On Demand Food Ordering Business Models

Food was probably the first item to be traded by man. As we moved from a case of need to that of want, producing food converted into a profession from a requirement. For thousands of years, food and related products and services have been in constant demand. Although we have come a long way from the barter system of old to modern currencies, credit cards and other digital ordering platforms, we have created an entire ecosystem that helps us get food when we want, where we want, on-demand. 

Is online food ordering and delivering an actual business?

Historically, food ordering systems were limited to customers making a call to the restaurant, and the restaurant sending the order over. With the advent of modern technology and the internet, restaurants started to offer their menu on their websites where people could go online and order food.

What started as the first online ordering system by Pizza Hut in 1994 has grown into a multi-billion-dollar industry and rakes in over US$100 billion each year! As the internet and devices that could leverage the power of the internet evolved, so did food ordering systems.

With the advent of the iPhone in 2007, the internet witnessed an explosion of devices, apps, and services like never before. This also gave rise to the world of the apps that have taken the internet by storm and the most affected industry by it is the food industry. 

How many people order online every day and why?

 

Millions of people order food online today due to two main reasons: convenience and variety. Whether it is a quick bite for lunch, a small snack in the evening or for a get-together, we just cannot imagine our lives today without a food ordering system in place. Revenues in the worldwide food ordering industry are slated to reach a staggering US$122,739m by 2020.

Slated to reach US$164,000m by 2024, the food ordering industry is growing by a healthy CAGR of 7.5%. In India, online food ordering is a growing market. The penetration of the internet in India has increased by leaps and bounds, fueling a rise in the usage of apps in nearly every sector.

This shows specifically in the food ordering sector as India is ranked third worldwide in terms of revenue. With revenues expected to touch US$ 10,000m by the end of 2024, online food ordering in India is showing no signs of slowing down.

Online food ordering and delivery businesses are following various business models today to engage customers and restaurants. Let’s talk about them in detail

3 Food delivery business models

There are three main types of food ordering and delivery business models that are popular amongst restaurants today. These include:

1. Order only model

This model began as a way to replace the antiquated phone call-driven ordering systems. Platforms such as JustEat and Grubhub started with this business model. They offered an interface that featured offerings from various restaurants. These restaurants would receive orders from the platform and deliver them on their own.

Here’s how this works:

• The customer places the order online
• The restaurant receives the order and confirms it through the app or website
• The restaurant delivers the completed order through an Uber Eats like interface or drivers on their rolls

This business model is simple and allows aggregators (platform owners) to list restaurants where customers can order food. As this is a pure order-only model, the share per order percentage of the aggregator is low (between 5-15%). 

Benefits

• The low share percentage of the aggregator reduces the markup for the customer
• These platforms are highly scalable and offer a quick e-enablement solution for small restaurants and takeaways

Limitations:

• Preferred by takeaway food operators, thereby limiting the choice of cuisines on offer for customers
• The ordering platform cannot control delivery speed and quality, which can sometimes lead to disgruntled customers

2. Order and delivery model

This model adds the delivery bit to the ordering systems. Restaurants list themselves on the platform, and the platform manages the ordering and delivery bit. This allows restaurants without their delivery fleets to offer takeaway and home delivery to their customers. Zomato and Swiggy are popular examples of such platforms. Here’s how this works:

• The customer places an order online or on an app
• The restaurant receives the order and confirms it through the app or website
• A rider is assigned to deliver the order by the platform, who picks up and drops the order off at the customer’s chosen location.

This business model allows restaurants of all sizes to offer food delivery through a simple, online interface. 

Benefits:

• Their range of offerings and an integrated delivery mechanism is unmatched by ordering only platforms
• Having an integrated ordering and delivery mechanism in their control allows them to maintain quality and delivery timelines

Limitations:

• Newer platforms must invest significantly in courier partner training
• Food is often more expensive as these platforms charge 15-35% commission on an average

3. Fully integrated model

Cloud kitchens and large chains such as Dominoes often choose the fully integrated model. These cloud kitchens are eateries that only exist online. They have a full-scale restaurant menu but do not offer dine-in or takeaway facilities. 

Their platform offer food on their apps for customers to order, which they then prepare and deliver. 

A classic example of a fully integrated model is Dominoes, a sizeable 

international pizza delivery chain that uses its platform for ordering and delivery.

Benefits:

• The entire process of ordering, cooking and delivery rests with one entity, making it easy to find and fix bottlenecks, quality issues and service gaps
• As all the control lies with the restaurant, they can change their offerings and prices at will

Limitations:

• Substantial investments are required to launch the platform

 

Although there might be many other models operating in the food delivery space, these are the most widely used of the lot. 

Which food delivery app model should you choose?

Choosing the right food delivery app model will depend on your current business line and how you wish to use the app in your organization.

Order only model

Aggregators: Choose this model if you do not have a delivery fleet of your own

Restauranteurs: Choose this model if you only want to take your food ordering process online.

Order and delivery model

Aggregators: Choose this model if you wish to offer ordering and delivery services.

Restauranteurs: Choose this model if you do not have your own delivery fleet and ordering system and want the aggregator to handle both.

Fully integrated model

Aggregators: This model is most suited to entrepreneurs who wish to run a cloud kitchen or if you are starting a kitchen on wheels franchise where you pick up pre-cooked food from restaurants and then deliver as per demand. This option is great for school and office lunch deliveries.

Restauranteurs: Choose this model if you wish to run a cloud kitchen or a kitchen on wheels.

Why do businesses need to adopt technology?

In today’s digital age, brick and mortar stores rely on the internet for marketing and promotion. Gone are the days when your restaurant could reach a large audience just by word of mouth or through traditional mass media like newspapers, magazines, radio, and TV. Today, social media campaigns, advertisements on popular food ordering platforms, and shares by popular influencers rule the roost.

For a business that has not invested in technology the market is extremely limited, and in many cases, non-existent. Adopting a technology platform helps restaurants and businesses reach a much wider audience, offer specials and a wider variety than what is possible in a restaurant, and focus on their core competence – making food. 

The benefits of  adopting technology

1.  Reach

Of all the benefits that one may list for investing in technology, the primary benefit would be reached. Every restaurant wishes to maximize reach. Many patrons might want to discount a restaurant from their list because it is simply too far for them. Others might think that getting a reservation is just not their cup of tea.

No matter what the reason is, every customer that removes a restaurant from their go-to-list is a loss in revenue. This is where a food ordering platform comes in – they ensure that you can search from an ever-widening variety of food from multiple restaurants and read reviews before you order them. They also ensure that food reaches your doorstep when you want it to. This factor of reach, which is directly connected to the matter of convenience is a major reason to invest in technology.

2.  Core Competence

Every business has a core competence. For a restaurant, it is making food. They might not be good at delivery or maximizing reach. This is where an ordering platform comes in.

From finding riders to deliver food to sponsoring restaurant posts to offer specials and freebies, and ordering platform can ensure that the restaurant focuses on making food while the platform focuses on processing orders and delivery. Zomato type app and similar online food ordering platforms like Swiggy and many more have made their mark by offering a world-class ordering experience and in-time delivery in the comfort of your own home.

3.  Convenience

Convenience is the single most important reason people order food online. This is also the reason a delivery platform makes so much sense today. Offering world-class service to both customers and restaurants is what everyone needs. Restaurants need a fuss-free ordering and payment experience, and customers want food when they order it. It’s ridiculously simple!

How can technology help?

The primary role of food ordering technology is to remove the hurdles a consumer and a restaurant face in interacting with each other. As platforms offer newer ways to enhance their services, people use them and in time, get hooked to them because they offer what the customers need. Technology everyone in this business model:

1. Helps restaurants accept and process orders and receive timely payments
2. Helps riders earn money by delivering orders
3. Helps customers get food in time and pay according to their convenience
4. Helps aggregators make a cut and continue to offer services

 In short, everyone benefits from using technology in this business model. With a new idea, great implementation and good service, there is nothing that can stop a platform from growing by leaps and bounds.

India is a large, developing country. As the penetration of the internet and smartphones grows by the day, so does the number of users who download and install food ordering apps to order food due to an increase in their disposable income. A food ordering platform that offers new and enhanced services is something that first-time users will always look for.

How can Volumetree help you in this regard?

Volumetree has helped many businesses bring an idea to life. From the seed of the idea to fruition when the service is launched, they offer exceptional technical expertise, world-class customer service, and unmatched online ordering experience. They have helped many companies start their online food ordering systems or have enhanced their existing systems in many ways. Volumetree’s teams have years of experience building food ordering platforms that can help you provide your customers with world-class user experience.

Give us a call or click here to contact us so we can help you jump the food ordering bandwagon and be the next big disruptor in this industry.