Types Of Food Delivery App And The Secret To Their Success

Last Updated on May 16, 2022

On-demand food delivery services have completely revolutionized the traditional way of delivering food. 

In fact, during the Covid pandemic, people have ordered more food than ever before, which was a huge deal for business, as where at one side the pandemic was forcing people to shut their food businesses down — On-Demand food delivery on the other hand was acting as a silver lining for them.

And now, on-demand food delivery apps are gradually changing the traditional way of eating.

The on-demand food delivery apps are becoming increasingly popular among millennials due to their speed and convenience. This allows you to savor away your favorite foods, right from the comfort of your own home.

This can be a win-win situation for both restaurants and aggregators as restaurant owners do not need extensive food delivery infrastructure. 

So this is why now is the perfect time to develop a profitable on-demand delivery solution for your business. To do this, you can either hire the best-dedicated developers or outsource to a dedicated software development team.

However, before you start communicating with your software development team, you should have sufficient knowledge of the on-demand delivery platform.

In this blog, I will tell you about the types of on-demand platforms and their pros and cons. But first, let’s understand how the food delivery industry is doing nowadays.

Meaning Of Food Delivery Apps

Food delivery is a home delivery service in which a store, restaurant, or third-party app delivers food to consumers, whenever they ask for it. These days, the offers are generally placed through a mobile app, website, or phone. 

Delivery includes cooked meals and groceries from supermarkets. Other ways to deliver food include catering or wholesale.

Fun Fact — did you know that the first case of food delivery was recorded in Italy in 1889. King Umberto and his wife Margherita called Rafaele Esposito, the creator of the Margherita Pizza, and requested that the pizza be delivered to the palace in Naples. 

The emergence of modern food delivery systems was driven by economic necessity. In the 1950s, middle-class Americans sat at home and watched television all day. This almost brought the US restaurant industry to a standstill and eventually forced it to adapt, giving rise to the modern delivery service we all know.

According to reports at the time, this adaptation increased restaurants’ sales by more than 50% in a short period of time.

What Does The Food Industry Look Like Today?

The US market is currently dominated by Dominos and on-demand food delivery startups Grubhub, DoorDash, Uber Eats, and Postmates. These food delivery companies quickly gained a high reputation.

As of 2020, DoorDash was valued at $13 billion, UberEats at $20 billion, and Postmates at around a whopping $1.85 billion. Together with Domino’s Pizza — these companies control 90% of the U.S. food delivery market. 

However, 338 food delivery companies that fund more than $5 million in the United States alone are trying to replicate this success.

While these companies are getting a lot of attention and high praise from users and investors, it’s still unclear what the future holds for the food delivery sector as a whole in the future.

The traditional model of food delivery somewhat looks like this — the customers order food over the phone for local delivery and wait for the restaurant courier to deliver the food to your doorstep. 

However, as we have seen in all other sectors, advances in digital technology are rapidly changing the food market. Having grown accustomed to ordering via websites and mobile apps with maximum convenience and minimal human interaction, modern shoppers now expect a similar experience when ordering food. 

Restaurants offering takeaway services must keep up with the times by developing online ordering apps to retain customers. Digitization of food orders allows for the fast delivery of takeaway food without (or with least) human intervention.

Types Of Food Delivery Apps

Primarily, there are 3 main types of on-demand food delivery applications or models which are super popular nowadays. They can be classified as:

• The Platform To Consumer Apps (Order Only Business Model)

This is a good business model, especially for novice players. At the same time, with this, the application owners can connect multiple restaurants and eateries to end-users. In other words, app owners are able to provide a platform for multiple restaurants to sign up and provide food delivery services to their customers. 

However, this is an order-only business model

Here, it is the responsibility of the restaurant’s delivery service or a hired third-party courier service provider to deliver meals to customers. You as the Food Delivery App owner are not responsible for logistics. 

The main advantage of this business model is that it requires minimal capital investment. Business owners can start with the trim level and gradually expand by adding more restaurants. Also, the owner does not have to go through the hassles associated with preparing or delivering food.

How Do Such Apps Work?

The operation of this platform is very simple and includes the following steps: 

• Customers can view and order menus in the app. 
• The restaurant sends a confirmation message to the customer as soon as the order is placed. 
• The delivery driver at the restaurant delivers the ordered product to the front of the customer’s door.
• If there is a problem, the courier can contact the buyer directly to arrange delivery.
• In most cases, app owners charge the restaurant a flat rate for each order placed through their own app.

And The Limitations Of Such Food Delivery Apps

Basically, food options are limited to this business model. This is because the app can only list dishes that can be cooked in a restaurant. Moreover, the app owners have no control over the quality of food or packaging.

So, if customers are not satisfied with the quality of the food —  it can get really tough for the app owners to retain them. 

The best way to overcome these limitations is to attract new customers and target restaurants through active PR campaigns. It can also be helpful to build a loyalty program to retain users.

• The Delivery Service Aggregators Apps (Order With Delivery Business)

This model is very much similar to the business model above, except that it is also responsible for logistics. Therefore, the owner of the application takes the order of the end-user and provides food delivery. 

The best thing about this model is that it is a very feasible business model as the restaurant does not have to manage its own fleet. Moreover, it also allows you to leverage your application’s existing customer base. And in this model, app owners typically work with several individual courier providers to deliver food to the customer’s doorstep. Most Famous food delivery apps like UberEats, Swiggy, Grubhub, and others have adopted this model.

How Do Such Apps Work?

The operation of this model includes the following steps: 

• Customers can view and order menus in the app.
• The restaurant sends a notification to the customer after receiving the order.
• The restaurant notifies the courier network as soon as the order is ready.
• The nearest delivery driver will pick up the ordered product and deliver it to the pickup location. 
• The customers will be charged shipping based on distance. 

 In this business model, the app manager can charge the restaurant a flat rate per order and charge the customer a delivery fee based on their exact location. A similar business model is adopted by the famous app, Grubhub which has been successful in generating solid revenue in the USA.

And The Limitations Of Such Food Delivery Apps

For businesses with such food delivery platforms —  one of the biggest challenges for food delivery businesses is to build an efficient and fast transport fleet.

The delivery team not only needs to be well trained, but it also needs to be fast enough to deliver on time. Delays can degrade the user experience and result in an unsatisfactory customer base. 

Timely delivery is important, especially during lunchtime. This is because most office professionals are limited to lunchtime. Therefore, to overcome this problem, it is recommended to hire more shipping personnel to cover a larger area.

• The Full-Stack Food Delivery Apps

As the name suggests, in this business model, one service provider serves the entire food chain. This means one party does everything from food preparation to delivery to the customer’s doorstep. 

This business model is very different from the previous two and requires significant capital investment. Typically, this business model is chosen by popular restaurants that create takeaway and delivery apps to offer additional amenities to regular customers. This allows customers to order food from the comfort of their own homes, which further boosts sales. The most famous example would be Dominos Pizza.

Then some entrepreneurs even hire ghosts or cloud kitchens to prepare food. Then you choose the cloud kitchen business model and deliver food to your customers under your own banner. However, in this case, the restaurant does not offer a meal opportunity. All you need to do is take the order on the platform and deliver the food to your customers.

How Do Such Apps Work?

• Customers can view and order through menus in the app. 
• The restaurant sends a notification to the customer after receiving the order. 
• When the order is completed, the restaurant’s courier delivers the food to the front of the customer. 

And The Limitations Of Such Food Delivery Apps

The biggest problem with this application business model is cost. This requires a large upfront capital investment as one service provider must manage all aspects of food preparation and delivery.

Also, even considering the cost aspect, attracting and retaining new customers is not easy for restaurants with a bad reputation in the market.

Finally, this business model reduces the profitability of many businesses because courier costs are very high. The best way to solve this problem is to secure the right investment. To attract investors, you need to prepare a great presentation. This makes it much easier to better serve our customers.

What Makes This Model So Appealing?

All service providers prefer an integrated delivery service business model. As far as application owners are concerned the platform offers higher income potential. 

They can quickly charge their restaurant partners a flat rate for all orders placed through the app. They may also charge a shipping fee based on the customer’s location. 

On the other hand, some restaurants prefer this business model because they do not need to handle logistics. In this business model, the application owner handles all courier services. So the restaurant only needs to prepare the food and all the logistics are handled by someone else.

Factors That Determine The Success Of Your Platform

Food delivery is a multifaceted process involving multiple parties simultaneously. To measure the natural growth and success of your food delivery business, it’s important to pay attention to specific KPIs or key performance indicators.

Let’s take a look at the most popular application KPIs here. 

•  Number of food deliveries 

One of the most important metrics in a food delivery business is the number of deliveries completed. Typically, a number is expressed as the sum of deliveries made during that month or quarter.

Knowing how many orders you are taking is important to estimate the growth rate of your food delivery business. In the world of venture capital, stakeholders are looking for significant increases in the number of deliveries. Growing businesses are typically expected to double their monthly deliveries.

•  Profit Per Shipment 

The ultimate goal of any business is to make a profit. Therefore, it is very important to know how much profit you get from each shipment. This information will help you identify the most profitable restaurants and reroute delivery of inefficient restaurants. 

This metric also takes into account costs such as salaries, advertising, and transaction costs. 

• Average Order Duration 

The average order time is a measure of how quickly your company can fulfill customers’ orders. An order is flagged the moment a customer purchases food in the app and marked as completed when an order confirmation is sent.

The Average Order Duration KPI is calculated as the sum of the time spent on all deliveries divided by the total number of orders completed. KPIs are important because they help get rid of slow-running restaurants and couriers and further improve application performance.

• Distance Transition Time  

This KPI measures the time it takes for a carrier to complete a shipment. This includes the time it takes for your order to be picked up and delivered to your doorstep.

This metric measures the speed of the delivery agent and the effectiveness of the delivery route. Therefore, the information obtained can be used to shorten delivery times and increase customer satisfaction.

• Driver On Order/Idle

This KPI measures the percentage of drivers in delivery or waiting for delivery at any given moment. This helps the application evaluate the effectiveness of the driver network. 

This metric also makes it easy to determine the time to reach the maximum number of orders. This will help determine how many drivers should be active during each period of the day. 

• Customer lifetime value 

The Customer Lifetime Value (CLV) measures the average amount of revenue a user earns over the duration of their membership. The longer the client uses the application, the higher the CLV. 

With all these metrics, you can easily track the performance and efficiency of your food delivery system and discover new ways to improve the user experience. 

Wrapping Up 

When you wish to launch your own food delivery app, it is important to understand all these business models and choose the one that is most suitable for your plan.

It is always advisable to start by creating an MVP with basic features that successfully depict the use of your app and with time introduce new updates on the basis of the feedback received from users.