The food delivery industry is globally one of the fastest-growing. This sharp growth is primarily fueled by the ever-increasing customer base for delivered food. According to the Business of Apps, U.S food delivery app users reached 111 million in 2020 and will continue to grow.
According to Statista, the number of people ordering food via online apps nearly doubled in the last three years, rising from 364.8 million in 2017 to 625.9 million in 2020. This number is projected to reach 858 billion in 2024 and should pass the billion mark in 2025.
This new reality pushes restaurants to cooperate with existing delivery services or create their own food delivery apps—causing slumps in sales or loss of business if they don’t adapt. Industry demand is growing, and now it’s a perfect time to become a leading player among restaurants and customers by considering food delivery app development.
Types of Food Delivery App Monetization
Delivery Charges
If a restaurant doesn’t have its own delivery team, such kind of an app can take care of delivery for a fee. Delivery fees can be a percentage of the order price or a flat fee depending on the distance.
Charging for delivery is a good approach for stable income, but it can be hard to stay afloat using this model alone. Therefore, you should think about additional sources of income such as surcharges during peak hours.
Peak Hours
Let’s consider one more way to make money with food delivery apps. This monetization approach involves a delivery surcharge during peak hours. For example, UberEats sets surge pricing during lunch and dinner. At peak hours, UberEats limits menus and locations and charges an extra fee to make them available. To see how successful this approach can be, look at the graph below that shows the average UberEats income per delivery by city. Charging more during peak hours is a great way of bringing in extra revenue. But keep in mind that not all customers are ready to pay a premium and may just go to a competitor where the service is cheaper.
Advertising
Advertising is another way that food delivery app make money. A delivery app can offer to advertise to restaurants at an additional cost. In a delivery app, advertising can mean listing a restaurant at the top of search results for a period of time. This is one of the major sources of revenue for Swiggy. Swiggy charges money to restaurant owners to feature their restaurants in the app. By being on a featured list, restaurants are shown above others in search results and can attract more customers. UberEats makes money through advertising income from restaurant partners. Like Swiggy, UberEats charges restaurant owners a marketing fee to feature their restaurants.
Since the market now has a huge number of restaurants, this means great competition. Many people want to advertise their restaurants and be more visible than others. Advertising is an excellent source of income. But partner only with trusted restaurants that have good customer feedback.
Commission Percentage
One more approach to monetizing a food delivery app is a commission percentage. Online food delivery apps can collaborate with restaurants on predefined commission rates based on the order size. For example, Just Eat makes money by charging restaurants commission on transactions. Today, the company boasts a market capitalization of $3.5 billion and operates in 15 countries.
One more example of a company that applies this approach to monetization is Deliveroo. Charging commission to restaurants has increased Deliveroo’s revenue by 20 to 25 percent a month for the last three years. The company’s latest funding round in November 2017 raised $100 million, valuing Deliveroo at around $600 million.
Commission percentage is a good way to make money and can lead to long-term customer relationships. But the size of the commission may vary depending on the restaurant level, its average revenue, and other factors.
There are also alternative ways to make money with food delivery apps like DoorDash:
- Third-party advertising
- Allowing restaurants to list their services through the food delivery app for a fixed monthly fee
- Charging extra for delivery during bad weather conditions
- App homepage advertising
- Extra fee for rush delivery
- Extra fee for businesses that want to open a restaurant using the mobile app
Here are the 9 advantages of online ordering:
1. Makes the Ordering Process Easier
Traditionally, people had to make calls to place orders or drive to the restaurants for a take-out, then wait for the food to be prepared and delivered. Sometimes, placing an order on the phone means that there could be mistakes in order. Clearly, these aren’t really the best solutions to order food from restaurants especially for people with busy lifestyles.
The best solution is switching over to online ordering. Restaurants owners can create a website an app or both that will not only make the ordering process easier for customers but also streamline restaurant operations. Having an online ordering system can make day-to-day operations more efficient for a restaurant. On the other hand, when a customer places an order online, they take their time to browse the menu and get familiar with add-on deals and offers that your restaurant must be offering. This can lead to an exponential increase in the total sale value per order.
2. Efficient Customer and Order Management
An online ordering system for Restaurants helps enhance the customer-restaurant relationship by providing end to end Customer Relationship Management (CRM) system. It provides a complete sales dashboard with information about new/active/canceled orders, lifetime sales details, etc.
It also comes with an order management system that streamlines the entire ordering process starting from order placement to final delivery.
Whenever customers place an order, an efficient online ordering system sends notifications via email or SMS to help the restaurant staff make the order execution faster. On the other hand, such software is also equipped with GPS systems that help you capture the entire address that in turn ensure timely and fast deliveries.
3. Monitor your Expenses Incurred in Real-Time
This is the greatest benefit of the online ordering system, it gives precise information about the cash flow in the restaurant. You get to keep track of costs incurred during preparing an order and compare it to the cost you are giving it to the customer, all this while keeping track of the profitability. In a day when you receive hundreds of orders, an online ordering system will give you an accurate monetary translation of each order without having you look into cash registers.
4. Free and Cheap Marketing
By enhancing your brand’s online presence in the market, you can boost your sales with additional new and returning customers.
Having a strong online presence simply means being in front of your customers 24X7 without having to pay for expensive media advertising and billboards. How? Internet is a free community and all you need is a user-friendly website and a decent social media engagement on social platforms like Facebook and Instagram to reach your target audience. All this comes at a fraction of the cost that you would have spent on traditional means of marketing and promotions. You can also invest some time in creating a strong company profile on Google My Business so people looking out to order food in your area or in your delivery range can find your business with a quick search. Having a dedicated team that can post on social media regularly and engage with your customers will prove to be a good investment to drive traffic and sales on the website.
Pro Tip: Show the human side of the business and engage with the local community positively. Establish yourself as someone who really cares about the customers, and don’t be shy to show it. Use these social platforms to their fullest.
5. Better Customers Data
Who are your regular customers? What do they like about ordering from your restaurant? Which food items are popular? Are they aware of the promotions and offers on the website? Do they prefer ordering from a website or app? These and many other related questions can be answered using analytics and insights provided by a robust online ordering system for restaurants. This data is valuable since you can use it to send targeted promotions to your customers and entice them to keep coming back.
In-house solutions allow you to analyze ordering trends and customer preferences in depth so you can customize your menu, offerings, deals prices, and so on to provide a tailored experience to everyone.
6. The Convenience of Mobile Ordering
From meetings to crowded areas, there are times when one may not be able to make a phone call to order food. Online ordering allows customers to order anytime, anywhere using their mobiles, tablets, or other handheld devices. There is no need for the customer to reach out and make a call while disturbing their privacy or disrupting a meeting for a lunch order. With a mobile app, the customer can quietly place an order without the hassle of talking over the phone. A mobile-friendly website or app will make sure that you never lose a customer.
7. Stay Ahead of the Competition
Did you know there are only 2-3% of restaurants in the world that offer online ordering facilities? This is your chance to make the most of this opportunity and make your restaurants available to your customers at their fingertips. With the growing consumer demand for faster, more convenient ways to order, independent restaurants are investing in this new takeout technology to stay ahead in the competition.
8. Grow your Bottom Line
Because in the end, that’s what really matters!
According to the survey conducted by Restolabs’ research team, it was found that Orders placed online are 20 percent larger on average, which means more revenue. When customers can browse the menu without feeling rushed bylines, they tend to spend more time deciding what to order. The math is simple: the more time they have to look over, the more they are likely to order. You can highlight specific items on menus and run promotions to influence their purchase. Now that’s a profit!
9. Greater Reach
Your restaurant seating capacity may be 100-200 at a time, or even less, but with online ordering, you can reach thousands of people at a time, and cater to a much larger number without having to make any additional investment in staff or infrastructure. All you need is a well-integrated online ordering system and you are good to go!
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