Restaurant delivery services cater to a pressing need for many consumers. These services offer fresh and tailored food options, allowing consumers to enjoy gourmet dining without having to leave their house.
The online ordering market, which became extremely popular during the COVID-19 pandemic, continues to grow and shows no signs of slowing down. Meal delivery revenue has already reached $420 billion.Maybe it’s just the right time for you to run your own business. So how do you start a restaurant delivery service? Is it the perfect match?
1. Research The Market
Researching a market before establishing a business is key; it helps a business’ limit errors. Food delivery is a low-margin business; therefore, it is essential to understand the ropes and find a niche market.
Here are some key aspects to consider while carrying out your research.
Competitor — as stated above, the food delivery business is low margin, meaning it has a lot of competitors. Those that dominate the industry are platform-to-consumer, including food delivery platforms such as Uber Eats and Postmates, and restaurant-to-consumer platforms such as Dominos and McDonald's. If you do good research on market strategies, online menus, and pricing patterns of these players, then you’ll have a great sense of how to position your business and give your competitors a run for their money.
Partnerships — it’s best when you work as a team. That’s why most restaurants partner with third-party platforms such as Uber eats and door dash. Partnering with these platforms aids your business—making deliveries a quick and easy experience for your customers. Before choosing one, do some research on the existing platforms; the best information is in the reviews. Talk to people around you who use these services and get their sentiments. Next, study potential partners and talk directly to their representatives so that you can get all the necessary information.
Opportunities and Threats — analyze your business' strength, weakness, opportunities, and threats vis-à-vis your competitors. A keen look at these aspects will help you leverage your strengths, work on your weaknesses, grab opportunities and identify plus neutralize your threats. For example, if most of your employees have cars, you can grab that opportunity and use their help to set up delivery logistics.
Market Gaps — look for market gaps that you can capitalize on by positioning yourself and making profits. For example, few restaurants might serve a particular neighborhood or serve a specific cuisine. The research will help you catch that, and you can better position yourself to cater to the customers' needs.
Consider also utilizing online tools such as Google Trends, social media sentiment analysis, and local review sites to gauge real-time customer interests and pain points. Adding focus groups or surveys to your market research can reveal hidden preferences that help in carving out a niche even in a crowded market.
Pro Tip:
✔ Compile a list of at least 5 competitors in your target area.
✔ Create a SWOT analysis document for your business idea.
✔ Use online tools like Google Trends, social media sentiment analysis, and review platforms to track customer pain points and emerging food trends.
2. Define Your Target Audience
Assuming you are moving from dine-in to delivery, you are not starting from scratch; this means that you already have an audience, a set of customers who already know what you offer. Just a few adjustments to better serve people in the delivery service.
The research you did in step one will make it easy to decide if you want to expand your horizon to reach other market segments and determine whether the area you want to service has potential customers.
A demographic mix that includes millennials, working families, college students, and hostellers are satisfactory to the delivery business. You might, however, need to refine your online menu to cater to all these customers. For example, provide healthier options for working families and affordable meals and snacks for college students.
Pro Tip:
✔ Segment Your Audience: Create detailed customer personas (e.g., "The Busy Professional," "The Budget-Conscious Student," "The Health-Oriented Family").
✔ Leverage Data: Analyze customer order patterns, preferred dishes, and peak ordering times from your existing database.
✔ Interactive Feedback: Use surveys and social media polls to gather insights on what customers want from a delivery service.
3. Determine Initial Investments And Related Costs
Starting a food delivery business is sure to set you back a considerable sum in monthly overheads. Below are some of the expenses involved in setting up a food delivery business.
Website Development Expenses
You can take food orders through phone calls, but it’s ideal to have a website. You can use website builder apps like Divi, Wix, or WordPress to create a website to cut costs, but if you have a flexible budget, it’s best to hire someone to do it for you.
Software Purchase/ Subscription
Basic software tools you will need in the initial stages of your delivery service include Point-of-sale (POS) software to collect online payments and GPS Tracking apps to track deliveries. You can opt to use free versions of these tools. But as your operation expands, you’ll need to upgrade and get more features.
Logistics Costs
Can you work out a way to have your own delivery logistics? This approach helps in cost-saving, as you won't be paying commission to third parties to deliver food to your customers. That said, having a fleet of your own is costly. Here’s one option you have to help you overcome this concern; use your car or those of your employees for a start. Then, purchase delivery vehicles as your business grows.
Marketing Expenditure
Marketing your business is a crucial step when you want to get your business off the ground. Set aside a budget for marketing your services. You can use social media for marketing your business as the tool is fast-growing and has proven to be very effective in business marketing. Other ways to market your products and services include printing pamphlets, email marketing, and attending events and fairs.
Additional Expenses (some are obvious, but must be considered anyway):
Packaging Materials: Invest in high-quality packaging that ensures your food remains fresh and intact during delivery.
Insurance and Licensing: Budget for insurance premiums for your vehicles and staff, as well as any permits or licenses required for food delivery services.
Staffing Costs: Consider expenses for hiring dedicated personnel for order management, customer support, and delivery coordination if needed.
Marketing and Promotion: Allocate funds for initial marketing efforts – such as online advertising, social media campaigns, and promotional events – to build brand awareness and attract customers.
Technology Upgrades and Maintenance: Plan for ongoing expenses related to website maintenance, software updates, cybersecurity measures, and integration with other systems (like accounting or CRM tools).
Contingency Fund: Set aside a budget for unforeseen expenses or operational challenges that may arise during the early stages of your business.
Pro Tip:
✔ Prioritize Packaging: High-quality packaging ensures food arrives fresh and presentable.
✔ Budget for Licensing & Insurance: Secure necessary permits and insurance coverage for your fleet and staff.
✔ Plan for Growth: Set aside funds for future software upgrades, marketing campaigns, and operational expansions.
✔ Create a Contingency Fund: Unexpected expenses can arise – having a backup budget is crucial.
4. Ensure Your Licenses Are Up-to-Date
Find out whether you need extra licenses to deliver food in addition to the ones you have for the restaurant. Get this information by reaching out to your town or city clerk’s office (requirements vary from state to state). Plus, you can visit the U.S. Small Business Administration (SBA) website to get all the information you need on permits.
Pro Tip:
✔ Stay Ahead of Regulations: Set up alerts for changes in local health and business regulations to ensure compliance.
✔ Get Legal Advice: Consult a professional to avoid fines or operational roadblocks.
✔ Keep Digital Copies: Store scanned versions of all permits and licenses for easy access when needed.
5. Set Up Suitable Channels For Receiving Orders
As a start and to save on costs, you can use free channels to receive orders – this includes phone calls and messages. Plus, your social media handle can multitask by marketing your business and at the same time receiving food orders.
Thanks to food delivery software, you can see to it that you receive orders and even track them once they've been dispatched.
Another option is using free food delivery apps; over time, you can switch to paid versions that charge a fee per order or a percentage of your total sales.
Pro Tip:
✔ Multi-Channel Integration: Integrate various free channels (phone, social media, website forms) into a unified dashboard to streamline order management and ensure no order is missed.
✔ Automation Tools: Use chatbots or automated response systems on your website and social media to handle initial inquiries, guide customers through the ordering process, and provide instant order confirmations.
✔ SMS and Email Notifications: Set up automated notifications to keep customers informed – send SMS or email confirmations when an order is placed, processed, and out for delivery.
✔ Analytics and Reporting: Implement analytics tools to track which channels are most effective, customer order patterns, and peak ordering times. This data can help optimize your order management strategy and marketing efforts.
✔ Scalability Considerations: As your business grows, evaluate the transition from free to paid channels or advanced order management systems. Investing in scalable solutions early on will help you handle increased order volumes without compromising service quality.
6. Market Your Service
Marketing your food delivery business is essential because your restaurant customers should be aware that you are providing the service. You also need to expand your customer base to reach more people.
There are a few options of marketing strategies that you can use to market yourself. Social media has grown over the years and even more in marketing businesses. You can make more people aware of your service by creating an enticing business account on social media.
Other ways to market yourself include pamphlets that you can distribute by handing them out or through the mail. You can also use text messages and WhatsApp Messenger to promote yourself by announcing deals, discounts, and specials.
Food delivery software offers digital marketing tools that are free. Examples of such software include Gloriafood and Flipdish.
Pro Tip:
✔ Utilize Referral Programs: Offer discounts to customers who refer friends to your service.
✔ Run Limited-Time Offers: Flash sales and exclusive meal deals can drive short-term spikes in orders.
✔ Track Analytics: Monitor marketing performance to see which strategies work best.
✔ Engage with Reviews: Respond to customer feedback to build trust and improve service quality.
1. Market Saturation: Standing Out in a Crowded Industry
The Risk:
The food delivery space is heavily dominated by major platforms like Uber Eats, DoorDash, and Grubhub, as well as large restaurant chains. Without a unique positioning strategy, smaller businesses may struggle to gain visibility and profitability.
How to Mitigate It:
Find Your Niche: Instead of trying to compete with mainstream offerings, focus on a specific cuisine, dietary trend, or delivery model that sets you apart (e.g., keto-friendly meals, late-night deliveries, or eco-friendly packaging).
Target Local Communities: Build strong relationships with nearby neighborhoods by offering localized promotions, sponsoring local events, or partnering with nearby businesses.
Offer Direct Online Ordering: Reduce reliance on third-party platforms by setting up your own online ordering system via a website or app. This helps avoid high commission fees and builds direct relationships with customers.
Optimize Your Delivery Radius: Instead of covering a wide area with slower deliveries, focus on hyper-local service with faster, fresher deliveries to stand out in quality.
Leverage Data for Pricing & Promotions: Use analytics to track competitor pricing and adjust your promotions accordingly. Offering bundle deals, free delivery at certain times, or personalized discounts can help you attract and retain customers.
Example: A small sushi delivery business could differentiate itself by offering curated sushi bento boxes designed for office lunches and a subscription meal plan for sushi lovers.
2. Regulatory & Compliance Hurdles: Navigating the Legal Maze
The Risk:
Different cities and states have varying food safety, labor, and licensing regulations. Non-compliance can result in legal fines, shutdowns, or reputation damage.
How to Mitigate It:
Consult with Local Authorities: Before launching, speak with local city officials, health inspectors, and business licensing offices to get a clear understanding of necessary permits.
Invest in Legal & Compliance Support: If regulations are complex, hiring a consultant or lawyer specializing in food business law can prevent costly mistakes.
Keep All Documents Digital & Updated: Store scanned copies of licenses, health inspection reports, and insurance policies in cloud storage for quick access.
Regularly Train Staff on Compliance: Food handling guidelines and delivery protocols should be reviewed every quarter to keep employees informed about best practices.
Secure Proper Insurance Coverage: Protect your business with:
- General liability insurance (for accidents and food safety issues)
- Commercial auto insurance (if using company vehicles)
- Workers' compensation insurance (for delivery drivers and staff)
Example: A local pizzeria launching delivery service discovered that its city required separate food handling permits for delivery staff—getting ahead of this early saved them from a delayed launch.
3. Cash Flow Issues: Managing Financial Stability
The Risk:
Starting a food delivery service comes with high upfront costs (website, delivery logistics, marketing) and low margins. Without proper budgeting, a business could run out of cash before reaching profitability.
How to Mitigate It:
- Start Small & Scale Gradually: Instead of investing heavily in expensive tech and large delivery fleets upfront, begin with a small test market and expand based on demand.
- Choose Cost-Effective Delivery Models:
- Use third-party platforms initially before transitioning to an in-house fleet once demand is consistent.
- Consider outsourcing delivery (e.g., using local courier services) to avoid investing in vehicles immediately.
Negotiate with Suppliers & Vendors: Secure bulk discounts on ingredients and defer payments where possible to improve cash flow.
Implement Smart Pricing Strategies:
- Use dynamic pricing (e.g., surge pricing during peak hours, discounted rates for off-peak orders).
- Offer higher-margin add-ons (desserts, drinks, premium packaging) to boost average order value.
Monitor Cash Flow Weekly: Use accounting software (e.g., QuickBooks, Xero) to track expenses and identify financial red flags before they become major issues.
Secure Alternative Funding Options: If capital is tight, explore:
- Small business loans (SBA loans, microloans)
- Crowdfunding (Kickstarter, Indiegogo)
- Restaurant grants or local investment programs
Example: A startup burger delivery business started with a single location and used third-party couriers before gradually investing in its own branded delivery fleet once demand justified the cost.
Key Risk Mitigation Takeaways:
✔ Market Saturation? Differentiate with niche offerings, direct online ordering, and local engagement.
✔ Regulatory Compliance? Stay proactive with legal research, proper licensing, and staff training.
✔ Cash Flow Issues? Start lean, track finances closely, and optimize pricing & cost-saving strategies.
By identifying potential risks early and having a plan in place, you can launch a sustainable, profitable delivery service without unnecessary setbacks.
Embarking on a restaurant delivery journey isn’t just about following a checklist – it’s about reimagining your entire service model. By diving deep into market research, fine-tuning your customer engagement, and strategically investing in technology, you’re not only setting up a delivery service; you’re transforming your restaurant into an agile, customer-first operation. Every step, from securing the right licenses to integrating automated order channels, is a chance to innovate and redefine what convenience means for your customers. As the food landscape evolves, your ability to adapt and personalize the experience will distinguish your brand and drive sustainable growth. Embrace the challenge, invest wisely, and let your passion for quality dining fuel a new era for your business.
