Help me with my new business idea in the food industry

thess123 · 02-08-2012, 04:01 AM

This is an idea I've been thinking about for a long time. After doing some initial research, I've found multiple other cities have this service-but not mine. My city has roughly 100K people living in it (for info purposes).

What I'd like to attempt to set up is a food delivery service. It would essentially be delivering food the same way that pizza places do, except for restaurants that don't already have delivery services.

Basically, you call up my company, place an order. Then, I place the order at the restaurant for you, pick it up when it's ready, and deliver it to you at a predetermined time.

My (still not official) pricing would go something similar to:
$0-14.99 $2 fee
$15-$34.99 $3
$35-$64.99 $5
$65-100 $8
$100-$500 $15
$500+ $40

+25% fee for each restaurant after the first (ie, you order $90 worth of food from three stores, your total fee is $12.

Short term plan

My short term plan is extremely small compared to where I see the company in three years. There are two fortune 500 companies that employ 1000's of people, one of them being GE and will be focusing on these two places to start.

With limited resources, I feel like my best bet (and possibly only bet) is to start out small. What I was thinking was starting with only being "open" two days a week. On Thursdays, I would be open to the GE employees, and Fridays to the other company's.

I would allow orders up to say 10 AM the day of, and all deliveries would be made at certain times (maybe have deliveries at 11:30, 12:30, and 1:30-this would be something I would discuss with employees of the company).

I feel like limiting the days that people could use my service at first would increase the desire to use it. I will be the only employee to start, so I feel like this is my best shot at not only putting a good product on the table, but also allowing demand to increase while not overstretching myself (think facebook, but to a much, much lower extent).

Long term plan

My long term plan would be to expand first in the two companies that I've already talked about (possibly opening it up to 3 days per place, possibly all week), as well as hireing another driver when needed.

After opening it up to a week long availability, I would also open it up to other companies. After heavily debating it, I feel like focusing on companies with large bases is going to lead to success a lot more than focusing on individuals, atleast at first.

Also, I would eventually like to expand to the "drunk" community. I have three colleges within a small area totalling roughly 10K students. I would like to allow students to call at say 2 AM to have lets say Taco Bell delivered to them. I would have specific drop off times/locations for each of the three schools, allowing me to drop off more food quicker. This service would be limited to Friday and Saturday nights, as well as during finals week.

Starting Expenses:
some type of business license, I would assume
some type of license to handle food
Food heating bags
Food cooling bags
marketing (see below)
gas (see below)
insurance
portable credit card machine

Marketing
I'm not sure how best to market this. I feel like word of mouth will get me the majority of my sales after the first few initial sales. Talking to the companies and getting them to allow me to post flyers may or may not help. I will probably also get a website set up(have a cousin who can do it cheaply). I'm not sure of what other avenues would be worth pursuing.

Gas
Gas seems like the biggest expense. My plan is to push restaurants where I can buy gift cards from giant eagle to use fuel perks to either decrease or possibly eliminate the gas expense.

As far as insurance, business licensing, and food licensing, I am clueless on how to go about it.

Overall, BFI, does this seem like a doable business? I'm willing to take advice on anything, from prices to marketing to "Don't ****ing try this, it will fail!"

In my mind, I see a market for it, but my mind isn't necessarily the one that matters.

PFUNK · 02-08-2012, 04:47 AM

I don't think your idea to start off small and only open like one or two days a week is very smart. You immediately limit your services to basically nothing, confuse and alienate customers, and wont bring in any money.

Are you able to dive into this thing full time or do you have a day job? Able to hire one dedicated driver even if he isn't even doing anything half the time?

You should try and open up and begin with as close to a "full time" hours approach as possible, otherwise I feel like you are going to take forever to get this thing off the ground and you are never going to "learn" the customers tendencies and what good hours and rates are for your business.

Besides, how the hell are you going to make any money only opening it up 2 days a week and only charging a $2 fee for up to $15 worth of food? This might not even pay for your gas to go pick up the food, drive it to the customer, and get back to your location. You should be charging a minimum of 20% for each delivery, and have a minimum of $20 per order imo. I would also only do 1 restaurant per delivery, per customer....otherwise you are going to get every fat guy wanting entree from this restaurant and a piece of cake from here and a milkshake from here....even if you are charging its a cluster **** and you are losing other opportunities.

Marketing I would do flyers, brochures etc. and get permission to advertise at the two companies you mentioned. I would hire a full time driver who wants to make money and when he is not busy, or on off days I would make him go hand out flyers at businesses, apartment complexes etc. I would also do a mailer to a section of town I want to get business from, dropping a flyer/brochure and mailing it to all these houses. I would figure out a way to get every small business in towns fax machine number and do a fax campaign, sending them a fax with info.

I would also make each person register online to a website and try to make the business very easy to order/purchase directly from there. These will be the returning customers you want and you will be able to solicit them (tastefully) on occasion offering discounts/specials or just a reminder that you exist.

I would personally put a lot of time/thought into the website. You want people to be able to make their orders from here and make all the payments here. I would probably work with a select number of places in town and put their menu on the website and only work with these restaurants. I would also figure out a way to make money off these restaurants since you are essentially advertising for them and bringing them business.

Bunch of random thoughts for ya.

I know its a totally doable business, though I have no idea how good the numbers are....they dont sound good at all unless you live in a very dense populated area with a lot of people, or you are wanting to do a ton of the work and deliveries yourself and just need a job you are the boss of.

I mean, lets say you can sustain 4 deliveries an hour (highly inflated example imo) between two people in an 8 hour shift, and lets say your average delivery fee is $4 which would be very high according to your fee chart, and lets just say you are one of the delivery drivers (free labor).

8 X 4 x $4 = $128

You made $128 dollars on this day in a full 8 hour shift, and you have to pay a delivery driver for 8 hours of work.

If you pay him a measly $8 an hour and make him pay for his own gas with no reimbursement, and don't profit share any fee's with him letting him collect his own tips, he just ate HALF of your days profit and you haven't even paid yourself or your own gas.

So you just profited $64 (+ tips) in 8 hours and used a lot of gas you still havent paid for and weren't able to do anything to expand your business during these hours, and probably have some other overhead variables to worry about as a business owner.

I'd think about this ALOT before moving forward on this.

I think a key is to sell "subscriptions" to local businesses to advertise their restaurant on your site, promote their menu and offer your customers a chance to get their food delivered, and only deliver food from restaurants who are affiliates and pay to be in your circle on your website. If they are on your website, they pay you a monthly fee to be there and your customers can get food from them.

B00T · 02-08-2012, 05:17 AM

Quote:

Also, I would eventually like to expand to the "drunk" community. I have three colleges within a small area totalling roughly 10K students. I would like to allow students to call at say 2 AM to have lets say Taco Bell delivered to them. I would have specific drop off times/locations for each of the three schools, allowing me to drop off more food quicker. This service would be limited to Friday and Saturday nights, as well as during finals week.

Have you ever waited for 50-100 items from Taco Bell at 2AM? I have, and I can tell you from the time you place the order there to delivering it to the last person's door, it would be nothing short of a miracle if you could do it in under 2 hrs. Many of those drunks would be long passed out by then.

That's putting faith that they get your order 100% right which is a longshot in itself.

HowardGrind · 02-08-2012, 05:20 AM

I think a more scaleable option is do a reverse group buying deal.

Contact local businesses and get them to commit to ordering corporate lunches via your website. You can take these $200+ orders and source them out to caterers/restaurants in your town. You could get the businesses 10-15% off their order, ask the restaurant for 20-25% off and then keep the 10% juice and charge $20-40 to deliver it.

BOOM.

DemonDeac · 02-08-2012, 09:33 AM

There are companies that already do this. You'll want to research them.

e.g. Diningin.com

mmbt0ne · 02-08-2012, 10:52 AM

Go to the 8/11 interview for "Madtown Munchies"

http://itunes.apple.com/us/podcast/m...el/id348690336

bearz · 02-08-2012, 11:59 AM

you definitely need to set up payment and not receive it upon delivery, especially if you're dealing with drunk students.

the restaurants are charging $30 bucks for food but the cost to them on a failed delivery is substantially less than that. a failed delivery for you means either you're shelling it out of your own pocket, or you beg the place to let you off the hook for this one which might work once or twice.

the logistics of picking up and delivery the food also seems pretty hard, you should definitely think upon limiting the options to a bunch of restaurants that are like right next to each other so you can pick it up all at once without driving somewhere, turning off car, picking up food, starting car, drive 3 minutes, turning off car, picking up food, starting car, etc.

perhaps one more problem would be if your idea winds up being highly profitable, the restaurants simply hire delivery guys and you lose a chunk of client base.

how many places by you don't offer delivery, but are clearly hotspots ? i went to a big university and every place i wanted to eat from had delivery unless it was extremely far, and that really makes it unfeasible for your idea as well.

thess123 · 02-08-2012, 01:35 PM

Quote:

Originally Posted by PFUNK

I don't think your idea to start off small and only open like one or two days a week is very smart. You immediately limit your services to basically nothing, confuse and alienate customers, and wont bring in any money.

Counter point to confusing and alienating customers (*note, I play devils advocate a lot, it allows me to see what makes sense and what doesn't)-I feel like it's actually pretty straight forward. "Ok, it's Friday. Today's the day that guy makes deliveries. Let's get Applebees. Awesome! We wouldn't have been able to get applebees if it wasn't for him!"

As far as not bringing in money right away, I'm fine with that-I have a job at nights which I can live off of until this expands to the point I'd like it to. But being open 5 days a week is something that is definetly an option. What do you think about limiting to one or two companies right off the bat?

Are you able to dive into this thing full time or do you have a day job? Able to hire one dedicated driver even if he isn't even doing anything half the time?

Currently, I don't have the funds to hand to a driver if he's sitting on his ass for four hours.

You should try and open up and begin with as close to a "full time" hours approach as possible, otherwise I feel like you are going to take forever to get this thing off the ground and you are never going to "learn" the customers tendencies and what good hours and rates are for your business.

Makes sense and will definetly be taken into consideration.

Besides, how the hell are you going to make any money only opening it up 2 days a week and only charging a $2 fee for up to $15 worth of food? This might not even pay for your gas to go pick up the food, drive it to the customer, and get back to your location. You should be charging a minimum of 20% for each delivery, and have a minimum of $20 per order imo. I would also only do 1 restaurant per delivery, per customer....otherwise you are going to get every fat guy wanting entree from this restaurant and a piece of cake from here and a milkshake from here....even if you are charging its a cluster **** and you are losing other opportunities.

What about making a minimum order from each restaurant? Like allowing orders from Applebees and say Quizno's, but making a $15-$20 minimum order.

As far as making money on the $2 for $15 worth of food, my thoughts (and they are quite possibly wrong) is that if I limit it to bigger companies to start, that the $15-$30 orders would be more of 2nd thoughts. Like I get a $100 order from Applebees and make $15 or whatever, but then I stop at the Mcdonalds that's on the way and make an extra $3 that otherwise I wouldn't have made. But this also opens me up to making single deliveries when I'm losing money.

Marketing I would do flyers, brochures etc. and get permission to advertise at the two companies you mentioned. I would hire a full time driver who wants to make money and when he is not busy, or on off days I would make him go hand out flyers at businesses, apartment complexes etc. I would also do a mailer to a section of town I want to get business from, dropping a flyer/brochure and mailing it to all these houses. I would figure out a way to get every small business in towns fax machine number and do a fax campaign, sending them a fax with info.

I would also make each person register online to a website and try to make the business very easy to order/purchase directly from there. These will be the returning customers you want and you will be able to solicit them (tastefully) on occasion offering discounts/specials or just a reminder that you exist.

Great ideas.

I would personally put a lot of time/thought into the website. You want people to be able to make their orders from here and make all the payments here. I would probably work with a select number of places in town and put their menu on the website and only work with these restaurants. I would also figure out a way to make money off these restaurants since you are essentially advertising for them and bringing them business.

Definetly something that I've been thinking of, more on this later.

Bunch of random thoughts for ya.

I know its a totally doable business, though I have no idea how good the numbers are....they dont sound good at all unless you live in a very dense populated area with a lot of people, or you are wanting to do a ton of the work and deliveries yourself and just need a job you are the boss of.

I mean, lets say you can sustain 4 deliveries an hour (highly inflated example imo) between two people in an 8 hour shift, and lets say your average delivery fee is $4 which would be very high according to your fee chart, and lets just say you are one of the delivery drivers (free labor).

8 X 4 x $4 = $128

You made $128 dollars on this day in a full 8 hour shift, and you have to pay a delivery driver for 8 hours of work.

If you pay him a measly $8 an hour and make him pay for his own gas with no reimbursement, and don't profit share any fee's with him letting him collect his own tips, he just ate HALF of your days profit and you haven't even paid yourself or your own gas.

So you just profited $64 (+ tips) in 8 hours and used a lot of gas you still havent paid for and weren't able to do anything to expand your business during these hours, and probably have some other overhead variables to worry about as a business owner.

I'd think about this ALOT before moving forward on this.

I think a key is to sell "subscriptions" to local businesses to advertise their restaurant on your site, promote their menu and offer your customers a chance to get their food delivered, and only deliver food from restaurants who are affiliates and pay to be in your circle on your website. If they are on your website, they pay you a monthly fee to be there and your customers can get food from them.

What are your thoughts on the benefits of a subscription versus a commission of sales?

Quote:

Originally Posted by HowardGrind

I think a more scaleable option is do a reverse group buying deal.

Contact local businesses and get them to commit to ordering corporate lunches via your website. You can take these $200+ orders and source them out to caterers/restaurants in your town. You could get the businesses 10-15% off their order, ask the restaurant for 20-25% off and then keep the 10% juice and charge $20-40 to deliver it.

Howard, are you suggesting to charge juice + a fee?

Also, is 20-25% off of food something that could legitimately happen? I've been trying to figure out the best way to make money from the restaurants and not only the customers and was thinking commissions would be the easiest/most profitable way to go. The only thing I'm not sure of is what a fair percentage to ask for is.

Are you also saying to limit orders to >$200?

BOOM.

Quote:

Originally Posted by B00T

Have you ever waited for 50-100 items from Taco Bell at 2AM? I have, and I can tell you from the time you place the order there to delivering it to the last person's door, it would be nothing short of a miracle if you could do it in under 2 hrs. Many of those drunks would be long passed out by then.

That's putting faith that they get your order 100% right which is a longshot in itself.

yes, ive waited for 50 items. Fun with a bunch of friends...probably not when I'm by myself and trying to make a quick delivery. As far as going from door to door, that's why I've talked about trying to get a mutual pickup spot-like in College X's lobby of their senior dorms, College Y's gym, etc where drop offs would (hopefully) go much smoother. This is a longer term, goal, however, and would be something I would need to focus on a lot more before expanding the business.

Quote:

Originally Posted by DemonDeac

There are companies that already do this. You'll want to research them.

e.g. Diningin.com

I know.

Quote:

Originally Posted by mmbt0ne

Go to the 8/11 interview for "Madtown Munchies"

http://itunes.apple.com/us/podcast/m...el/id348690336

Will do, thanks for the link

Quote:

Originally Posted by bearz

you definitely need to set up payment and not receive it upon delivery, especially if you're dealing with drunk students.

the restaurants are charging $30 bucks for food but the cost to them on a failed delivery is substantially less than that. a failed delivery for you means either you're shelling it out of your own pocket, or you beg the place to let you off the hook for this one which might work once or twice.

Makes sense. When I go about setting up the website, this is something that will almost have to be included.

the logistics of picking up and delivery the food also seems pretty hard, you should definitely think upon limiting the options to a bunch of restaurants that are like right next to each other so you can pick it up all at once without driving somewhere, turning off car, picking up food, starting car, drive 3 minutes, turning off car, picking up food, starting car, etc.

perhaps one more problem would be if your idea winds up being highly profitable, the restaurants simply hire delivery guys and you lose a chunk of client base.

I'll take them off my website, go to another restaurant, and promote them through my site while the restaurants that hire drivers and aren't capable of paying a driver to make a delivery 2 times a night will fail

how many places by you don't offer delivery, but are clearly hotspots ? i went to a big university and every place i wanted to eat from had delivery unless it was extremely far, and that really makes it unfeasible for your idea as well.

The only places that deliver are pizza shops-everything else is take out only. I would focus on places like Quiznos, Subway, Applebees, and some independent restaurants that offer good, higher priced foods.

It seems like a few people aren't sure if I could make a profit on what I was thinking about charging. What about a flat $3 fee plus 10% delivery charge? Does that seem more reasonable?

I know I may not have answered every question you guys have, but please keep on asking-I would rather they come up now than when I first start. Thanks for all the help so far.

heater · 02-08-2012, 02:40 PM

A good friend of mine found out the hard way that 100k population is not enough to support a restaurant delivery service. He had a full partner and a couple of investors. They were well-funded and provided lunch and dinner service seven days a week for close to five years before finally giving up. He and his partner each wound up spending the second half of the five years working 30-40 hours a week at other jobs while attempting in vain to keep the business afloat.

He originally learned the business from a Takeout Taxi franchisee that he knew. That person told him that starting up in 100k population would not end well.

Your idea of being a one-man operation that delivers two days a week or whatever is pretty bad as well. Nobody is going to take you seriously with such limited availability.

*edit* Okay, I just read some more of the thread. A couple things: drivers don't make an hourly wage in this business. They are independent contractors who get paid per delivery. You, the owner, are supposed to set up agreements with specific restaurants for which you will be offering your services. That agreement includes you getting a percentage of every order placed through your service. The standard is 25%. This is NOT your service delivering food to customers at a discount and you keeping some portion of that 25%. Your customers pay full menu price. That 25% goes in your pocket.

You are providing a service the restaurant does not provide themselves. You are bringing an order to the restaurant that they would otherwise not be receiving. Their ovens are already on, their kitchen staff are already being paid to cook, etc. What you offer is essentially overhead-free (beyond food cost) business for their restaurant. Every bit of advertising that you do for your business is free advertising for theirs. There is a lot of value in what you do. Selling this service to restaurant owners isn't all that difficult. I would be very surprised if any franchisee of a national chain weren't already aware of the pros and cons.

Again, though, 100k pop. is just too small.

thess123 · 02-08-2012, 02:46 PM

heater, thanks for the info. if i may, what city did your friend run the business in? what was his pricing etc?

sharpie337 · 02-08-2012, 03:06 PM

Other option is to offer delivery services to several restaurants that don't have it themselves because of the small number of orders they would potentially get individually. i.e. they don't want to have a driver on staff with all the licences and heaten van etc for a couple of possible orders per night. Once you get a stable of 10 to 20, you could be making decent money. Just charge a flat $5 delivery fee (with extra to deliver outside of a specific area) and take the time to model demand by asking them when their busy periods are.

From there, you can get a simple website built that will let the restaurant know how long delivery will take, based on the number of orders currently in your queue. If you start to get busy you can see if you can find drivers who are willing to work occasional hours when you call them.

If there is a high enough density of restaurants without drivers plus hungry people wanting takeout in a given area, this could be very viable. Also, having the restaurant handle the order taking means they can handle the billing etc. as well - you just invoice them monthly for the total number of orders.

heater · 02-08-2012, 03:15 PM

I'm too late to edit my original post, but another thing: your fee structure shouldn't be based on the order total. You can always tack on gratuity over a certain amount but your fee structure should mostly be based on how far the driver has to go. Break your delivery area up into zones and go from there. Take a look at Takeout Taxi or Cafe Courier to get a general idea of the pricing.

PFUNK · 02-08-2012, 03:28 PM

Heater is a tad harsh, but I have to agree and sometimes its what we need to hear.

He has a relevant real world example, but who knows....maybe his friends were complete idiots all the same?

That is the main problem I see though.....you do not have the population to sustain an intensive delivery business unless you really drum up some loyal, consistent customer bases.

That being said, I never say never.

There was a similar start up in the college town I went to school at, and the service has since changed names leading me to speculate it has changed owners at least once, but who knows.

As far as the subscriptions to restaurants and only using the ones who pay you, I really think that is a key to locking some fixed income into a business, otherwise you are never going to make a livable income simply off $3-$5 delivery fees every day.

Domino's does literally hundreds of deliveries per day and they charge at least $2 a delivery, but if they weren't selling a pizza with it, there is no way that would be a sustainable business.

Think about the amount of volume you would need to do and I think you will find its just not reasonable, or attainable.

I would also run the website as the backbone of the business and have each restaurants menu on there, even possible a slimmed up version of it. A business that simply says "just order whatever you want from wherever you want and we will pick it up" is just begging for trouble and will go nowhere. You need some control and system in place. Don't worry about little limitations like this. Also, having all your orders automated through a website it a lot more efficient. I cant imagine having to verbally take all orders for these.

The more I think about it, having confusing fee structures based on orders is stupid. Simply mark up the restaurants price on each item, and have each item on your website with YOUR pricing marked up from their pricing.

Just act like a convenience store for these restaurants and mark up the price, building your fees into the food items themselves and give your customer one price. I would also sell soft drinks (bottles, cans, 2-liters) and any other convenience item (candy etc.) and mark them up huge.

bearz · 02-08-2012, 04:06 PM

There are also already many sites that consolidated many stores onto one site you can order from, though they generally only do it for stores that already deliver.

But the fact that they haven't done what you're trying to do even with all the infrastructure already set up, might indicate that there aren't huge profits vs effort in the gig unless you find a sweet spot in price marking where the customer is willing to pay for the service and you can make decent money.

Honestly though, for restaurants like Applebees and subway, if there is a significant price markup, id rather just order from the local pizzeria that will likely also have just as tasty sandwiches, wings, pastas, etc. Hopefully some banging food places that don't deliver are by you like a random chicken and rice place or something.

PFUNK · 02-08-2012, 04:16 PM

There is a very successful grocery delivery in my town, but they are more of a natural/organic produce type of niche market....but still, all considered, I'd probably explore a grocery store delivery service before food delivery.