Food delivery businesses are now more than ever an important part of the American economy. They’re crucial in assisting restaurants and food service professionals in reaching out to new customers in a constantly changing environment.
DoorDash, Postmates, Blue Apron, and Uber Eats have all become popular options for diners who prefer to eat at home. However, starting a food delivery business is still an option for aspiring entrepreneurs looking to carve out a niche in their communities.
We’ll go over the following topics in this article:
- Food delivery businesses come in a variety of shapes and sizes.
- The advantages of starting a food delivery company
- Steps to start a food delivery business in detail
- How to Keep Your Company Safe
- Food delivery businesses come in a variety of shapes and sizes.
- Restaurant delivery services and meal delivery services are the two types of food delivery services.
A restaurant delivery service makes money by charging a commission to the restaurants it works with and a service/delivery fee to the customers.
A meal delivery service entails a chef or cook, who is usually based out of their home or a rented kitchen, delivering pre-prepared meals or home meal prep ingredients to homes or businesses.
The advantages of starting a food delivery company
Starting a food delivery business is a great way to give back to your community by supporting small businesses and giving residents more options for dining at home.
Restaurants can benefit from food delivery services to expand their reach beyond foot traffic. They can also assist restaurateurs who no longer have a physical location where customers can dine, as well as those who want to confirm a proof-of-concept for a new restaurant concept.
You’ll be up against established players like Uber Eats, GrubHub, and delivery apps like doordash in this space. Your local connections and partnerships, on the other hand, may give you a competitive advantage in terms of commission and delivery fees. (According to a WIRED article, many restaurant owners are struggling with existing service fees imposed by food delivery companies.
How to Start a Food Delivery Business in 4 Easy Steps
So, what do you need to start a home-based food delivery business? Here are some simple and straightforward steps to get you started:
1. Determine the amount of capital required to start a business.
The two most important steps in starting a food delivery business are writing a business plan and obtaining funding.
Consider your target customer base, your startup and ongoing costs, and how long it will take to become profitable when writing a business plan.
This is also an excellent time to choose a business name and develop an initial marketing strategy.
The costs of starting a food delivery business can range from $3,000 to $25,000. The following items will be required as part of your investment:
A place to work: The costs of running a business vary significantly depending on where it is located. Many entrepreneurs choose to start their business from home, which can save money.
Technology costs: A computer, phone system, internet access, and possibly a printer or scanner are required by most small businesses. You can use your personal devices at first, but after you’ve covered your initial startup costs, you’ll want to invest in technology.
Business license and insurance: It is critical to ensure that your company is properly insured. Liability insurance is required for most small businesses, and commercial auto insurance is required for food delivery businesses. Worker’s compensation insurance is required in most states as soon as an employee is hired.
Materials for marketing and a website: To gain clients from local restaurants and the customers you plan to serve with food deliveries, you’ll need to promote your business. Consider using branded napkins, cutlery, and other items to give customers a consistent experience.
Take the time to create a marketing strategy that includes social media and a website, as well as other tactics like flyers and advertising. Review sites like Yelp and Facebook can help you build trust in your company.
Vehicles and tools designed for delivery: Most delivery companies provide transportation for their drivers, as well as food service bags and/or food trays designed to keep food fresh and warm. This is where commercial auto service comes in; your personal auto policy will almost certainly not cover business-related accidents or other claims.
2. Conduct market research on your intended audience.
Any business that understands its target market has a better chance of succeeding. Examine the environment in which your company will operate — will you surround by a university, a business park, or suburban families?
The demographics of your target market can help you choose a name for your company, a marketing strategy, and the meals you serve.
You can conduct research on your own by going into the community and asking/observing what people need, or you can conduct research with local business bureaus to see where there might be a need in your community.
3. Create a menu and services for food delivery.
You can start planning your menu and service offerings once you know who your target market is. Whether you’re working with a meal-prep service or local restaurants in your area, this will vary.
Will you concentrate on quick meals, easy snacks, lunch, dinner, family meals, or singles meals? As you get start with your delivery service, having a clear theme will be beneficial.
If you want to partner with a local restaurant, approach them strategically with your research and business plan.
4. Take care of your legal and financial obligations
Every small business requires a few things:
Create a legal entity: Creating a legal entity can help you protect your personal assets. You can choose from a variety of options, including an LLC, Corporation, or DBA.
To register for taxes, go to the IRS website and fill out an application for an employer identification number. Before you open your doors, double-check your state and federal tax requirements to ensure you’ve met them.
Open a business bank account: You can protect your personal assets by opening a separate banking and credit line for your business. It also makes tax preparation easier. Also, set up an accounting system to better understand your finances and prepare to file taxes on a yearly basis.
Check with local, state, and federal small business agencies to ensure you have all of the permits and licenses needed to operate a food delivery service in your area.
Find small business insurance to protect yourself from liability risks and unexpected out-of-pocket expenses by purchasing food delivery business insurance.
How can you safeguard your food delivery business from dangers?
Once you’ve decided to start a food delivery business, you’ll need to be aware of the potential risks. Many of the most common delivery-related accidents cover by small business insurance.
General liability insurance for food delivery businesses, for example, can cover:
Compensation for third-party injuries and medical expenses
If you are found liable for delivering food that causes a customer to become ill and they sue you for medical costs, this can cover your expenses.
You also financial protect if you left a food delivery outside of a home and someone was injured as a result of tripping over the package.
Property damage to third parties
General liability insurance also includes coverage for property that you do not own. For instance, if a delivery person breaks a sprinkler outside a customer’s home, causing significant water damage, the customer may choose to sue you. The associated legal costs would cover by your liability insurance up to the policy limit.