The world keeps evolving. Everything changes with time, and several developments take place. However, one thing that cannot change is humans need food to survive. They may stop shopping for shoes, jewelry, and flowers, but they can never resist the urge to eat. This is why business owners found it a brilliant idea to start a food delivery app.
A food delivery app is convenient and beneficial to all the key stakeholders. Its popularity is growing like crazy and will continue to do so. Don't believe us? Here is a fact: According to Uber, Europe's food delivery app sector will be valued at $25 billion by 2023, growing at 10% each year.
Now, you must be wondering how does a food delivery app make money? What does your favorite food delivery app do to keep it going? What exactly is the revenue model of a food delivery app? What are all the charges the app levies on its users and restaurants?
Don't worry; we have the answer to all your questions. Let's start and discover all food delivery app charges!
Why do people prefer to use a food delivery app?
There are different types of business models for food delivery app development. All have their own set of benefits and limitations; and different ways of making money. Let us first discuss why people are so much into food delivery apps. What's so special about them? What benefits do they provide?
Comfort and Convenience
Convenience is directly proportional to the client experience—the more the comfort, the better the client experience and hence better sales. According to a PwC survey, 86% of consumers are willing to spend extra for a better customer experience.
An online food delivery app can succeed with business strategies prioritizing the user experience. Even minor changes, such as maintaining the "Add to Cart" button within easy reach, are beneficial.
Because of the ease of use and quick processing of a mobile phone, users can order food instantaneously. As a result, any food delivery business model includes a specific app for clients.
Each step, from login to payment, exists within the same application. 70% of users prefer to view the restaurant's menu on their mobile phones.
25% of users have more than one food delivery app on their phones. If one program is unavailable or experiencing problems, they switch to another.
So, developers should make every food delivery app with extra care in a professional space.
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Apps are appealing
With an app, several strategies and approaches exist for impressing, attracting, or appealing to your target market. Loyalty programs and special discounts might be part of your online food delivery app plan.
You can even include location-based recommendations for a more personalized appeal. When users are close to a Starbucks location, they receive push notifications. These elements contribute to a company's market presence.
One can implement app check-in awards, referral prizes, and other rewards that attract users.
Revenue Model of Food Delivery Apps
Before launching any business, everybody first researches how much money their competition is generating. There is also a misconception that an on-demand food delivery app only sends food to valued clients. It's more complicated than that.
Food delivery apps' revenue streams are highly complex beyond simply providing food on-demand. Each link in this network generates income for the food delivery apps that use it to represent them on the platform. Here are some ways a food delivery app makes enough money to stay in business.
One of the primary ways an on-demand food delivery app makes money is by representing different restaurants on its platform. Any restaurant must pay a large sum of money to appear on the featured list on the platform of food delivery apps. Customer reviews and feedback are often used to determine the position of an application in the application window. The higher restaurants pay, the higher their rank in the application window.
Some restaurants pay exorbitant fees to show themselves on the landing page. It is due to estimations that such restaurants will likely obtain consumer orders. However, one thing to remember is that some of the restaurant's positioning also varies based on previous feedback and ratings.
Charge per order from the restaurant
When any restaurant receives an order through the food delivery app platform, the company charges the restaurant for a portion of the order. Because the application platform is in charge of the orders, it is allowed to share a part of the revenue generated by the mobile application with the restaurants. Every restaurant must pay a set amount or a percentage after collecting orders from the application.
It is why food delivery programs are so keen to advertise diverse restaurants. But proceed with caution. Disputes between establishments and on-demand food delivery apps occur frequently. Establishing a contract before the restaurant's operation and the application regarding the distribution of the money is preferable.
Charges for delivery and convenience
Customers are charged additional fees for delivery and convenience by the food delivery app. Delivery is almost always free in some apps; others, however, impose a fee for convenience and delivery methods. Many on-demand delivery apps believe collecting delivery costs will stifle their growth and profitability. On the other hand, there is a widespread belief that food delivery app fees can boost revenue.
Putting up advertisements
Placing advertisements is one technique to earn money in any of the applications. Anyone can share the platform to provide adverts to make extra money. Advertisements are not required to reflect the subject of the food delivery app. Some adverts are utterly unrelated to the concept of food delivery apps. They are, nonetheless, strongly encouraged because they are one of the ways to earn extra money.
Payment gateway fees
A Food app owner bargains with payment gateway companies about the fees they impose for online transactions. Because they are a platform owner with a high volume of daily transactions, they pay them the best transaction fee. The app may charge more from their restaurant enterprises.
Earning potential from subscriptions
There are two subscription-based revenue streams for a Food Delivery app. The app owner can create various plans for a restaurant business to limit the number of food menus, orders, placements, featured listings, unique branding assets such as mobile apps, social media marketing, and so on. They can provide multiple plans for discounts, monthly subscriptions for earning reward points, and so on to users. And charge them monthly, quarterly, semi-annually, and annually.
Service-based pricing in the restaurant industry
Each restaurant has its own set of requirements for doing business. Some restaurants are okay with handling incoming orders through web-based software. In contrast, others prefer a separate mobile app to manage orders more efficiently. Some use thermal printers to print order receipts, while others pick to control everything using an app. Some restaurants would like to create their consumer mobile app. You can charge them differently for these various extra services.
Food Delivery App Fee of established businesses
Four major businesses control 95 percent of the market in the food delivery industry. The popularity of Grubhub, UberEats, DoorDash, and Postmates continues to grow. DoorDash owns over 46 percent of US consumer deliveries, with UberEats a distant second at 23 percent. Grubhub, on the other hand, is only 21 percent behind UberEats. While Postmates barely controls 8% of the market, Uber's plans to acquire the company might significantly alter the distribution. Let us look at the food delivery app fee of these famous businesses.
Food Delivery App Fee: What does UberEats Charge?
When it comes to commissions, UberEats has two options. If the restaurant has a fleet of drivers and vehicles, the typical commission is 15%. Commissions range from 15% to 30% for businesses that use the UberEats platform and Uber drivers to deliver meals.
Food Delivery App Fee: What does DoorDash Charge?
DoorDash blocks access to pricing information. However, while the rates are not publicly known, they are said to be 10-25%.
Food Delivery App Fee: What does GrubHub Charge?
GrubHub's platform is technically "free," but commissions range between 10 and 25 percent. While restaurants can submit their information for free, there is a 15% fee for restaurants to appear when customers use the app. Furthermore, like UberEats, GrubHub charges an extra fee when they supply the drivers. In the case of GrubHub, it is 10% of the total order cost.
Food delivery businesses will always be in demand. Online food delivery apps act as jetpacks for local restaurants, allowing their businesses to soar due to increased reach and deliverability. As a business owner, you amass vast sums of money as your partners (restaurants) prosper.
As proven by the success of prominent companies such as UberEats, GrubHub, and DoorDash, online food delivery is a promising business idea. Suppose you have a popular mobile food delivery app service that works with eateries. In that case, you can easily earn money through commissions, delivery, and advertising.
So, if you don't already have an app, it's time to invest your time and energy into developing food delivery apps to make money and run a profitable business in the future.
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