A Complete Guide to the Food Delivery App Business Model

The global food delivery market has rapidly transformed into a powerhouse, now valued at over $150 billion. Since 2017, the market has more than tripled in size, with the U.S. on-demand food delivery app sector alone doubling since the onset of the COVID-19 pandemic. This momentum is expected to continue, with a projected annual growth rate of about 8%. The surge in user-friendly apps, tech-driven networks, and rising customer expectations has cemented ready-to-eat food delivery apps as a dominant force in the digital marketplace.

However, if you’re just starting out in strategizing your food delivery app business model, the following insights will help you navigate this dynamic space:

• Analyze the Market
• Define Your Target Audience
• Outline Your Business Goals

With the right strategy, you can position your food delivery app for success in this competitive market. Here’s a deeper dive into various business models and how they can shape your on-demand food delivery app.

The Surprising Truth Behind the Food Delivery Business Model – Stats You Can’t Ignore

As a newcomer to the food delivery space, it’s essential to gain a clear understanding of the different business models that drive this $150 billion industry. Knowing these models and their potential advantages and challenges will help you make an informed decision.

Let’s explore the most common on-demand food delivery business models that entrepreneurs can adopt.

1. Order-Only Model

For entrepreneurs just starting out, the Order-Only Model is a fantastic business plan to consider. In this model, your food delivery app acts as a bridge between customers and restaurants. The app allows customers to browse a wide range of eateries and place orders. However, the restaurant manages the logistics of food delivery themselves, either through their in-house delivery staff or a third-party delivery service.

In this case, you, as the app owner, focus on building an easy-to-use app, managing customer orders, and ensuring seamless connections between users and restaurants. The logistics—specifically the delivery—are handled by the restaurants themselves.

Monetization Options:

• Commission Model: Charge a percentage on every order made through your app. This typically ranges from 20% to 30% of the order value, plus delivery charges.
• Feature Listing Fees: Restaurants can pay to have their listings appear at the top of search results or be highlighted to customers.

Workflow:

1. Customers place their orders through the app.
2. The app notifies the nearest restaurant of the order.
3. Once the restaurant accepts the order, the customer is notified.
4. Payment is processed securely via the app.
5. The restaurant handles delivery, either with their own team or a third-party service.

2. Order and Delivery Model

The Order and Delivery Model takes the order-only model a step further. In this business model, the app not only connects customers with restaurants but also handles the delivery logistics. This can be a game-changer for restaurants that don’t have the resources to manage their own delivery fleet.

In this model, your app will manage deliveries, assigning riders to pick up and deliver orders from restaurants to customers.

Monetization Options:

• Delivery Charges: Charge customers for the delivery service, particularly for non-premium users.
• Subscription Model: Offer a membership option that provides benefits like free delivery or exclusive discounts.
• Registration Fees: Charge restaurants to be listed on your platform and access your customer base.

Workflow:

1. Customers place orders via the app.
2. The restaurant is notified and prepares the order.
3. Once ready, a rider (either employed by your app or contracted) picks up the order and delivers it to the customer.
4. Real-time tracking ensures customers are kept informed throughout the process.

3. Fully Integrated Model

The Fully Integrated Model is a more comprehensive approach where the app owner not only facilitates the connection between customers and restaurants but also owns and operates the kitchens. This model, often referred to as the cloud kitchen or ghost kitchen model, eliminates the need for physical dine-in locations and focuses solely on food delivery.

In this case, you will manage everything from the kitchen (where meals are prepared) to the delivery process, essentially running a restaurant without the need for traditional brick-and-mortar infrastructure.

Monetization Options:

• Delivery Pricing: Set your own prices for delivery, shared between the app and the restaurant.
• Premium Features: Offer services like scheduled deliveries, personalized meals, or corporate meal plans to increase customer engagement.

Workflow:

1. Customers choose from the menu available on the app.
2. The app notifies your cloud kitchen to prepare the meal.
3. Once prepared, the delivery team picks up the meal and delivers it to the customer.
4. Customers enjoy a seamless experience with a wide variety of options tailored to their tastes.

4. Meal Kit Delivery Model

The Meal Kit Delivery Model allows customers to order pre-portioned ingredients for specific meals, along with detailed recipes to cook them at home. This model has gained popularity as it combines the convenience of food delivery with the experience of home-cooked meals.

In this model, you’ll need to employ chefs to create recipes, work with suppliers to source ingredients, and organize logistics for delivering the meal kits.

Monetization Options:

• Subscription Model: Offer weekly or monthly subscription plans where customers receive regular deliveries of ingredients and recipes.
• Upselling: Add additional products such as snacks, beverages, or premium ingredients to increase order value.
• Cross-Promotions: Collaborate with other brands or food companies to offer exclusive recipes or ingredient kits.

Workflow:

1. Customers browse the meal kit options via the app.
2. They select their desired meals and customize their orders based on number of servings.
3. The meal kits are prepared, and the ingredients are packed for delivery.
4. Customers receive the kits and cook the meals at home.

Final Thoughts: Building Your Food Delivery Business Model

Deciding on the right food delivery business model is a crucial step in setting up your app. Whether you’re going with a simple order-only model or diving into fully integrated operations, each model offers its own set of advantages and challenges. It’s important to evaluate your target audience, available resources, and long-term goals before committing to a specific approach.

As you embark on this journey, collaborating with the right app development partner can make all the difference. At Softkingo, we offer a range of solutions and expertise to help you build a food delivery app that stands out in the market. Our experienced team can guide you through the process, ensuring your app meets the needs of today’s tech-savvy, on-demand customer.

Ready to turn your food delivery app idea into a reality? Let’s connect, and together we’ll create an app that inspires the next wave of innovation in the food delivery space.