How to Start an Online Food Delivery Business in the US, Canada, and UK
Updated: Jan 21, 2023
Published: Jan 11, 2023
The food delivery industry is on the rise, with popular services like Uber Eats, DoorDash, Postmates, and Grubhub leading the way. This makes delivery an important aspect for any food-based business to consider. There’s also a trend of cottage food businesses and virtual restaurants where entrepreneurs can sell food directly from their homes and online. In this article, we’ll offer some useful tips on starting a local food delivery business, whether you’ll deliver through a food delivery network or your own independent service.
Join food delivery networks
Large national networks
When it comes to food delivery services, there are a few different options to tap into. One popular choice for small businesses just starting out is to join a network of existing delivery services like Uber Eats or DoorDash. In the US, Canada, and UK, some of the most well-known networks includeUber Eats, DoorDash, Grubhub, Seamless, SkipTheDishes, and Deliveroo, which offer nation-wide service.
Here are some of the large delivery networks and links on signing up to their service:
Regional and independent networks
Another option is to look into smaller, regional alternative delivery networks that cater to a specific food vertical or demographic in that area. For example, Fantuan is a popular choice for Asian food delivery and Neon delivers delicious grub from independent food creators in the Bay Area.
Some regional and independent food delivery networks include:
- Fantuan (Asian food)
- Neon (Bay Area)
- Tock (High-end restaurants)
- Caviar by DoorDash (High-end restaurants)
Pros and cons of joining a network
Joining one of these networks can be beneficial as it provides access to a large customer-base and a network of delivery people that will handle logistics for you. However, these networks can charge high commission fees, typically up to 30%. Be sure to research the rules, fees, startup costs, and processes to join each network.
Another thing to take into account is your ability to fulfill demand from customers who find you through the delivery networks. If you have limited capacity or if you’re just starting out and figuring out your processes, joining a delivery network may not be the best first step. Also, if you’re offering highly customized food like custom cakes and baked goods, it may be better to operate your own delivery service.
Lastly, if you are interested in signing up to multiple food delivery services, then you want to take a look at updating or purchasing an order management system that will help you streamline all your orders from the various networks.
Start and run a successful independent food delivery business
If you’re starting out or if joining a food delivery network doesn’t fit your business model, you can start your own delivery service for your business. The benefits of operating your own delivery service is that you can maintain attractive pricing for your customers and keep all the sales margin. To add delivery to your food business, you need a way to accept and manage delivery orders, a pricing strategy, and a way to deliver the food to customers.
Starting a food delivery business from scratch
Starting an independent food delivery business can be exciting, but daunting! We’ll walk through all the components of starting a successful food delivery business from scratch — from getting permits to pricing to doing the actual delivery.
Cottage Food Operator Permits
Cottage Food Operator permits can make it more affordable for food entrepreneurs to start their home-based food business and delivery-only restaurants. These permits are low-hurdle licenses that allow you to sell low-risk homemade foods such as baked goods and jellies. You can check with your regional government for specific cottage food permit requirements.
Find out how to get a cottage food license from each of these regions:
- Washington State Cottage Food Operation
- Colorado Cottage Food List
- LA County Cottage Food Operation
- Connecticut Cottage Food Operator
- Chicago Cottage Food Operation Registration
- Orange County Cottage Food Operations
- New Jersey Cottage Food Operators - Home Bakers
Manufacturing your food for delivery
Next, you want to determine where you’re going to manufacture your food. Your home kitchen may be the most affordable and convenient option and give customers a real home-cooking experience, but it depends on your setup and licensing requirements. If it is not feasible, you can rent space from a local commissary kitchen that provides equipment and storage.
When deciding on where and how to manufacture your food, consider the type of food, timing of making and delivery, and storage options. For example, if your food has a longer shelf life, such as frozen foods or chocolates, it can be made and stored in different locations, but if you're making fresh food on-demand like for a lunch service, it needs to be manufactured and packaged on-site for same-day delivery.
Packaging is a crucial aspect of the customer experience. Choose packaging based on the type of food you are offering. For hot food on-demand, select packaging that keeps the food warm and prevents sweating. Offer reusable containers such as glass jars or tiffin boxes to frequent repeat customers as an eco-friendly option. Other aspects you should consider include how you want to make your customers feel when they unbox your food, the type of utensils they need, the portability of your packaging, and food safety.
Once you have all your permits ready and a place to make your food, determine how to price your delivery fees. Think through factors such as delivery distance, costs (vehicle gas, mileage, labor, packaging, and payment processing), and whether you want to make a profit on delivery.
Delivery fees are typically added to food fees, ranging from $5 or more. You can offer a flat fee within a certain area, or vary the fee based on location to account for mileage. Decide if you want to make a profit on delivery or not. To make the delivery effort worthwhile for you, you can set a minimum order size for delivery, such as $50, and offer incentives like free delivery for larger orders ($100 before tax).
For delivery operations, it’s important to determine who will be responsible for delivering the products and the method of delivery. One option is to do the delivery yourself, while another option is to offload it to an employee or contractor. To make delivery profitable for your business, evaluate strategies such as batching deliveries and offering designated delivery days or times.
It’s also essential to have clearly defined policies for addressing errors and customer complaints, including when to offer refunds or replacements. For example, think through possibilities such as deliveries not being on time or the wrong items being delivered, as well as situations where customers have forgotten about the delivery date or want to pay on delivery instead of at the time of ordering.
Ultimately, the approach to running delivery operations should take into account both your capacity and the needs of your customers.
Choosing a food order delivery management system
To keep track of your delivery orders, while you can use Google Forms or add-ons to take orders and payments, you should implement a good delivery management system that will automate and keep track of all the orders you need to deliver. You will also want to find something that is flexible enough to accommodate all your business requirements, such as pricing.
When selecting a delivery order management system, you should look out for the following features:
- Self-serve ordering website for customers
- Credit card payment and cash on delivery
- Flexibility to meet your delivery pricing and requirements
- An order dashboard to view upcoming delivery orders and dates
- Automated notifications to confirm orders and remind customers of deliveries
- Mobile-friendly interface for tracking orders and deliveries while on the go
- Pricing and fees associated with the software
Implementing FormPay as your delivery order management system
Delivery operations can get gnarly, so choosing the right software will be critical for the experience for you and your customers. One such delivery order management software is FormPay, a simple-to-setup ecommerce solution designed for independent food businesses that are getting off the ground.
You can quickly create beautiful online ecommerce sites without any coding and little technical skills. FormPay can accommodate all types of delivery pricing options whether it’s flat fees that could be waived over certain order sizes, delivery prices by city, and more. You can let your customers choose to pay by credit card when they order or pay by cash on delivery. And to make sure everyone knows when an order will be delivered, you and your customers will get automated delivery notifications. With no monthly fees and risk-free transaction pricing, you can also manage your orders with a mobile-optimized order management dashboard.
Marketing your food delivery business
The last thing to do is to tell the world about your new food delivery business! Link your delivery order form to your Instagram account and any other sales channels you plan to use. On your social media and email lists, announce to friends, families and followers that you’re now offering delivery. Incentivize people to try out delivery by offering promotional pricing like waiving delivery fees for a period of time.
Whether you choose to join an established food delivery network or manage your own deliveries, with the right systems and processes in place for delivery, you can create a seamless and enjoyable experience for your customers that will keep them coming back again and again for your delicious food.