Popular Business Models for
On-Demand Food Delivery Apps
The purpose of existence and functioning of on-demand food delivery startups share a common psychological value in the on-demand economy. All food delivery startups take up the responsibility to conserve the time and efforts of people when it comes to ordering and receiving food. They also look into the provision of convenience to their deserving customer base.
Food startups have taken the approach of making it brisk and easy. There are three core components of the food ordering process – Order, Cook and Deliver. And based on these three elements, the proven to work business models for food delivery startups, which are:
1. The Order Only Model
Through this online food delivery business model, the key target is to attract new customers via an integration of web and mobile channel.
- The food ordering process under this model starts with the customer placing an order on the website or mobile app initially. This order is then collected through an app or dashboard by the restaurant. The restaurant will confirm the order has been received by sending out an alert through an email or automated phone call.
- The delivery process is undertaken by a person who can be either employed by the restaurant or directly by the company.
The startups which follow this model have restrictions in terms of price and cuisine in their service offering on request. Their basic association is with customers who order low-key delivery foods such as burgers, pizzas, Chinese etc. Optimization and/or control of both the quality and pace of food delivery services is not possible for the food startup under this model. The startup being a pure software company have possibilities to scale higher with the prospects of remarkable growth.
2. The Order & Delivery Model
Under this model, the focus is on the first & third component of the food ordering process – ordering and delivery. Here, the customer orders and requests are brought to the stores and also the distribution is handled by themselves. Various distinct courier service providers are linked through an app for distribution where customer orders are received and delivery details are also exchanged.
Under the food ordering process, the orders are submitted in the app or website where menus from different websites are posted online. Once the order is received from the food delivery app by the restaurant, then the delivery company is notified of the time when the package needs to be collected and of the destination address.
Under the delivery process, a courier service is assigned that shall detect the locations. On the receipt of the order, the courier company decides whether or not to take up the work. From the multiple couriers the job is sent to, the first one to confirm gets the assignment.
Since taking up this model means looking into the logistics despite being software company, much efforts go in the former domain to buck up services. Therefore, for a food company that follows this model, it becomes difficult to scale up.
The restaurants can be charged a flat commission as well as the customers can be charged a delivery fee depending on the order amount and delivery location.
3. Fully Integrated Model
The entire food cycle is managed under this platform. The ingredients are sourced after which the meals are prepared and delivered. Individuals as well as corporate clients are catered to under this model.
Costly investments need to be made under this model though as operational expenses are also high. In order to cut down operational expenses, order density needs to be increased so that multiple deliveries can be made at a time.
Which model to choose?
A fresh entrant to the food delivery market should opt for the simplest business model – order only – and gradually expand as the base of partnering eateries is set. As making arrangements for a robust delivery system may work out to be exorbitantly expensive. A niche focused food delivery startup may also be risky to execute.