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Business Model of Food Delivery Apps: Capital Cost, Operating Cost, Break-Even Time and ROI Strategies

Let’s talk a fact. 

You are reading this blog to know the business model of food delivery app or more specifically:  

  • How much money will I need to start an online food delivery business? 
  • How much money will I need to run an online food delivery business? 
  • How long does it take me to cover the capital cost and start making a profit?  
  • How can I get more returns in less time? 

Trust us. We will answer all of your questions with our CEO’s 3 decades of experience in the Indian startup ecosystem. 

Business Model of Food Delivery App:

How Much is Capital Cost to Start an Online Food Delivery Business in India? 

First of all, the capital cost is nothing but the money you require to start the business. 

If you are starting a restaurant, the capital cost would be property, furniture, kitchen equipment, staff etc. 

Similarly, if you are starting an online food delivery business, the capital cost would be,  

  • Company registration
  • Mobile app
  • Delivery drivers
  • Kitchen  
  • Food packaging materials 
  • Food delivery bags 
  • Pre-launch marketing 

How can you keep the capital cost low? 

The app development cost accounts for more than 60% of the total capital cost you would require to start the food delivery app. 

That means, if you manage to spend less on mobile apps, you will be most likely to save thousands of dollars on capital cost. 

There are multiple ways you can save money on app development. Following are some of them. 

  • Rather than developing the custom app, go for a clone app or white-label app. Because the custom app will cost you more than 10 lakh INR whereas the clone app and white-label food delivery app will cost you around 5 lakh INR or lesser than that. 
  • If you are developing a custom food delivery app or clone app, don’t consider a native app. Instead, go for a cross-platform app as a cross-platform app is 30-40% more affordable than a native app. 

In case you are wondering, the cross-platform app runs both on iOS and Android platforms from the same codebase. 

Meaning, developers have to write code only for one time which requires them less time and due to less development time, they charge you less. 

How Much is the Operating Cost to Run the Food Delivery Business in India? 

The operating cost is nothing but the money you require to run the day-to-day operations of your business. 

If you are running a restaurant, the operating costs would be staff salary, ingredients or raw food, maintenance of your restaurant etc. 

Same way, the operating costs of running an online delivery app would be, 

  • App maintenance costs 
  • Marketing efforts 
  • Drivers’ salary or commission 
  • API fees (you have to pay monthly fees to different APIs used in your app such as map API, payment API) 
  • Customer service 

How can you keep the operating cost low? 

The higher the operating cost is, the lower your profit is! 

Because Profit = Revenue – Operating cost! 

Thus, to keep profit high, you have to reduce the operating cost. 

The following are some of the ways you can apply to keep the operating cost of the food delivery app low. 

  • You can hire an app agency that provides you 3 months of free support after you launch your app in the market. 
  • Rather than hiring customer service executives, add a chatbot into the app which answers queries of customers in real-time, 24/7. 
  • Always select value-for-money API. Because there are many premium APIs that offer many advanced features which you might not need at all. 

What is the break-even time of an online food delivery app? 

First of all, let’s understand the break-even point and break-even time. 

The break-even point is the point in your business journey from where you start earning profit or getting returns because you have already covered the capital cost. 

The break-even time is nothing but the time it requires you to reach the break-even point. 

This image clearly depicts the concept of the break-even point. 

Before reaching the break-even point, the money you are earning is just covering your capital cost or the amount you have invested. 

But your earning after reaching the break-even point is your actual return on investment (ROI). 

So, talking about the time it requires to reach the break-even point, it depends purely on your market, app, efforts and many other factors. 

Thus, we can’t estimate the exact days to break even. 

But based on a common scenario, we can help you to estimate your break-even time. 

  • Suppose, you have invested 1 lakh INR. 
  • Every day you are delivering 100 food orders. 
  • The average revenue per order is 30 INR. 
  • Your operating cost per order is 20 INR. 
  • Thus the profit per order is 10 INR. 
  • The profit per day is = 1000 (100 orders * 10 INR profit per order) 
  • Thus, the days required to cover 1 lakh INR is 100 days. 

This way, 100 days is your break-even time with 1 lakh INR investment and 1000 INR profit every day. 

Here, it is worth mentioning that with proper ROI strategies, you can bring break-even time to the lowest possible time and cover the capital cost much faster. 

So, let’s now discuss the top ROI strategies of online food delivery apps. 

ROI Strategies for Food Delivery App to Make Money Out of Your Small Investment 

Be it online or offline business, there must be well-defined ROI strategies prior to market launch. 

With ROI strategies, you can focus only on factors that contribute most to your business and profit. 

A well-defined ROI strategy makes sure you are spending less on running your business while making more profit. 

The ROI strategy must include customer-centric points because when you manage customers well, you will get more ROI thanks to those customers. 

More specifically, you have to be very careful with your initial customer acquisition that they will define the fate of your business. 

The following are some of the ROI strategies you should take into considerations to quickly cover the capital cost and claim a high return on investment. 

  • Provide personalized user experience based on their favourite food, days and mood.  
  • Let users order for the group by selecting the number of people – rather than selecting the food quantity.  
  • Always make sure drivers deliver the food on time 
  • Never give two orders to the same drivers. (Yes, Zomato and Uber are doing the same. But it is a fact that drivers can’t deliver the second order on time.) 
  • Invest more in extraordinary customer service.  
  • Ensure the drivers are well-trained and taking all precautionary measures to deliver food safely especially during the ongoing pandemic.
  • Treat drivers well. Without them, you can’t run the app and business! 
  • Make sure your drivers are keeping food in a hot bag because no one likes cold food. 
  • Add a three-way rating system to promote transparency among customers, drivers, and restaurant owners. 

By following all such action items, you can satisfy all needs of the customers which results in a loyal customer base and a loyal customer base results in high ROI. 

Because of all these reasons, the business model of a food delivery app is very important. You should draft it even before developing the app. 

Get your own food delivery app and start making a profit within 15 days with an investment of 1 Lakh INR 

We are a startup-focused app development company based in Ahmedabad, India. 

We are led by a well-versed leader having 3 decades of experience in the mobile app ecosystem. 

We strongly believe you don’t just require an app. 

You also require a powerful business model which facilitates you to make more profit while investing small. 

Thus, our dedicated business experts help you draft the most profitable custom business model for you based on your business goal and market. 

Talking about the food delivery app, we are clever enough to develop custom, clone, native and cross-platform mobile apps. 

We even provide a white-label food delivery app with your own branding options. 

These are some of the real screenshots of our white-label food delivery app. 

Our white-label food delivery app is equipped with all the important features you require to run your food delivery business easily. 

It is a ready-to-use solution that you can start using as soon as we deliver it to you. 

And we deliver it to you within 15 days if you don’t require any custom features. 

Talking about the cost, it just costs between 75,000 to 1,00,000 INR with current features. 

Since it is highly customizable, we can easily customize its UI and features as per your requirements.

  • User App Features
  • Delivery Driver App Features 
  • Restaurant Owner App Features 

So, feel free to schedule a meeting with us to discuss and get the live demo of our white-label food delivery app. 

And trust us, we will provide you more than just an app!