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This article provides a guide on how to start a food delivery business. The food cum restaurant business is thriving and profitable. The only obstacle is that the big players have occupied the available space and for a new player to emerge, hard work and perseverance must be the order of the day. However, don’t be scared and take my word for it; opportunities still abound for food delivery service entrepreneurs who indeed wish to fight the battle and excel in this business.

Food delivery service is the process of executing orders: i.e., preparing meals and delivering it to customers at their locations. Food delivery service is indeed a courier service that provides meals on-demand. The rules are placed by customers and executed by stores, restaurants, or the use of smartphone applications, websites, or telephones. Such deliveries include groceries from grocery shops as well as cooked meals. Eating out has been with us for a long time, and today, many people prefer instead of going out to eat, the same food can be served in their own homes. This is, in effect is, buying for the customer time and convenience. The food delivery business is expanding, and many established restaurants, foreign and local, are in it and a new start-up is likely to be faced with an uneven playing field. But with proper planning and the execution of marketing programs, it is a question of time, and the area will become even.

How to start a food delivery company

If you are contemplating going into the food delivery service business, you have made the right decision because today, more and more people are busy and unable to spend time preparing their meals and therefore, the market is getting larger by the day. What you need to do is to research the untapped or unexplored niche/market and work to effectively maximize the potential. Going into food delivery service to serve work places, schools, business areas, and even homes may be an opportunity to go into the business of your dream, which is thriving and, at the same time, profitable.

Before we go into the business of outlining what you need to do as a newbie to excel in the food delivery business, let us see the smart way home food delivery outfits deliver convenience across every customer touch-point. Convenience research has been carried out on the specific job that is done when food is delivered to customers. It identified five opportunities for saving people time and effort, namely:

• It speeds and eases the process for people to make decisions on the choice of the type of food and from which restaurant the food is coming from.
• It speeds and eases the process for people to receive their orders on time. This, in turn, makes it possible for people to eat when the food is hot and at the same time when they are hungry.
• It speeds and eases the process for people to get what they ordered for and pay for them in the most convenient way.
• It speeds and eases the process for people to enjoy the benefit of convenience. For instance, on Postmates, you can place two orders from different restaurants and get the foods delivered to your location.
• It speeds and eases the process for people to re-order by, for example, having addresses and other details saved and your favorite dishes bookmarked.

Read Also: Checklist for Starting a Company

How the on-demand food works:

1. Prepare a business plan
2. Research your target market:
3. Create a meal plan
4. Marketing and sales strategy
5. Promotion strategy
6. Pricing strategy
7. Payment options
8. Distribution
9. Start-up budget
10. Funding the start-up capital

What has happened to the traditional market of eating out in a restaurant is that the on-demand full-cycle approach has revolutionized the three elements of a meal experience at eateries. The three parts are: ordering, cooking, and delivering. Ordering as an element of the meal experience that comes from the customer requesting for food, cooking is the process of having food prepared. At the same time, delivery brings the menu to the customer’s location on time.

Today’s technology has produced software that makes it possible for customers’ orders to be received by a company (integrated approach) and pass on to a restaurant that makes sure the food is cooked and delivered via their driver or delivery company driver.

Prepare a business plan

To go into this business, the first thing first is to draw up a plan that will serve as a road map. The business plan will encompass the following details:

• The food delivery industry overview, the number of players and their sizes, where located and how profitable they are.
• The target market: which segment of the market are you going to target and attack? You should conduct a market survey on the identified and unidentified parts to discover the unexplored market and assess whether you will be able to attack and succeed in this segment.
• What is the desired brand name? it is necessary to pick a catchy brand name that will ring a bell whenever it is mentioned.
• What will be the location where the target market is located? Choose a residential area where the identified target market can be found.
• What will be the marketing mix? The marketing mix is the four elements of the marketing program that the marketing manager blends and uses to entice potential customers. They are products, price, promotion, and distribution.
• Product: what type of products are you going to concentrate on? Some people prefer junk food, other fast food, and the vast majority of potential customers would like American, European, or African delicacies.
• – Price: what will be the billing format – price per pack or price per distance?
• Promotion: what promotional method is to be adopted, and what are the promotional tools to be used?
• Distribution: Which method are you going to use to deliver the food to the potential customers – own vehicles and driver or outsourcing these
• What will the sales forecast for the next year be broken down into quarterly and monthly sales?
• What will be the start-up capital and recurrent budget will be?
• What will be the forecasted return on investment (ROI)?
• What will be the start-up number of employees, and what will be the expected human resources required for the next one to two years? This should dependent on the scale you will be able to operate.
• What is the expected growth rate in the next six months to one year?
• What is the estimated start-up capital, and how can it be raised?

Read Also: Understanding Margin of Safety in Business Plan

Research your target market:

After you have decided on your target market segment, conduct research on it and find out if you have the resources to pursue that end of the market both now and in the future. For instance, if your target market is the college students few kilometers away whose numbers are estimated to be about one thousand, and then it is likely that you are going to prepare light and heavy food for them.

If, on the other hand, you decide to serve employees of a textile company across the road, you are likely to offer a balanced meal of about two courses.

But if your target market is the residents of the middle working class in your neighborhood, you may need to consider the needs of their kids too.

On the other hand, if you have the opportunity to serve corporate executives of a blue-chip company located opposite the surrounding area of your vicinity, you are likely to offer them a four-course meal.

Once you have your target market meal customized and meet their standard requirement, you will likely have regular orders flowing. If you had adequately researched the favorite meals of your market segment, they would be happy doing business with you.

On the whole, you will have to choose from the various market segments, but should base your decision on the following criteria:

• Measurability It means that there must be some way of identifying the members of the segment and knowing how many they are.
• Homogeneity –  The members of the segment must act consistently and respond in the same way to the marketing communication that they receive.
• Accessibility – The ability to reach the buyers group with advertising media, delivery channels, sales force etc., effectively and efficiently.
• Substantiality  –  Each segment should be large enough to be profitable and the parts should not be too many for the marketing strategy developed to be effective.
• Exclusivity (uniqueness)  –  The segment must be different from others and must respond in the same way to the marketing stimuli.
• Sustainability  –  It is hoped that buyers will be able to patronize the company products for the foreseeable future.

Various market segments identified include:

• Children- – boys and girls of school age living a few kilometers away..
• Corporate Executives – chief executives of nearby companies
• Government Officials – different Government agencies workers close by.
• Business People – businesspeople, having their businesses nearby.
• Military Men and Women – military barracks close by.
• Students— Students of a nearby college or university
• Other people living in your target locations.

Create a meal plan

The meal plan should go with the business plan and should include the cost of selling each pack of food for each package and each location. There should also be the list and price of each ingredient and other utility bills such as gas and electricity. You should estimate the cost of labor for yourself and other staff if you are engaging one or more part-time assistant employees to cook and deliver food.

Though at first, you should do the hand delivery by yourself, as time progresses and you are acquiring more customers, then you should employ one or two staff to assist in the preparation of the meals and their delivery.

With the estimated meal cost and the sales you make on a weekly and monthly basis, you will be able to determine your gross profit and at which point you break-even.

Marketing and sales strategy

For your food delivery business to get quickly established in your area of operation and begin to grow sales and delivering foods, you should work to explore the following marketing and sales strategies:

Promotion strategy

• You should print flyers containing pictures of different delicacies you will be selling, which is the outcome of your market survey. It is also advisable to send direct mail, introducing your business to the local community, residents, corporate organizations, and other markets that have been targeted.
• Engage in road-show in selected communities to promote your business.
• Collaborate with a restaurant to open your business with a party to attract the attention of the residents.
• Advertise in the community newspaper, local radio, and television.
• List your business in local directories such as Yellow Pages.
• Advertise on the online media platform such as Facebook and Instagram.
• Make the use of referral as part of your promotion tools.
• Employ the use of a direct marketing approach to sell your products.
• Organize events with parties.
• Send as many as possible, introductory email to all leads.

Read Also: How to Increase Sales Without Extra Marketing Costs

Pricing strategy

Since the prices of cooked food are not high and can be afforded by most people in most communities, the best approach to adopt is the penetration pricing strategy; pricing  which is a little below the average nation-wide  prices for the next six months of operation. This approach will attract potential customers, and if the product and good service levels are adopted, it will attract and retain customers.

Payment options

You are going to adopt the payment options that will encourage every potential buyer to choose your brand of products. Here are some of the payment options that you can utilize to help customers to patronize your food.

• Payment through bank transfer
• Payment with the local currency (USD).
• The use of credit card and point of sale machines (POS)
• Online transfer via bank.
• The use of mobile phone transfer.

The online bank transfer method will make it easier for your customers to pay for your services. So to further enable your customers to pay without stress, make your bank account number available in all your documents as well as your website.

Distribution

In serving your customers, the execution of orders will be prompt. Once an order is received, you should ensure the message is passed on to those responsible for preparing the food, and delivery will take place as soon as the cooking has taken place. To make this possible and hold someone to account for any delay, record-keeping for the time the message is received from the customer, and the food cooked, and delivery takes place is kept.

Moreover, you should procure your vehicles to facilitate speedy delivery and keep the customers always satisfied. But if resources are limited to the extent that own cars can’t be obtained at this stage, alternative arrangements must be made, and strict adherence to the speedy delivery rule must be kept to ensure repeat orders from the customers.

Read Also: How to Adjust Price to Maximize Profit

Start-up budget

The initial capital outlay will depend on the size and scale of your home and office food delivery service. If you decide to make it big from the outset because you discovered a large chunk of potential customers, you must provide a large sum of money. But if on the other hand, you want to make it small, you must submit an equivalent amount of capital.

The tools and equivalent equipment you may need, however, will be similar no matter the scale you want to operate except the minor differences in the prices of such material, depending on the state you have chosen to run. In order words, the initial capital can either be high or low, depending on your scale choice.

You should be spending the bulk of the initial capital on purchasing fixed assets such as reliable kitchen equipment, delivery vans/bikes, renting, or leasing good facilities. You must also provide money for the payment of wages and salaries for your employees, if any, and of course, procuring supplies. The list of items you are bound to spend your initial capital may be as follows:

• Business name registration of Limited Liability Company (LLC) status.
• The grand opening of food delivery marketing and promotion costs
• Payment for the procurement of licenses, permits and general liability  and workers’ compensation insurance
• The cost of obtaining accounting software for the proper keeping of the accounting records.
• Cost of renting befitting business premises for at least one year.
• Cost of erecting a standard kitchen
• Cost of purchasing a distribution van/bike
• Cost of start-up stocks of food ingredients and other cooking materials.
• Cost of running expenses for the next six months, if possible.
• Cost of setting up a website and run it well.
• Cost of start-up stocks of food ingredients and other packaging materials.
• Running expenses for the next six months, if possible
• Cost of setting up a website.

The list is not exhaustive, and there are other essential items and equipment necessary to guarantee the proper take-off of the food delivery service.

Since these costs vary from state to state and from country to country, they cannot be estimated with every reasonable amount of certainty. Therefore, you should do some online research to come up with a reasonable estimate.

Funding for the start-up capital

Firstly, you need a bank account for your food delivery business. Even though you have a personal bank account, you still need to open a separate account for your food delivery business where you can lodge all the receipts the company generates. Also, you should make all the expenses relating to the business from the account. This makes you more accountable. At the same time, it will be easier for you to source loans from the bank when needed. Furthermore, having a bank account makes it easy for your accountant to prepare the financial statements of the business.

There is no doubt that you will need a lot of money to invest in at the start-up state and probably will be needing external funding. The following various sources of funds are possible during the start-up period:

• Personal savings
• Donations and soft loans from friends and family members
• The government relief packages for small businesses
• Bank overdraft/loan

Outside the initial capital budget, the business will be sustained by the internally generated funds, since our research shows that a large chunk of potential customers in the neighborhood of Houston who recently became disappointed because of the closure of their primary source of the food supply.

The mere fact that you may be operating from home shouldn’t be the reason for you not to obtain the necessary legal documents. It is essential for you to know that when you have all the materials, you are likely to be trusted by all your customers that you are operating legally. Besides, you have nothing to fear should you be involved in the matter that requires the attention of the relevant government authority.

You should register your business in order to give it a legal status. You need to determine the legal structure of your food delivery business. It can be a sole proprietorship, partnership or a limited liability company. Each of these has its pros and cons. For instance, if you register the food delivery business as a sole proprietorship, you will have the full control of the business. It is the easiest and cheapest way of structuring a business. However, at the same time, you will bear the whole risk of the business. If you don’t want to do it alone, you might consider partnership. Partners in a partnership are collectively responsible for all business debts and profits, and also have full control of the business. For a limited liability company, the company is seen as an artificial body that is separated from the owners; it can sue and can be sued. Unlike sole proprietorship and partnership, owners are not personally responsible for business debts and liabilities of the limited liability company.

You should understand that you need register your food delivery business with relevant tax authorities both at state and federal levels. As an entity, there are certain taxes your business should pay. Also, if you hire staff working for you, you need to deduct tax from their salary which you are expected to remit to the state tax authority. Doing otherwise will be seen as tax evasion. Of course, this has its own legal implications. Besides, you will need to obtain the following:

• Business permits: to enable you to operate in the US.
• Tax registration: to enable you to pay your taxes.
• Sanitary permits: required explicitly for those in the food delivery business.
• Food handling seminar and permits: also required for those in the food selling industry.
• Insurance: for compensating employees for injuries arising from accident in the course of duty as well as protecting the food delivery business assets.

Set up a website

A website enables your business to be noticed by potential customers mainly if you are operating from home. You should craft something by yourself and make it an interactive site. But if knowhow is the issue, hire a professional who will deliver the goods. Make sure social media accounts are linked to the site and also upload quality and captivating content regularly to your site. Open a business account with Facebook and upload different delicacies with quality color pictures on your social media platforms.

Read Also: 8 Reasons Why Small Business Need a Website for Your Business

Conclusion

A food delivery service suits those who, for one reason or another, decide to work from home such as stay-at-home-mothers. It is also a good business for those who live close to the central business district or schools, with the nearby offices or college students are your potential markets, respectively.

Apart from having the advantage living close to your potential customers, it is also necessary that you learn the tricks of the trade, imbibe most of the traits of an entrepreneur and train your employees to serve customers with humility and respect; follow the steps outlined in this article, success awaits you as you go into food delivery business.

Foods and Healthcare

Tags: Business ideas, Food Business Ideas