Cost to Implement UberEats Business Model
UberEats – a subsidiary of Uber Inc – is on a growth spree since its beginning in 2014. The food delivery platform is expanding at a remarkable rate grabbing a market share of 24% – up from 3% in 2016. Grubhub is the primary victim of UberEats’ introduction. The market share of Grubhub decreased from 52% to 34% in the same period. A major proportion of UberEats business model overlaps with Grubhub business model. However, there are few differences too which enable UberEats to attract more revenue.
Before assessing the costs of implementing a similar business plan, one needs to find out the working of UberEats.
How does UberEats work?
There are a number of factors which participate in revenue generation of UberEats.
1. Delivery Charges from customers
For every order, UberEats charges the customers. The delivery fee follows the same model as Uber ridesharing. However, the end charges are relatively lesser since Uber delivers multiple orders during the same trip. The fee depends on the distance traversed and time consumed.
One significant factor on UberEats part is its advantage to acquire services of Uber ridesharing vehicles. If there is no idle UberEats delivery agent in the area, the management may request partner Uber drivers. However, Uber ensures that this driver remains inaccessible as long as the order is undelivered. Conversely, Grubhub and Doordash have to maintain a large fleet.
Following the business plan of ubereats, the profit per each delivery is lesser than Grubhub. However, total profits will surpass Grubhub in future due to excessive control over market share.
One way to cut costs is to deliver multiple orders on the same trip. Although UberEats ensures that customers also attain discount, yet the net profit is greater than the case when agent delivers single order per trip without discount.
2. Profit sharing from allied restaurants
Another source of income is the profit sharing by attaining a chunk of every partnered restaurant. As a standard, UberEats charges 30% of the total worth of order catered by a restaurant. For instance, if a pizza is worth $20, the allied restaurant or fast food pays $6 to UberEats. Thus, Uber is able to make significant profits by collaborating with various food outlets.
Apart from profit sharing, UberEats and its partners also supplement each other in marketing. At times, this marketing also enables these businesses to acquire discounts.
By July 2019, McDonald’s was able to reach 5000 locations in North America alone by partnering with UberEats. The total number of worldwide locations crossed 12,000 at the same time. Recently, Starbucks also partnered with UberEats. The leadership of Starbucks expects to launch services in 2000 new locations in a couple of years.
3. Marketing fee from restaurants
UberEats charges additional fee from restaurants if they intend to rank above their competitors in UberEats app searches. UberEats restaurant search differs from common search engines queries, as in Google where ranking depends on keywords and domain authority. The administrators of app prioritize the search results depending on marketing package obtained by restaurants.
This ability to rank higher enables food outlets to reach new customers. In metropolitan cities, dozens of restaurants compete to attract customers. In such a severe competition, new food startups struggle to grab even a fraction of market share. Ranking higher than competitors may require some marketing investment, but the return is worth it.
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4. Advertising for New Customers
Although Uber ridesharing plays a part in promotion of UberEats, yet independent campaigns are significant too. Statistics from 2018 reveal that four of ten people who used Eats did not use Uber ridesharing ever before. This study indicates that 40% of Eats customers learned about UberEats from independent marketing.
The company uses a wide range of strategies for advertising. One frequent way is the get the leverage of public celebrations. For instance, it offers discounts during Christmas week, Thanksgiving and other days of mass celebration. Various partnering restaurants also advertise UberEats on their websites and apps.
Cost to Implement Business Model of UberEats
It is noteworthy that the cost to implement a similar business model is highly reasonable. The two primary factors affecting costs include app development and marketing of business. Each of these costs varies depending on the degree of details.
Usually, app development companies are reluctant to reveal costs in fear exceeding the base costs. However, ODTAP enables its customers to find a precise cost since we already have an app framework. The customers can rebrand this white label solution according to their business requirements. The cost to develop delivery app directly varies with the number of features.
In the past, ODTAP successfully developed delivery apps for an array of customers. The framework ensures that the app caters five million customers. Moreover, this number can be scaled up as the customers go past five million. ODTAP uses state-of-the-art algorithms to find the nearest agent who can cater an order. Besides, real-time navigation facility enables the agents to find the most appropriate route considering traffic volume and distance.
ODTAP also offers the feature of prioritized search for paying restaurants. The ranking of food outlets depends on the marketing fee. However, a delivery startup can exempt some restaurants due to high frequency of orders. The software provides the internet connection strength of customers as well as agents. This framework also offers separate panels for admin, customers, and delivery agents.
Apart from these costs, investment in digital and paper marketing also boosts the company’s outreach.
Grow With Us
Entrepreneurs are keenly interested in food delivery business models of UberEats, Grubhub, Foodpanda, and Doordash considering the high success probability of these models. Significantly increasing worldwide food delivery demand ensures that the existing businesses will not affect a new startup. Replicating UberEats model is a massive opportunity for investors. Relatively small investment carries the potential of huge returns.
While some startups are flourishing, many of them are struggling to achieve milestones. Since its introduction a few years back, the primary objective of ODTAP framework is to lift the number of successful startups.
Contact us today to start your food delivery business by rebranding our white label on-demand delivery app.