COVID-19, social distancing, and COVID-19 have helped restaurant patrons stay at home for the past several years. As a result, consumers have spent a lot of money on take-out orders from off-premises restaurants using delivery, take-out, or drive-thru services. The average American spends $67 per Week on takeout, with millennials spending $70 per week.
Our penchant for ordering takeout is expected to increase due to the popularity of delivery and takeout and continued caution about in-restaurant dining.
In order to meet demand and maintain restaurant operations, new food delivery services are springing up everywhere. Here are some tips from successful entrepreneurs on how to start your own food delivery company.
1. Find your niche
Many food delivery companies offer everything from delivery to restaurants to farm-to-table meals, meal kits, and direct delivery to restaurants. Finding your niche is the first step in starting a business. What special strategy do you have to solve this issue?
Stephanie Scherzer is the co-founder of Farmhouse Delivery. She started her company 11 years ago. Her background as a farmer was part of what she saw, and she wanted to solve it through her business.
Scherzer says, "I tried gardening in Austin, took them all to the farmer’s market, and realized that [the sales process] is difficult." She didn't know much about the industry when she started but decided to jump in with a partner.
Andy Wang, the founder of the food delivery company Spread worked before starting his business. He was a Groupon employee who built take-out and delivery products for restaurants. He knew restaurants' difficulties working with popular food delivery services that charged 20-30 percent commissions for every order.
Wang stated, "Restaurants should be prepared to pay a large amount of money to win customers." They shouldn't be required to pay for each subsequent order.
He was also aware of the challenges restaurants face in marketing. Wang stated that only a few restaurants could create their own websites and maintain email lists like larger chains. Facebook ads are not effective for hyper-local restaurants.
Spread is a new business model. Spread is a dedicated advertising network for restaurants, something Wang believes is lacking in the current market. This commission-free platform allows restaurants to reach the most qualified customers. It also helps them win more repeat customers.
Consider your target audience and their needs. Then, think about how your delivery service can meet those needs. Are your ideal customers looking to save money or time? Are they willing to help make their meals? Do they prefer home-grown products?
Your niche will be established by knowing what your ideal customers are looking for.
2. Choose your method of food delivery
Which type of food delivery company is best for your market? There are many options:
- Food delivery platforms: DoorDash and Grubhub are two examples of marketplaces. It is easy to set up a marketplace. Sign up restaurants, create a product, gather users, and then pass the orders on to restaurants. However, building a successful marketplace requires attention to details such as accepting payments and ensuring orders are filled correctly. You need to have a unique angle to attract restaurants to your marketplace.
- White label ordering service: Wang estimates that there are over 100 companies in this market. This space is not easy to access because of its low entry barrier: Just write the code and then sell it.
Platforms for ordering and delivering food: Similar to Uber Eats, this large-scale meal delivery strategy entails developing the logistics. This includes everything from creating an app to accept orders to setting up a network of restaurants and creating a delivery company.
- Meal delivery service involves working with a professional chef to deliver food to your home or business. A chef can prepare food in their own kitchen or a professional kitchen. Sometimes, the chef will have a set menu that only includes a few items. Customers can choose from a limited number of options. Other times, the chef may offer a wide range of options that customers can choose from. This is similar to ordering at a restaurant. The chef is the focus of a meal delivery service, not a restaurant brand. This service is great if you are looking for people who support local businesses and chefs in their community.
- Delivery service for meal kits: This approach is available to customers who need help cooking meals. Blue Apron, for example, requires customers to prepare portions of the meal while the ingredients are ready.
- The fresh farm produces delivery service: Many people are searching for fresh, farm-fresh produce, milk, and meat. This involves connecting multiple farms with customers using proprietary or third-party software. The farm will then deliver the food to customers' homes.
Your approach to delivery may change depending on whether you are doing restaurant delivery or another type of food delivery. Scherzer started her business as a produce delivery company. Later, she expanded to include the delivery of groceries, dairy products, and clean pastured meats. Although the company's offerings have changed, Scherzer's focus has remained: To support Texas ranchers and farmers and provide a "green convenience delivery service."
3. Set up a budget
Calculate how much money is needed to start a food delivery company. This figure can vary depending on your business model and your customers.
These are the things to keep in mind as you create your budget.
- Licenses. Which type of business license do you need for your state, city, or both? Federal licenses may be required for agriculture or trans, portation depending on what kind of food delivery service you run.
- Your workplace. Where will you locate your food delivery company? Your home, your professional kitchen, or a rented office will all be the base of your business.
- Insurance. Small businesses usually need liability insurance. You will also need commercial auto insurance is responsible for the delivery. Workers' compensation insurance may be required if you are hiring employees.
- Technology. Can you create your own software or use third-party software? Can you manage technology or hire an IT professional or developer?
- Equipment. Does your business need delivery vehicles, special food trays, food transport bags, commercial kitchen equipment, and other items?
- Marketing. What will it take to reach your target audience and give information about your company? What marketing materials, such as flyers, flyers, napkins, and branded napkins, will you require?
4. Plan the logistics of staffing, equipment, technology
Logistics is key to food delivery. Farmhouse Delivery was small back then. Scherzer and her partner pulled the products from the shelves and drove them around Austin in an old DHS van.
As the orders increased to over 100 and spread across other cities nearby, it became clear that they needed a new solution. Scherzer stated that ten new customers were found in four cities, instead of the usual 10 customers who live on the same street.
Her business now has a fleet of vans as well as box trucks. The truck's box trucks travel to major cities in central Texas to deliver food to the vans that then deliver it to customers' homes. Although 90 percent of deliveries are done in-house, TaskRabbit sometimes employs contract drivers to help with late deliveries or support.
Farmhouse Delivery needed more vans and routing software (Onfleet) to deliver faster. Delivery Biz Pro, a mapping service that texts consumers ten minutes before the delivery arrives, is another tool that Scherzer's drivers utilize.
"We avoid being late to deliver. We work in teams between 4 a.m. and 2 p.m. on Tuesday through Friday to get everything out. We will send a truck to out-of-town markets early in the morning so it arrives before noon. Vans can deliver for six to seven hours before it becomes too late.
Another important lesson was how to keep food cool and which containers to stack the deliveries in vans. They had to make several deliveries before opening the van doors without having products scattered everywhere due to too many hard turns and poorly stacked bins.
Wang knew logistics were complicated; initially, his company only worked with restaurants that could deliver the food. Spread is now a partner with Relay, a logistics company.
Wang advises that you could employ your staff, pay them an hourly wage and hire them, but this strategy will only work if there is a certain number of orders. This is solved by using a third-party logistics partner.
Scherzer's advice is to partner with someone who handles the delivery so that you don't have any problems with fulfillment, procurement, and delivery. Let someone else do the delivery, and you can focus on what you are good at.
A key part of logistics is ensuring that you have a way to communicate with customers. Jotform offers a range of food delivery order forms, including restaurant order forms and meal delivery forms. A grocery delivery form is also available. These forms can be embedded on your website to securely collect orders and payment information.
You can link directly to the restaurant site, from where you can place an order online. Wang, however, noted that not all restaurants have an online ordering system. His site lists only the phone number of the restaurant. He does note that online ordering is more convenient because there's no miscommunication, and the order can be confirmed.
5. Your target audience should be able to market your service
Scherzer admitted that they didn't spend much money on marketing. They started with word-of-mouth marketing strategies. This included hosting dinners at a farm-to-table and visiting relevant markets to explain their business.
We made gumbo for large numbers and gave out legal pads to obtain addresses [for new clients]. She added that she spent a lot of time with farmers, building relationships, price negotiations, and figuring out how to bundle products to pay each farmer what they made.
These options will help you market your food delivery company successfully:
- Social media. Show your appreciation for the delicious meals you offer by sharing photos. You can also use this to increase visibility for your company. People love sharing food photos, especially when they win a free meal.
- Website. In today's world, a user-friendly website is vital. Your website allows customers to order food or learn more about your company. Strategically placing marketing forms online can help customers engage with your company.
- Flyers. Whether paper or digital, they are a great way for people to learn about discounts and promotions. You can also add QR codes to link back to your site.
- Surveys. Get testimonials from happy customers. You can also periodically poll customers to learn about their experiences with your service to improve it.
- Attend networking events. Go to the places your target audience is at, such as food festivals and agriculture conferences. To make a lasting impression, hand out flyers and sample food.
Wang offers this advice for starting a food delivery company
: "You can validate and validate your idea without doing anything." He created a landing page, explained his angle, and designed a website. Then he watched how many people signed up. You can also do the same.