November 03, 2020

How to Not Fail Your Food Delivery Startup: Crucial Factors to Consider

  • company
  • case study
  • startup
  • foodtech
  • food-delivery-app
Rodion Salnik

Rodion Salnik

Co-founder, Brocoders

7 min read

With social distancing becoming the new trend, you might want to try your luck and start a food delivery service in the days ahead. However, jumping into the meal delivery business can be a daunting challenge, so it’s vital to think over every detail and consider various pitfalls that you might face in the future.

In this article, we aim to provide a few helpful hints based on our own foodtech development practice. We hope you can learn from the mistakes that we made so you could develop a good understanding of what it takes for a business to run an online on-demand food delivery service.

First and foremost, let’s dive into the ground-breaking insights to find out what it takes to validate a business idea.

Content

4 Key tips for building a future-proof meal delivery system

Some years ago, people used to have the time to prepare food and bring lunch to their office. However, with the world turning faster and faster, many people can hardly get the time to cook and eat these days, so they need an affordable alternative.

This situation provided a remarkable opportunity for online meal delivery startups to flourish, so it’s no wonder why meal delivery services have mushroomed in the past couple of years.

In fact, this foodtech sector had boomed even before 2020, but then COVID happened. According to the Research and Markets’ survey, the food delivery global market is forecast to reach mind-blowing $154.34 billion in 2023 at CAGR of 11.51%, all thanks to the coronavirus outbreak.

That said, with a bunch of giant players like Uber Eats out there, along with small businesses trying to venture into the food delivery domain, it’s of critical importance for you to begin with a full-fledged strategy in the first place.

#1 Find your target market and audience

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Knowing your customers is as vital as knowing your rivals, so make sure to identify your niche and conduct thorough research of your target audience. It’s the right time for you to find out what their specific interests and preferences are.

Besides, you have to decide which business model to opt for. There are two primary business models in the online food delivery sector:

  • Restaurant-to-consumer
  • Platform-to-consumer

As the name implies, the restaurant-to-consumer model is based on deliveries from a certain restaurant or restaurant chain. In contrast, the platform-to-consumer model is focused more on deliveries from different cafes, restaurants and grocery stores.

The next thing to study and consider is your location, which directly impacts your delivery meal menu.

To cite an example, if you are in a business zone, you may want to focus more on healthy and home-cooked lunch choices. On the other hand, if you are in a campus zone, and your target audience is students, you’d better focus on providing snacks and beverages.

To find out more about our expertise, you can take a look at our snacks delivery app.

Now you need to dive deeper and research your target audience’s requirements. Talk to as many potential customers as possible to acquire their invaluable feedback, which can help you avoid many critical failures at the final phases.

You may want to pay special attention to what your rivals' customers prefer to use and order. Perhaps, it would be more profitable for you to focus on a different audience.

At the very early stages, your primary goal isn’t about acquiring a new customer group but rather applying client-oriented methods to keep the clients that you already have at the moment.

The ever-changing food delivery market is hot, so it’s vital to build your services around your target audience’s needs and provide your customers with special offers and discounts. In such a way, you can ensure a continuous order flow and maintain a regular customer base.

#2 Conduct market research

Market Research

This step goes hand in hand with the previous one and is basically the most vital part of your project. Without a proper estimation of the target market and your potential rivals, you risk to jeopardize your project early on.

Unfortunately, there is no winning recipe that can guarantee 100% success. Even backed by the best possible investment programs, some businesses may end up as a failure, such as Sprig and Munchery food delivery startups did despite substantial total funding.

That said, before proceeding any further, it’s essential to mitigate potential risks by investigating the market you are planning to operate in. Firstly, you have to analyze the niche and determine what companies you will go up against. Tools like SEMrush Market Explorer can be of great assistance here.

While most startup owners prefer to study other foodtech small businesses, we’d recommend you check out a few well-established companies to enable sustainable traction in the future.

Following this strategy, you can analyze their multi-year expertise and find out what digital marketing tactics and methodologies have let them make it to the top. Besides, you’ll be able to learn from their mistakes instead of having these in your own practice.

The next thing to consider is how you will look and attract new clients, so make sure you have a robust customer acquisition plan.

Last but not least, making use of a minimum viable product (MVP) is the right choice when you need to validate your idea, attract early adopters or meet harsh time-to-market deadlines. However, many entrepreneurs fail to give proper attention to the MVP development stage, which is ultimately a terrible mistake.

According to Go – Globe, 74% of high growth internet startups fail due to premature scaling, and 29% of startups run out of cash before they’re able to get fully established, while startups that expand properly perform a 20-times faster growth.

With an MVP, you can avoid premature scaling and save your budget and resources since you only pay for a limited set of core features at the first go-of.

For instance, to build a food delivery app like UberEats or GrubHub, you may need to spend at least $30,000 to $50,000, while the MVP’s price list can range between $5000 and $25000. Thus, the price of a mistake is substantially lower, so if your idea turns out to be unviable, you can save your money and start another project.

Eventually, you’ll be able to estimate the total market size, along with your potential of entering a particular niche. There’s a good chance someone has already launched a service driven by the same idea, but there’s nothing to worry about since there should be something you can offer that those startups can’t.

#3 Create a business plan

Business Plan Development

Once you have identified your target audience and have conducted all the necessary market research, it’s time to strategize and make a well-prepared business plan.

Whether that be a large-scale enterprise or a startup, a business plan is a must since it covers all the major aspects of your company, starting from market analysis to a marketing plan or a sales strategy.

With a business plan, you can easily spot critically vulnerable points and fix these early on. Besides, a carefully thought-out business plan can help you understand if you will be able to close your expenses and get a real profit from your meal ordering system.

While planning, you may want to think about branding your meal delivery business. See if you can pick a catchy name that will be associated with your particular food delivery startup. Moreover, you will need a stunning logo design to draw attention to your new brand. You can either hire a logo designer or do it yourself using an open-source online tool.

Next, you might want to work out a marketing campaign to seamlessly reach your target audience through social media networks or by leaving flyers in offices. You can also publish your food delivery business advertisements on various popular websites to draw new customers or potential partners.

Marketing is often underrated, but a decent marketing strategy is in fact, one of the most vital factors that let you succeed in a highly competitive market environment.

#4 Develop an on-demand meal ordering platform

According to Statista, the number of smartphone users worldwide today outreaches 3 billion and is expected to grow by several hundred million in the next few years. Another research says that 47% of the food ordering market was offline, while 53% was online back in 2019. Furthermore, the coronavirus outbreak has forced many customers to opt for lunch delivery services instead of offline restaurants.

According to the Digital Market Outlook, the number of users in the eServices Online Food Delivery segment Platform-to-Consumer Delivery worldwide is expected to be 965.8 million in 2024.

With so many people using their smartphones to order food online, you may want to make sure all your services are mobile-friendly. Here are a few benefits of having a web or mobile food ordering app:

  • A user-oriented food delivery app provides an outstanding experience to your customers and enhances the reach & accessibility of your business.
  • It allows you to automate your business processes and delivery order flow
  • You can scale up your startup quickly
  • You can focus on your core business tasks and save your time

As for the development process, we at Brocoders sincerely believe it’s critical to start with interactive prototypes before moving on to product development.

A prototype is the first iteration of a product that serves as a backbone for the following versions. Both prototypes and MVPs are crucial elements of product development, but a prototype is a fundamental basis for what will become an MVP later.

In short, a prototyping stage allows to:

  • Test hypotheses and get invaluable feedback
  • Find and fix the design issues at the early stages and prepare the best UI/UX
  • Use a prototype as a presentation tool for potential clients and investors
  • Save customers’ time and resources
  • Start testing the idea at the early stages

Some entrepreneurs often skip the prototyping stage and go straight to product development, which by itself is very toxic to the budget and the entire business. They might spend thousands, if not millions, to develop a feature-rich product only to find out no one wants to use it. For sure, not testing your business ideas is a great way to fail fast.

If you want to learn more, please read our article about the prototyping process or watch this video why prototypes

Now, when it comes to on-demand food delivery apps, most market leaders tend to split their delivery management software into 3 user-specific parts, each with its own functionality. Backed by our food delivery app development expertise, we highlighted the key features for each user role.

Food Delivery app (1)

Appetini food delivery project — our failure story

Why spend extra money and time on ordering food to your doorstep? This is exactly what I was asking myself before I came up with an idea to create a tech-enabled lunch delivery solution for Brocoders. Appetini is a side service that allows users to get high-quality and healthy food delivered from home cooks and restaurants right to their office or home.

Rodion Salnik

Rodion Salnik

Co-founder, Brocoders

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Appetini's story begins with an in-house hackathon that Brocoders held to develop a new ambitious startup idea. We split into several teams to estimate and analyze different projects and suggestions. Each group was comprised of 2 marketing experts and 2 developers. In just a few days, all teams presented their unique solutions, and Appetini won this battle by a majority vote.

On top of everything else, the hackathon allowed us to:

  • Develop an MVP
  • Validate the idea and a business model
  • Check supply and demand
  • Check a delivery possibility

The idea itself was based on our custom-designed social network platform for cookery experts. Initially, Appetini was meant to be a marketplace where chiefs could place their offers while customers could order healthy home delivery meals.

The main difference from competitors like MisterAm was that the home cooks placed their meals at lower prices. We were about to add different restaurants to our food delivery system as well.

IMG_6481

Later, we built an MVP to test the idea with real users and check if someone would like to make an order. It was a simple website with only basic functionality that let users to:

  • Browse the menu from different chefs
  • Order a meal

At the first go-of, we added one cookery expert to the system and delivered ten lunches to our first clients. To achieve profits from those operations, we added a 10% service fee to the cost of a meal. Besides, customers had to pay for delivery services (still, they didn’t cover all delivery expenses).

Appetini - Food Delivery Platform Worflow

It's at this point when we rushed into things by moving on to the project development stage, despite the fact that we still didn't acquire the full picture by that time.

Now looking back, we know exactly what we did wrong and when we should have changed our priorities. In fact, we should have stopped for a while to understand where to go next.

With this in mind, we'd like to share our expertise with you. We sincerely believe it's better to learn from other people's mistakes so you could avoid the same issues in your own business practice.

#1 Insufficient research

Learning: We only had the time to conduct primary research of the market and the target audience. Due to tight deadlines, we didn’t manage to make insightful analysis of the business model either. Thus, we had no idea of how truly big the market was or what our costs and revenues would be.

Solution: As mentioned above, it’s of crucial importance for any business to conduct in-depth market research in the first place. Don’t be afraid to waste your time and dive into various metrics and statistics. To check the market expectations and validate your idea early on, we’d recommend you start with prototypes and MVPs.

#2 Undeveloped courier services

Food Delivery - Courier Car

Learning: At the very beginning, we made a little bit of delivery survey and reached out to a few taxi providers. We managed to find a few affordable options, but we also looked for the possibility of hiring a courier at the same time. Unfortunately, we didn’t think every single last detail out back then, so the logistics were far from great.

Solution: Depending on your goals, you may want to start a delivery business all by yourself. For that, you’ll need:

  • Make market research and write a business plan
  • Create a custom-designed application
  • Hire extra stuff, including couriers or cooks
  • Invest in a vehicle fleet and manage your own delivery providers
  • Hire couriers with own vehicles and provide a fuel allowance

As an alternative, you can also team up with a partner or join third-party platforms like Uber Eats and pay a monthly commission fee for their delivery services. The choice is yours, but it’s vital to consider all the pros & cons of these perspectives at the early stages, as well as compare all available offers.

#3 Early functionality enhancements

Appetini-Functionality

Learning: After we finished developing prototypes and designs, we launched a marketing campaign to promote our new brand. As a result, we got several corporate customers (each office made orders for 15-18 employees at a time).

Thus, we ended up developing additional functionality enhancements for them. However, it definitely wasn’t an appropriate decision since the existing solution had all the features required for seamless platform operation, such as:

  • Browsing and sorting meals by chefs and other categories
  • Fully-functioning ordering system
  • Admin panel

Solution: Many entrepreneurs tend to make the same mistake when they get their first feedback from end-users. However. it’s critical to focus more on polishing the existing functionality than adding new features at the early stage.

You have to consider all pros and cons to understand what elements are essential to develop at the moment. Only when you have acquired in-depth insights and have estimated a business plan will there be a reasonable basis to extend a feature set. Otherwise, you risk to exceed the budget and spend valuable resources on time-wasting tasks.

#4 Fear of change

Learning: One day, we got stuck in a process, and the startup stopped expanding since we didn’t impose an additional fee on our meal delivery services. Appetini produced a low income, so we could merely close our expenses. We needed to test more than just a single hypothesis, but we feared losing what we already had.

Solution: Again, a new strategy can change things for the better and make your startup more successful in some cases, but it is necessary to analyze all ins and outs.

In our case, we had to pivot our business approach and test different ideas. When you come to realize that there is no way you can gain profit under certain circumstances, you have to take a longer view of the entire situation and decide where to go next.

It’s pointless to wait for a miracle to happen, so go search for new revolutionary ideas without fear of being unable to re-adapt your project.

For example, we had a few options to consider:

  • Make a SaaS-driven product and sell it to restaurants or cafes
  • Look for scaling alternatives and reach other markets/cities
  • Keep improving the existing solution

#5 Daily routine

Food Delivery - Packs

Learning: One of our team's biggest problems was that we got stuck in a routine while receiving calls and managing orders. We were tired and burned out. Besides, we didn’t see inspiring results, so our team was least-motivated by the end of the project.

Solution: There’s no silver bullet here, so it’s for a team leader to decide how to solve the same issues. For our part, we had to refocus and catch our breath from day-to-day tasks. Perhaps, it would have been easier for us if we had seen the profit.

As a result, we came up with a great and feature-rich food delivery solution that we couldn't sell. As of today, we are about to start another development phase that will include further optimizations and enhancements to the product.

A few more tips to consider:

  • To reach a wider audience and enhance the customer experience, you may want to include options for vegetarian, gluten-free and other meal menu choices
  • To attract more customers, try to run special-day events or provide discount vouchers from time to time
  • Make sure that the signup process is user-oriented so that new customers can start ordering their food immediately
  • Try to collaborate with local restaurants, cafes and home cooks in case you want to build a third-party food delivery platform
  • To ensure an outstanding user and customer experience, you have to enable as many different payment methods as possible, such as contactless payments, credit cards, e-wallets, online banking, cash on delivery, to name a few
  • To avoid a food delivery fail, make sure to apply for all the essential licenses and permits
  • You may want to run a few tests to ensure your food looks good after transportation
  • Don’t forget to add a clear description and a high-quality picture for each meal that will tempt users to order your food more often

Final thoughts

All in all, online food delivery is on the rise, to say the least. So if you are planning to invest in the online food ordering and delivery domain, you have to take a bunch of crucial factors into account.

As mentioned above, there’s no winning recipe out there, and even both prototypes and MVPs can’t guarantee you will end up with a successful business. However, following this tactic allows you to minimize the risks and know the market’s pulse, which, in turn, gives you the edge over your competitors.

With almost 100 successful projects under our belt, we at Brocoders are eager to implement new actionable and cost-efficient innovations for all types of startups and fast-growing companies. In case you have any questions left or you need a piece of expert advice, please don’t hesitate to drop us a line.

This article was created in cooperation with

Vladislav Korenyugin

Vladislav Korenyugin

Copywriter at Brocoders

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