Start a restaurant delivery service 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 restaurant delivery service. 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 restaurant delivery service?
Entrepreneurs experienced in this industry indicate start-up costs could range anywhere from $3,000 - $25,000.
Your initial investment should include the following:
- Dispatch space - Specific costs vary, depending upon location. To reduce expenses, many business leaders have chosen to start out working from home.
- Insurance - Be sure to discuss your needs with a reputable insurance agent. If working from home, contact your agent to proper coverage. The last thing you need is a team member hurting themselves onsite, only for you to find out you’re uninsured/underinsured.
- Computer, fax machine, & telephone system - Utilize your personal devices until you’ve generated enough profit to invest in these business tools.
- High-speed internet and a business landline with several lines - initial down payment ranges anywhere from $60 to $250
- Delivery vehicles - Most businesses require their delivery drivers to have their own mode of transportation. Owners in large cities such as New York City will provide each driver with a bike.
- Business license
- Delivery food service bags to ensure freshness and maintain proper temperature
- Marketing materials - Shirts for delivery drivers, menus, coupons, etc.
- Website - Invest in an intuitive and interactive website that has the ability to grow with your company. If it is within your budget, definitely speak with a developer about packaging your site with a mobile app.
- Software solution - Investing in a logistics management software system will help in coordinating orders, customers, and drivers.
What are the ongoing expenses for a restaurant delivery service?
Overhead costs vary, ranging anywhere from $600 to $10,000 per month, depending upon how the business is structured and the dispatch location. Items that should be budgeted for include:
- Payroll costs - To reduce these expenses, consider hiring your team members as independent contractors. There are pros and cons to both choices, so it is recommended that you speak with an attorney and/or an accountant to weigh your options fully.
- Marketing and other printed materials
- Rent and other associated costs, should you decide to lease a space for dispatch
- Phone and internet expenses
- Website maintenance
- Business management software system
Who is the target market?
Your delivery radius must be populated enough to sustain and grow your business long-term. Target customers include busy/working families, disabled persons, heavily populated business areas, seniors, and college students.
How does a restaurant delivery service make money?
Restaurant delivery services generate a profit by charging each restaurant a commission. Additionally, most companies include a delivery service fee, which is paid by the customer.
How much can you charge customers?
Before opening for business, take time to develop a delivery menu. To avoid questions and confusion, keep all food prices the same as they appear on the restaurant menu. Include a surcharge for delivery, in order to make your business profitable. This could be either a flat rate or a percentage of the total order. Since your restaurant partners are realizing increased sales and receiving “free” advertising through your organization, it is also standard to charge the restaurant a surcharge. Additionally, it is recommended that you encourage customers to tip their delivery driver.
How much profit can a restaurant delivery service make?
Experienced professionals have reported an annual profit of $25,000 or more the first year. Five to six years in, those same companies are reporting upwards of $4 million annually. Factors such as location, demand, and desired growth affect your overall profits.
How can you make your business more profitable?
To maximize productivity, consider the following strategies:
- Consider offering additional delivery services. This could include: wine/liquor, farmers, grocery stores, health food stores, pet stores, and pharmacies.
- Work to decrease delivery time, increasing the number of orders that can be filled.
- One industry leader guarantees his employees a minimum of $15/hour. He also holds a monthly employee meeting, where individuals can express concerns, ask questions, and receive additional training. This reduces turnover and increases workforce engagement.
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 Restaurant Delivery Service 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 restaurant delivery service 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
Certain state permits and licenses may be needed to operate a restaurant delivery service. 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.
In addition, certain local licensing or regulatory requirements may apply. For more 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.
Businesses are required to register vehicles which will travel across state lines for commercial purposes. Check here for a list of state requirements.
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.
How to promote & market a restaurant delivery service
Restaurant delivery leaders have found success with a diverse marketing strategy. Printed materials, such as delivery menus and flyers, are a great first step. Leave delivery menus at participating restaurants, hotels, and businesses within your delivery area. Distribute flyers on neighborhood doors and in other public places around town. Partner with community newspapers and include your organization’s fliers inside each paper.
Contact your local Chamber of Commerce and other business associations. Use local networking events as an opportunity to foster relationships with potential customers and other entrepreneurs who might be willing to partner with you in the future.
How to keep customers coming back
Your customers are counting on you to deliver fresh, quality meals in a timely manner. Accuracy is also critical. Drivers should carefully check each order to ensure all items are prepared properly and include any necessary extras, such as plasticware, condiments, and side items. For premium service, supply each driver with a “backup bin” that includes any potential last-minute requests or forgotten items.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
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 Restaurant Delivery Service 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?
Entrepreneurs who wish to position themselves in the food and beverage industry, without all the overhead and grueling hours, will discover fulfillment in this business venture. While this endeavor offers flexibility, it also requires a great deal of dedication and organization.
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 restaurant delivery service?
Running a successful restaurant delivery se rvice requires a high level of professionalism and hard work from the entire team. Everyone must work and no one’s role is more important than another.
Management and staff will be tasked with the following items each day:
- Recording relevant information for each order.
- Dispatch and delivery of each order placed.
- Reaching out to current and potential customers, answering any questions and/or concerns they might have.
- Working with current and potential restaurants to ensure profitable partnerships for both parties.
- Market research and implementing marketing strategy.
- Administrative tasks such as payroll and accounting.
What are some skills and experiences that will help you build a successful restaurant delivery service?
A basic understanding of both restaurant and delivery industries would prove beneficial. This experience will offer valuable insight into the logistics that go into coordinating client requests, restaurants, and delivery needs.
Regardless of which role you decide to take on within the organization, it is critical that you possess strong communication and leadership skills. Each team member represents the company in both word and action. Organization and time management are necessary, as is the ability to remain calm when faced with an unforeseeable crisis.
If you are inexperienced in managing a business, consider attending an online or local class that focuses on business management, logistics, and marketing. The Restaurant Marketing and Delivery Association is also a great educational resource and networking tool.
What is the growth potential for a restaurant delivery service?
According to recent studies, United States consumers spend an average of $3.5 billion annually on restaurant delivery. This number is expected to rise to over $12.5 billion by 2019. The owner of one major delivery service started out as a one-man operation, delivering on his bike. He now has over 200 employees in multiple cities across the U.S., with an annual profit of over $3 million.
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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.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
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 restaurant delivery service?
Industry leaders offer the following start-up advice:
- Make sure your customers have a variety of options to choose from. Pizza and Chinese are more readily available for delivery; what about Thai, Mexican, Indian, and American?
- Food freshness is a direct reflection on your company. Work with restaurant management to ensure the delivery menu only includes dishes that transport well.
- Try to keep your restaurant radius to 20 minutes.
- Try to focus on locally owned restaurants. In addition to supporting another small business, these establishments are free of franchising contracts that could limit participation.
How and when to build a team
It is recommended that you start out with at least one other team member. If you try to wear too many hats, your business will suffer, hindering you from ever really getting off the ground. You will need at least one driver, preferably two, as well as someone dispatching. Since your drivers are the face of the business, make sure they are professional and look presentable at all times. They should also have a clean driving record and reliable transportation.