Start a grocery delivery business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your grocery delivery business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a grocery delivery business?
Costs involved may not be very much to start because you’ll mainly buy what’s already been ordered and you don’t necessarily need a formal space to conduct business. However, you’ll likely want to invest heavily in technology so your customers have an easy way of ordering. You’ll also need to insure your drivers with commercial auto insurance and workers’ compensation, and budget for marketing as well.
What are the ongoing expenses for a grocery delivery business?
Grocery delivery businesses have to account for the cost of salaries, gas, insurance, and equipment maintenance. They'll also need to budget to keep their automation as relevant and reliable as possible.
Who is the target market?
The target market is anyone who can afford luxury, time-saving services or for those who may be unable to drive to the store or shop on their own.
How does a grocery delivery business make money?
Grocery delivery businesses charge people a membership fee for their services and a markup on the cost of food. They may also charge additional fees based on quantity of food ordered and location of the home.
How much can you charge customers?
Most delivery services make people sign up for a membership first, charging around $100 for the year. They also may charge a delivery fee or about $10 or so for smaller orders. For larger orders (e.g., over $50), they may waive the delivery fees in lieu of the profits they’re making off their personal wholesale markup. Check out your local competition before setting your terms.
How much profit can a grocery delivery business make?
Profits for grocery delivery services can be considerable in the right neighborhoods. Let’s say you charge a 10% markup for the food you sell, and sell $100,000 worth of food every two months. This leaves you with a profit of $10,000 plus delivery fee charges and membership charges (if applicable.)
How can you make your business more profitable?
You can make your business more profitable by expanding your services with additional perks. For example, delivering people their Starbucks in the morning the moment they step out the door, or offering an express option for small items where people can pay a modest premium to indulge their cravings.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Grocery Delivery Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your grocery delivery business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a delivery license. Certain state permits and licenses may be needed to operate a Grocery Delivery business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
Businesses are required to register vehicles which will travel across state lines for commercial purposes. Check here for a list of state requirements.
Class B Driver Licensing Requirements
In most states, licences are issued by classes, operating according to the weight of the vehicle being driven. Drivers of standard cars and trucks require a class A commercial driver’s license (CDL), while operators of heavier vehicles, including most tow trucks, require a Class B CDL to operate. More information can be found here.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
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How to promote & market a grocery delivery business
Look for angles that your competition (or near competition) isn’t serving in the area. For example, are people simply too busy to shop, are they inefficient when they're at the grocery store, or are they finding it difficult to pick meals every week? This will help you decide how to appeal to different types of customers. You can certainly advertise your services online, but you should also consider advertising locally. After all, this is a local service, and passing out flyers on the street can help you engage so and better understand what people are looking for.
How to keep customers coming back
Owners have to consistently deliver groceries on time, every time. They should have contingencies and communication plans in place in case there’s a hiccup and clear contracts with customers that explain the terms. These types of services are unfortunately easy to dismiss for many people if they're not perfect, and it really only takes one bad experience for a person to be turned off to the service entirely.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Grocery Delivery Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
People who are organized, creative and familiar with technology. Grocery delivery involves a lot of details to get right so it helps to start with a strong foundation and a focus on accuracy and value.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a grocery delivery business?
The name of the game is flexibility when it comes to grocery delivery businesses. Owners may find themselves doing everything from maintaining relationships with wholesalers to completing the actual deliveries. In addition, owners also need to coordinate pick-up times with staff, keep up with invoicing, and figure out ways to market their services to a greater audience. But the biggest thing an owner may need to do is work with their automated features. Most delivery businesses find they need constant fine-tuning to ensure the customer experience goes well.
What are some skills and experiences that will help you build a successful grocery delivery business?
Owners should definitely have some type of experience working in the delivery industry. There’s a lot to keep track of when it comes to perishable food, especially considering that schedules can be difficult to coordinate with customers. From spoiled onions to box theft, there are a million ways for the order to go wrong. That’s why it helps to understand the logistics of ordering and delivering. It can’t prevent every mishap, but it can go a long way to ironing out the kinks before they actually occur.
What is the growth potential for a grocery delivery business?
People are starting to shift a significant portion of their income into services and they’re willing to pay a premium for convenience. As cities like NYC and LA continue to become more condensed, grocery delivery can look more and more appealing to a young professional who probably doesn’t want to navigate traffic or spend time perusing 30 different supermarket aisles.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a grocery delivery business?
Grocery delivery services are somewhat new, meaning owners are still in uncharted territory. It’s very exciting for an entrepreneur who wants to make an impression on their customers, and there are a variety of ways to do it. For example, popular meal delivery services such as Blue Apron may look more appealing to busy professionals without a lot of time to plan their meals, so grocery delivery services may want to try offering a simplified version of this service as just one component of their businesses.
You can also offer a variety of options to your customers based on their previous orders. You can suggest meals or products to them to make their shopping experience easier. Or you can set up customers with a standard shipment and invoice every week so they don’t even have to think about it. Make sure you identify your target market before moving forward. A 30-year-old single professional will need a different message than a 55-year-old ordering your services for their ailing parents.
Owners also need to devote time to talking to wholesalers. While it’s possible to contract through grocery stores, it makes more financial sense to go through a wholesaler because their markup is far less drastic. However, this step will require establishing a good reputation for yourself among the people in the business, which will take both time and effort.
How and when to build a team
If you’re just getting started, it may be better to go it alone at the beginning. Once you start exceeding your monthly goals, consider hiring additional drivers or an administrative person to coordinate contracts, billing, and scheduling.