Starting a food delivery business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful food delivery business.
Importantly, a critical step in starting a food delivery business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Food Delivery Business:
- Choose the Name for Your Food Delivery Business
- Develop Your Food Delivery Business Plan
- Choose the Legal Structure for Your Food Delivery Business
- Secure Startup Funding for Your Food Delivery Business (If Needed)
- Secure a Location for Your Business
- Register Your Food Delivery Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Food Delivery Business
- Buy or Lease the Right Food Delivery Business Equipment
- Develop Your Food Delivery Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Food Delivery Business
- Open for Business
1. Choose the Name for Your Food Delivery Business
The first step to starting a food delivery business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own food delivery business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your food delivery business.
2. Develop Your Food Delivery Business Plan
One of the most important steps in starting a food delivery business is to develop your business plan. The process of creating your plan ensures that you fully understand your food delivery service market and your business model. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your food delivery business.
- Company Overview – this section tells the reader about the history of your food delivery business and what type of food delivery business you operate. For example, are you a grocery delivery service, restaurant delivery business, meal kit delivery service, or an online food delivery business?
- Industry Analysis – here you will document key information about the food and beverage industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing strategy should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your food delivery business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your food delivery business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Food Delivery Business
Next you need to choose a legal structure for your food delivery business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the food delivery business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a food delivery business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a food delivery business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a food delivery business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your food delivery business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Food Delivery Business (If Needed)
In developing your food delivery business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a food delivery business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a food delivery business that they believe has high potential for growth.
5. Secure a Location for Your Business
An important factor to consider when finding a location is the cost of doing business in the area. You’ll want to find an affordable spot in terms of rent and other expenses like utilities and marketing. Additionally, you’ll want to be sure that there is a high population density in the area, ensuring that you have enough potential customers to make your business successful.
6. Register Your Food Delivery Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your food delivery business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your food delivery business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
To start a food delivery business, you will need to obtain a food handler’s permit and a business license. You may also need a permit from your local health department.
10. Get Business Insurance for Your Food Delivery Business
The type of insurance you need to operate a food delivery business will depend on the scope of the operation.
Some business insurance policies you should consider for your food delivery business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Food Delivery Business Equipment
You will need a food delivery vehicle, such as a bicycle, car, or motorcycle. You will also need a smartphone to take orders and a printer to print receipts. Additionally, you may need some basic kitchen supplies, such as pots, pans, utensils, and storage containers.
12. Develop Your Food Delivery Business Marketing Materials
Marketing materials will be required to attract and retain customers to your food delivery business.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your food delivery business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional food delivery business website provides potential customers with information about the food delivery services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you..
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your food delivery business.
13. Purchase and Setup the Software Needed to Run Your Food Delivery Business
The most important software for a food delivery business is a Point of Sale (POS) system. This system will allow you to track sales, manage inventory, and process payments. Other software that may be helpful includes delivery management software and customer relationship management (CRM) software.
14. Open for Business
You are now ready to open your food delivery business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Food Delivery Business FAQs
Is it hard to start a food delivery business?
No, it is easy to start a food delivery business. All you need is a good location and some great food. You can also market your business online, or through social media and food delivery apps. Just make sure you have the right tools and resources to make your business successful.
How can I start a food delivery business with no experience?
One way to start a food delivery business with no experience is to research the industry and find a successful food delivery company to emulate. You can also look for online resources or attend workshops to learn more about the food delivery business. Additionally, it is important to have a clear understanding of your target market and what services you will offer. With a well-thought out business plan and a commitment to learning, you can start a successful food delivery business.
What type of food delivery business is most profitable?
There is no definitive answer to this question because profitability depends on a variety of factors including the location, competition, and efficiency of the business. However, in general a delivery business that specializes in a specific niche may be more profitable than a general delivery business. This is because there is often a lot of competition for delivery services, and the companies that can stand out from the competition have a higher chance of achieving profitability than those that do not
How much does it cost to start a food delivery business?
It costs around $10,000-$30,000 to start a food delivery business. This includes the cost of a vehicle, insurance, and marketing.
What are the ongoing expenses for a food delivery business?
The ongoing expenses for a food delivery business can vary depending on the scope and scale of the operation. Some common expenses may include delivery vehicles, fuel, insurance, workers' compensation, advertising, and food costs.
How does a food delivery business make money?
A food delivery business makes money by charging a delivery fee on each order that it delivers. The delivery fee is usually a percentage of the total order cost, and the business may also charge a food delivery service fee. The delivery fee and any service fees are typically added to the customer's bill at the time of purchase.
Is owning a food delivery business profitable?
Owning a food delivery business can be profitable because it offers a service that is in high demand. Customers appreciate the convenience and affordability of food delivery, and businesses can make a healthy profit by meeting these needs. Additionally, there are many ways to market a food delivery business, which makes it an attractive opportunity for entrepreneurs.
Why do food delivery businesses fail?
Food delivery companies can fail for a number of reasons, but the most common are a failure to properly execute on their business plans, a lack of marketing and advertising, and/or not having the proper capital to sustain operations in the early stages.