Deliveroo Business Model | How Does Deliveroo Make Money?

Deliveroo is a technology company focusing on marketing, selling, and delivering restaurants’ meals to homes and businesses.

The Company’s platform connects web and mobile consumers with restaurant-based order management terminals and logistics optimization algorithms through its delivery driver smartphone software.

What is Deliveroo?

Deliveroo is an online meal-delivery service that partners with food companies and restaurants to deliver food to its clients. 

A contractual driver assists with deliveries on an as-needed basis. Its emphasis on high-quality food products makes it stand out from other food delivery services.

Deliveroo Business Model | How Does Deliveroo Make Money? 1

Deliveroo earns money from delivery fees, signup fees, membership fees, and food sales through its cloud kitchens.

It was founded in 2013 by American entrepreneurs based in London, and it has since become one of the world’s largest platforms for food delivery. Deliveroo now operates in 11 countries and has a network of over 140,000 restaurants.

How Does Deliveroo Work?

Deliveroo is an online delivery service that lets users order meals from restaurants in their neighborhood. 

Customers can order meals through the company’s website or mobile apps for Android and iOS.

Deliveroo is a platform-to-consumer service and does not prepare meals. Instead of that, they work with existing restaurants in the cities where they operate.

Deliveroo will then handle the delivery and payment. Approximately 110,000 contract drivers handle food deliveries (in 2021, the company will have over 110,000 riders).

Delivery.com differentiates itself from its competitors by focusing on high-end restaurants. As a result, they can charge a premium both for food and delivery (more later).

Additionally, if the user lives near the restaurant, they can choose to pick up the food themselves.

How Does Deliveroo Make Money?

Deliveroo earns revenue from delivery fees, service fees, onboarding fees, subscribers, and sales through its cloud kitchens.

Deliveroo generates the bulk of its revenue from direct clients. They charge £2.50 for delivery and commission fees from their partners, typically between 10% and 20% per order (if the restaurant has more than one delivery partner, the commissions are higher).

Deliveroo Business Model

Food delivery has traditionally been plagued by low margins and significant operational complexity, making profitable operating incredibly challenging.

Once Deliveroo achieved the required scale, their business model evolved to reflect this, and they expanded their income streams. 

Deliveroo makes a healthy portion of its income via promotions and partner benefits to partner restaurants in exchange for a fee.

Let’s examine them one by one.

Commission on Orders

Every online marketplace (of which meal delivery companies are a part) retains a share of the transactions made through its platform.

Deliveroo, for example, charges a commission of between 25% and 45 percent. It depends on the arrangement with the restaurant and where it is located.

A restaurant in Australia charges between 30% and 35%, whereas it is equivalent in the United Kingdom charges between 25% and 30%.

Deliveroo Business Model

Consumers will be charged a flat delivery price in addition to the commission. As a result, the delivery fee is applied to the driver’s wages (in addition to tips and a variable bonus paid by  Deliveroo).

Restaurants may also be charged an onboarding fee when they sign up for the platform. Typically, this is around $300.

Subscription Fee

Customers can subscribe to Deliveroo Plus, which offers numerous incentives to its users. The following are some of them:

  • Delivery is free on orders over £10
  • Customers can receive special discounts that aren’t ordinarily available
  • Offer 24-hour customer service
  • Test it for free for 7 days

The plan costs £11.49 per month in the United Kingdom.

Deliveroo users protested a 50% increase in price in January 2020 (from £7.99  per month).

Deliveroo For Business

Business users can place bulk orders for their employees on Deliveroo for Business. It also allows businesses to establish food budgets for individual employees while keeping all orders (and expenditures) in one place.

Employees will be able to place orders with their existing restaurant partners once again. Deliveroo will receive a commission on these sales and split the remainder with the restaurant.

The company has not stated if it intends to charge business customers for access in the future. Rather than that, corporate consumers are likely to pay a slightly higher premium due to their greater propensity to spend.

Deliveroo Editions

Being associated with thousands of restaurants worldwide offers a fantastic insight into what works and what doesn’t. For example, Deliveroo used this model to launch Editions, a digital kitchen of its own.

Customers can choose from a variety of cuisines, including Pizza, Burgers, Sushi, and Indian. Deliveroo operates these restaurants directly or works with other restaurants that prepare the cuisine in their kitchens (the concept is called ghost restaurants).

Deliveroo splits revenue equally with restaurants in cases of collaborations.

In case you’re ever in the mood to eat in the air, Deliveroo has you covered as well. Their Helicopter Dining experience was launched in London in 2019, offering customers a 1,000-foot view.

A London-based concept known as Helicopter Dining was launched in collaboration with Charter-A helicopters by Deliveroo.

Deliveroo Business Model

As a meal ordering and delivery platform, founded by William Shu and his friend Greg Orlowski in 2013, it is reminiscent of unicorn firms such as Grubhub in the United States or Swiggy in India.

The Deliveroo model disrupts existing business models by combining aggregator and marketplace business models with logistics to create a new hyperlocal on-demand model.

To address the issue of terrible restaurants and poor service, the organization uses a dual partnership model. The following are some of its partners:

Restaurant Partners

Deliveroo partners with high-end restaurants in their neighborhoods that may or may not offer doorstep delivery but are interested in increasing their customer base. 

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Several of these Premium restaurants are among the most well-known restaurants globally, and their businesses have grown significantly since they partnered with Deliveroo. Deliveroo reports that its revenues have increased by about 30% annually. 

The following are just some of the fantastic prospects Deliveroo can offer to these eateries that other meal delivery companies in the United Kingdom have not been able to do:

Brand Promotion

Their channels and growth programs provide continuous promotion to these restaurants.

Tech

Using sophisticated technology, Deliveroo has enabled these eateries to take and dispatch orders efficiently.

Support

In addition to providing 24×7 customer service and dedicated account management, Deliveroo offers its partners continual assistance in terms of performance analytics to assess the health of their businesses.

POS Integration

Deliveroo has also developed a restaurant partner API to integrate with restaurants’ point-of-sale (POS) systems. As a result, restaurants can view all Deliveroo orders in real-time on their point-of-sale systems.

Perks

As an additional benefit, restaurants receive free 4G internet, websites, and online presences, recruitment assistance, a free staff benefits program, print and merchandising free customer wifi, and subsidized packaging materials.

Growth

Furthermore, Deliveroo has an editions program that assists restaurants in opening new locations based on their algorithm and technology-driven market research on residents’ food preferences and eating habits in the area. 

Opening a new store typically takes 8 to 12 weeks, and we assist restaurants with all aspects of logistics and administration. 

Doing so increases revenue for the company and helps the restaurant’s multilateral expansion, which other platforms do not offer.

Delivery Partners

Over 30,000 riders bring freshly prepared food to clients on bicycles, motorbikes, and scooters within a 30-minute window as part of Deliveroo’s delivery channel. 

Deliveroo owes a great deal to these hustling riders who are prepared to go above and beyond to accomplish Will Shu’s aim to revolutionize the food delivery platform landscape. 

They earn a living wage and receive excellent benefits and assistance, which is why they chose Deliveroo over other food delivery services. The following are among them:

Tips & Referrals

Deliveroo riders earn somewhere between £7 and £8 per hour, depending on the number of hours they work. Moreover, they receive all of the recommendations provided by the consumer during the order process. 

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As a result, an average rider earns £120 per week. In addition, they get £250 for referring riders to Deliveroo.

Flexible Work Hours

The hours of work for Deliveroo riders are flexible, and they can pick the times when they want to work. They can also plan their schedules accordingly thanks to Deliveroo’s rider app, allowing them to log in whenever convenient and begin riding immediately.

Insurance

Deliveroo ensures the safety of its riders on the road. In addition, their automobiles receive pay-as-you-go insurance through the integration of the Zego app with this platform.

Other Benefits

Deliveroo Riders receive high-quality safety gear, Deliveroo basics, complimentary foreign money transfers, promotions, and savings. Additionally, they receive free internet tools and create social organizations such as the Deliveroo riders’ network.

Deliveroo’s ultimate users are those who want to order food from high-end restaurants and the best eateries in town but want to do so from the comfort of their own homes or offices. 

Deliveroo has been very successful in this market because of its ability to efficiently service a vast consumer base. 

In addition to providing restaurants with food, Deliveroo also makes sure the consumer receives the items they desire. 

Deliveroo strives to give its customers a wide selection of meals, with various cuisines for a variety of meals. Deliveroo’s consumers are thrilled with the service’s simplicity and speed.

Also read, How Does ClassPass Make Money?

What is the Funding, Valuation, and Revenue of Deliveroo?

The company has received more than $1.7 billion in venture capital funding in eight rounds, according to Crunchbase. Further, the company disclosed in January 2020 that it raised $180 million in the most recent fundraising round (Series H).

According to Deliveroo’s Series H round, the company was valued at $7 billion. Its valuation is likely to double when the company goes public in March 2021.

Among the notable investors are Fidelity Management, Amazon, DST Global, Accel, Index Ventures, and General Catalyst.

For the fiscal year 2019, Deliveroo reported annual revenues of $1.01 billion, an increase of 62% from the year before. However, during the same period, it lost about $400 million.

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