efficient processes for order processing, fulfillment, and delivery.

Lack of Visibility

An order-only model may lack transparency and visibility into the order fulfillment process. This can make it difficult to provide accurate order status updates to customers or address their queries effectively. 

Solution: By implementing order tracking systems and establishing clear communication channels with customers, businesses can enhance visibility and improve customer satisfaction.

2. Order and Delivery Model

The order and delivery model is another type of on-demand delivery business model. In this model, the restaurants are not concerned with the delivery. The logistics company or a third-party courier service handles all the delivery processes.

The delivery service provider works with food delivery platforms to provide food faster. The courier decides on order delivery costs. Well-known food delivery companies like DoorDash and Zomato use this business model for food delivery. 

Pros	Cons
Customization of services	Limited restaurant choices
More chance to earn more commission	For setting up your team, invest time and money
Control over the entire delivery process	High operational costs
There is no need to invest in the delivery fleet	Delivery time constraints

Challenges of Order and Delivery Model and How to Overcome Them

Below are some common challenges of the order and delivery model and some best ways to overcome them:

Inventory Management

Efficiently managing inventory is crucial to ensure that products or services are available for timely delivery. Challenges may include inaccurate inventory tracking, stockouts, and overstocking. 

Solution: Implementing an automated inventory management system, using real-time data, and establishing strong supplier relationships can help overcome these challenges.

Scalability

As businesses grow, scaling the order and delivery model can be challenging. It involves expanding operations, managing increased order volumes, and maintaining service quality. 

Solution: Implementing scalable technologies and investing in additional resources can support the scalability of the order and delivery model.

3. Fully Integrated Model

This best online food delivery model for food delivery service is the most flexible. In this business model, the restaurant owner is responsible for everything from meal preparation to delivering the food to the customers.

This integrated food delivery model serves a specific area, and meal delivery startups frequently work with chefs.

Pros	Cons
Complete control over the process	High initial investment
Flexibility in services	Limited restaurant variety
Brand consistency	Operational complexity
Cost savings	Market entry barriers

Challenges of Fully Integrated Model and How to Overcome Them

The main challenge associated with a fully integrated model is high logistics operational costs. One way to overcome this challenge is to increase the density of orders to be able to make multiple deliveries at a time. This way you can at least lower logistics expenses.

4. Meal Kit Delivery Model

This model is also known as the restaurant-to-consumer model. This fast food delivery business model is profitable. In this model, the restaurants deliver premium quality ingredients to their customers. This on-demand delivery approach lets customers choose vegetarian and non-vegetarian meals. In this model, multiple restaurants can’t operate. Food businesses usually adopt the meal kit model.

Suppose the businesses want to opt for the meal kit delivery model. In that case, they will hire a team of chefs to create innovative recipes, a staff to distribute the meal kits, and suppliers to provide quality ingredients.

Pros	Cons
Time-saving	More expensive
Convenience	Cooking skills required
Reduced food waste	Market competition
Don’t rely on a third-party food delivery platform

Challenges of Meal Kit Delivery Model and How to Overcome Them

The quality standard is the main challenge of the meal kit delivery model. To resolve this problem, you should partner with established businesses that deliver fresh, high-quality ingredients in the right quantity, at the right time.   

Food Delivery Business Model Canvas

Here is a business model canvas for a food delivery service:

Factors to Consider for Choosing the Best Food Delivery App Business Model

A successful food ordering and delivery business follows a specific food delivery revenue model and business model. However, when several business models of food delivery apps are available, sometimes it is challenging to choose the right one. Therefore, we have compiled some tips to help you make the right decision.

Understand Your Needs: You have to identify your business needs and goals and then choose the delivery service business model according to them. You also know your financial capacity. Otherwise, it becomes a huge problem.

Do Research: Before starting an online food delivery business, invest some time in a market analysis. Conduct thorough market research and understand the latest food delivery trends and your target audience. 

Competitor Analysis: Study existing food delivery apps in your target market. Analyze their business models, strengths, weaknesses, and customer feedback to identify opportunities for differentiation.

Scalability: Choose a model that allows for scalability. Your business should be able to grow and adapt to increased demand, expanding to new locations or offering additional services.

Differentiation: Identify a unique value proposition differentiating your food delivery app from competitors. It could be special features, exclusive partnerships, or a focus on sustainability.

Cost: Evaluate the expenses associated with selecting the business model. Consider factors such as app development, server costs, software updates, and ongoing technical support. Also, determine the commission or fee structure charged to restaurants or customers. 

Customer Experience: Providing a seamless and enjoyable experience for customers is crucial for the success of a food delivery app. Make sure that the business model you select can help you provide the best experience to your customers. 

Steps to Create the Food Delivery App Business Plan

A well-crafted business plan is a roadmap for your business. It acts as a guide that outlines the main steps needed to ensure the success of your business.  

Below are some steps to help you create the food delivery business plan. 

1. Create a Business Plan

Before creating the menu, you must create a food delivery business plan. For effective planning, a daily planner template can assist you in structuring your business plan and staying on track with both short-term and long-term goals that align with your business objectives.

Make sure that you have a clear understanding of the mission and vision that you want to achieve. 

2. Decide the USP (Unique Selling Proposition)

Select the unique approach that helps you stand out in the competitive food delivery market. You must identify your USP that makes you different from or better than your competition.

Moreover, it is the distinguishing factor that makes your customers return for your services and products. 

Here are some ways that help you identify the USP for your business.

• Brainstorm ideas 
• Identify your customer
• Analyze your competitors
• Identify your strengths and weaknesses
• Make your USP clear and concise

3. Determine the Revenue Stream 

Identify the revenue stream you can use to generate revenue for your business. Several revenue stream methods are available, so choose the one that aligns with your business objectives. 

4. Allocate Budget

In this phase, you have to follow these strategies: 

• Prepare detailed financial projections, including revenue, expenses, cash flow, and profitability. 
• Identify the funding requirements and potential sources of capital, such as investors or loans. 
• Outline your pricing strategy and revenue model (e.g., commission-based, subscription, or a combination).

5. Promote your Food Delivery Business 

It is the main step that you should add to your business plan. It shows you how to promote your successful food delivery business from scratch.  

• Describe your marketing channels and campaigns to attract and retain customers.
• Explain your sales strategy, including any partnerships or distribution channels.
• Discuss your branding and positioning within the food delivery market.

6. Risk Analysis and Mitigation

Identify the potential risks and challenges your food delivery app may face, such as regulatory changes, competition, or technological disruptions. Outline your strategies to mitigate these risks and address any contingencies.

7. Implementation and Milestones

Provide a detailed implementation plan, including the development timeline, launch strategy, and key milestones. Discuss any legal or regulatory considerations that may impact your business operations.

Frequently Asked Questions

1. Who uses food delivery apps the most?

Adults mostly use the food delivery apps with lower incomes ($0-$9k). While just the third-highest income ($150–175,000) also uses food apps. 

2. What food delivery app costs the most?

UberEats is the most expensive food delivery app that costs 104.2% more than buying directly.

3. What is the concept of online food delivery?

Online food delivery is buying food online from different restaurants and delivering the food to the doorstep. The process of online food delivery is simple and consists of some steps such as:

• Customers browse the restaurant
• Check the menu items
• Choosing an item
• Choose the delivery option
• Make a payment
• Order confirmed
• The restaurant prepares the order
• The rider delivers the order

4. What is the aim of an online food ordering system?  

The main aim of an online food ordering system is to provide a platform that simplifies the ordering process for customers and restaurants. With an online food ordering system, restaurants can manage their operations seamlessly, and customers order food online without hassle. 

5. How much does it cost to develop a food delivery app?

The developing cost of the food delivery app depends on various factors, such as:

• Complexity
• Features
• Platform
• Development method and more

 6. Are food delivery apps profitable?

Yes, creating food delivery apps for your business is profitable and helps you generate revenue. 

7. How much does it cost to develop a meal kit delivery app? 

For meal kit delivery app development, the average cost ranges between $15,000 to $60,000. Design, platform, tech stack, features, time required, and development team are the factors that influence the cost.

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