It is exciting to order food from the comfort of the home, right? The number of people ordering food online has been on a constant growth, and the industry is expected to be worth USD 442.5 billion in 2030.
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This unprecedented growth has encouraged many businesses to adopt this business model. But the question is, can this business model work? Is it possible for an on-demand food delivery app to bring in revenue as expected? Is this a sustainable food business model?
Don’t worry; we are going to discuss all these elements and more in this in-depth guide on the online food delivery business model.
In a nutshell, it is the convenience that prompted an increasing number of individuals to opt for food delivery over home-cooked meals. And every business wants to share this with a food ordering website or system.
Online food delivery customers can be categorized into two primary groups.
1. Those who want convenience
These are individuals with limited time at their disposal. They are willing to pay a premium for the sheer convenience of doorstep food delivery. Promptness and efficiency are of paramount importance to this group, more than the quality of food.
2. Those who want value
These customers prioritize cost-effectiveness. They are willing to endure longer wait times if it translates into lower prices. These customers are also quality-conscious and expect quality on par with their spending.
To succeed as an online food ordering app business, you need an innate understanding of the preferences of these segments. It comes down to striking the right balance to meet the diverse demands of the customers.
In an integrated food delivery business model, the restaurant provides a food ordering website or system and a delivery service.
Here is how it works.
Online food ordering system.
This is where the customer journey starts. The food delivery system of the restaurant offers a food order system. This is where the customers can browse the menu, choose offers, and place orders.
When the restaurant receives a confirmed order, the food is prepared and packaged for delivery. A dedicated team may oversee managing the delivery if the restaurant gets many online orders.
This is the team that’s going to deliver the food to the customers. In the integrated on-demand food delivery app business, the delivery service is included. Otherwise, it may be a third party who looks after the delivery part.
Real-time delivery tracking.
Most online food ordering apps enable the restaurant to track the order from the time of its placement, preparation, delivery, and customer review. This allows the concerned parties to address any concerns or issues as they happen.
The customers may have many queries regarding the service, the orders placed, payment issues, the quality of food, etc. The customer service team handles all these concerns in a timely manner to keep the customers satisfied.
Revenue sharing model.
The revenue generated through the food ordering system is usually shared between the restaurant and the online food delivery platform. The sharing ratio may be decided by the businesses involved.
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The online food delivery business model helps businesses in a range of ways. A few of the top benefits are given here.
Food delivery apps are more convenient.
On-demand food delivery apps make it easier to order food from the comfort of their homes. Who wants to drive to a restaurant, defy the traffic, and spend hours getting food?
You could be binging your favorite series on Netflix while the restaurant brings your food home.
That’s the kind of convenience that these food-ordering websites offer customers. And everyone loves that.
Reach more people.
Traditionally, restaurants are restricted by their geographical location. No one drives 10 miles to a restaurant all the time, right?
But with on-demand food delivery apps, restaurants can reach more people. Geographical location is suddenly not a restriction. You can serve customers even if they are at a distance.
And people can order food from their favorite restaurants all the time. It is more cost-effective.
The most significant expense of restaurants is the cost of infrastructure and staff. But with a food ordering system, you can cut these costs considerably.
All you need is a kitchen, a few chefs, and a takeaway app for restaurants with a delivery partner. You are set for tremendous growth. This is also the reason why many food businesses opt for food ordering systems.
With technology to help you at an affordable cost, you can bring down costs and improve revenue for more profits.
Delight your customers.
The chief reason for people to order food via an online food-containing app is for convenience. You can dial this up a notch ahead by making the app easy to use and navigate.
We are sure it will drive the customer satisfaction levels to go up further. They can order food anytime they want. Order from their favorite restaurant.
And they can pay any way they wish with a credit/debit card. All these options can make your customers even happier.
Better sales for restaurants.
Restaurants can reach more customers with an on-demand food delivery app. This was only possible for them with the app.
Customers who need help reaching the restaurant physically can order their favorite food from the restaurant using the app. And they get the order delivered in no time.
The result is more sales and revenue.
Understand the market and customers.
It is hard to get customer data when you run a traditional restaurant. There is no data about the customer’s interests, their purchase behavior, etc. With an on-demand food delivery app, it is a different picture.
You can learn what food items are ordered the most and when. What days are performing better? What areas do the most orders come from?
Based on this data, you can invest more in what works and stop investing in what is not working. This leads to better profitability and customer satisfaction, which is what all businesses need.
The online food delivery business is lucrative. There is no doubt about that. But it is not without its share of challenges, either.
Here are a few challenges to keep in mind if you are considering a food delivery app or takeaway app development for restaurants.
The competition is high
You want to enter the field because the industry is highly lucrative. Like-minded businesses also do the same. And the result is competition.
Therefore, you will have to innovate your approach to the industry and work hard to succeed.
If you are unwilling to work hard and invest as needed, you may not win.
High operational charges
Unlike traditional restaurants, online food delivery is tied to technology, which needs regular maintenance and management. You also need a team to take care of the app.
This can shoot up the operational cost of your business. In addition, logistics, fleet management, etc., may add other costs, too.
So, there needs to be an efficient system to manage this and to reduce the cost of overall operations.
You are dependent on the delivery partner
Many restaurants do not have a delivery app. They depend on delivery partners to serve their customers. This may not be the best option for your growth.
You might need to pay a higher revenue share to your delivery partner. The best way to address this issue is to have a food ordering system of your own.
It will help you enjoy all the revenue yourself.
The cost of infrastructure
The cost of maintaining a restaurant’s infrastructure is high. Add a food delivery app to the mix. It can become messy.
You need to manage the cost of technology, marketing, and maintenance.
And this is another challenge you need to face and manage when using an on-demand food delivery app.
User retention is challenging
The number of online food ordering apps is on the rise every single day. Customers have a lot of options to go for. And this makes it hard for businesses like yours to keep the customers retained.
The only way to retain customers is to deliver the best food, ordering experience, and occasional offers.
With an unrivaled user experience, it is easier to retain your customers.
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The challenges we have discussed above are universal for every restaurant. With the right approach to your business, you can manage your business effectively.
Here are a few ways that you can use to attract customers and grow.
Create exclusive app discounts and offers
Offering exclusive discounts when ordering food on the app is a great way to attract customers to your restaurant.
You can do this on days when you see fewer orders.
Make ordering food easier online
Ensure that your customers have a great ordering experience on the app. The app must be very intuitive and easy to use.
They can order food in a few clicks and make payments quickly.
The customers will come back if it is easier and quicker to order food on your app.
Create a strong community online
Creating a community around your app and restaurant is a great way to grow your business. When you have a community, people will share their experiences—good and bad—there.
You can use this to resolve their issues and ensure a better experience for them.
The community behavior will also help you grow your customer base.
Rely on social media for marketing
Using social media and digital marketing methodologies to grow your business is a great way to address the challenges of running an on-demand food delivery app.
It helps you reach the right audience who uses similar services and have similar interests.
You can also understand the audience’s behavior and cater to their needs specifically.
With large businesses like Zomato, Uber Eats, Swiggy, etc., making big bucks in the market, you might wonder if it's possible to grow in the field with an on-demand food delivery app made for you. We can confidently say that you can. We have developed numerous takeaway apps for restaurants, and they are doing exceptionally well.
In fact, one of our clients, Savoria, a multi-cuisine restaurant in Canada, has increased their orders by 53% and decreased their operational costs by 23% with our takeaway app for them. You can also do that by working with our mobile app developers to create an online food ordering app for your business.