The online food market has witnessed a significant boom in recent years. At the same time, the lack of time for people to go to the nearest restaurant and enjoy their meal is another big reason for the rapid growth of the online food market.
According to Statista, the online food delivery market valuation is all set to touch the milestone of $1.04 trillion by the end of 2023. The market is further expected to show a CAGR of 11.47% to achieve a valuation of $1.79 trillion by 2028.
So, developing a food delivery app can be a significant business idea. Still, there are different models that you have to go through and choose one to develop your app. It can be a little complicated when you are new to the industry or landscape. So, today in this blog, we will talk about different food delivery business models and which one you should go for according to your vision.
Top food delivery business models
Before talking about any particular food delivery business model, let’s understand some of the best and most used business models that are operating online food businesses worldwide. It will help us choose the best one according to the requirements and make our decision more data-driven. Let’s get started-
- Platform to Consumer or Order Only Business
Acting as the connecting platform between the customers and restaurants, this model is a widely used food delivery business model. Developing the software or mobile application on this model will help the customers access the menu of different restaurants and order something out of it. The restaurant receives the order and prepares the food. The delivery task is the responsibility of the restaurant only. They can hire a personal delivery boy or partner with some delivery aggregator. The application has no role in getting the food delivered.
Monetization strategy- Commission-based earning is the most popular type of monetization strategy integrated with this business model. The app can earn whenever any restaurant receives an order via the application. It can be any fixed charge of a percentage of order value.
| Pros | Cons |
| The app owner doesn’t have to take care of delivery tasks as the restaurant owners solely handle it. The simple mechanism allows new restaurants and startups to explore more markets in the least time. | The app doesn’t have any control over the quality of food or the packaging. If the restaurant is not providing satisfactory services to the customers, the brand image of the app might be affected. |
- Delivery Service Aggregators or Order with Delivery Business Model
This is the successive business model to the previous one where the application connects the customers and restaurants as well as takes care of the delivery task. So, along with accepting the order, it also includes the delivery task. This is a positive point for the restaurant owners as they don’t have to worry about hiring a delivery fleet. At the same time, most of the applications that run on this business model have a big client base, and thus restaurants leverage the benefits. The complete meal delivery system is handled by a single application thus reducing the reliance on third-party applications.
Monetization Strategy- Registration Charges are the one thing that can you collect from the restaurant as well as the customers to use the service. It can be a one-time fee. Similarly, if your application is providing a valuable service, the subscription model can also be a good choice.
| Pros | Cons |
| It offers a wider and better service with an integrated delivery mechanism. When the platform is responsible for the delivery practice, the quality and delivery timeline of the food are also under control. | The application has to manage the delivery partners along with the customers and restaurants. Delivery partners have to be more reliable in handling the food with care and hygiene along with delivering the food on time. |
- Full-Stack Model
This is the full-stack model where you have to own much more than just an app. One has to set up a cloud kitchen or complete cooking setup where your workforce will prepare the food as per the orders. The major and core aim of this model is to encourage the delivery model and compete with the dine-in concept. By establishing the cloud kitchen at different and popular locations, they can cut the cost of preparing food and bring the delivery time to the least.
Monetization Strategy- The freemium model goes best with this type of app where you offer the basic services to your customers for free while charging the fee for some advanced and premium services.
| Pros | Cons |
| Having complete control over the activities from taking the order to delivering it to the doorsteps of the customer brings more savings to the pocket. There is little reliance on any third-party service provider throughout the process. | The setup cost is generally higher in this food delivery business model which is not affordable for all the startup owners.Couriers’ charges being so high, makes it difficult to secure a good profit as long as the order value and frequency are not good enough. |
The Final Words
As we went through all the above three food delivery business models have their core competencies. While the first one comes with a simple interface, it just connects the food seeker to the provider. The second one goes a little further where it also takes the responsibility to deliver the food. The third one is a full-stack business model where the food is prepared by the app authorities and hired professionals only. All three models have their target audience with their pros and cons. At the same time, the investment requirement also differs in these business models.
So, it is suggested that you conduct thorough research on your industry and recognize the vision you carry for your business. You can only choose one model once you have all the requirements and business goals clear in your head. So, identify the goal and objective you want to achieve and select the one that leads the path in the best way.