A grocery delivery company is involved in the delivery of groceries to any destination within their coverage area as ordered by their clients. The process of ordering groceries from a grocery store or online market is through the telephone, website, or customized mobile app, and many of these grocery delivery companies allow customers to keep accounts with them to make frequent ordering convenient.
Payments are usually done either by credit card or cash, with the grocery store returning a percentage to the grocery delivery company if they are not the owners of the grocery store. Recent data shows that in 2020, the last-mile delivery market for food and grocery earned a revenue of approximately $25 billion.
This is expected to cross $72 billion in 2025, accounting for a surge in the market due to the COVID-19 pandemic. Almost 112 million Americans say they’ve used a food and grocery delivery service in 2020. That represents a 17 percent year-over-year increase from 2019.
Steps on How to Start a Grocery Delivery Business
Table of Content
Conduct Market Research
If you are considering starting a grocery delivery business, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your grocery delivery business should be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source information that will help you maximize your business, give you a clue of what your potential market will be looking out for from a grocery delivery business and also help you operate your grocery delivery business with less stress and of course, build the business to profitability.
a. Who is the Target Market for Grocery Delivery Business?
Fast food restaurants, households, assisted living homes, nursing homes, hostels, dormitories, camp houses, and everyone who resides in the location where you intend to operate your grocery delivery business.
b. Is Grocery Delivery Business a Profitable Business?
Yes, the grocery delivery business is profitable. The industry is projected to grow by $ 631.84 billion from 2020 to 2024.
c. Are There Existing Niches in the Industry?
There is no known niche area when it comes to the grocery delivery business. Every player in this line of business is involved in the delivery of groceries as requested by their customers. Some may decide to operate online and others may decide to operate both offline and online.
d. Who are the Major Competitors?
- Amazon Fresh – Amazon’s grocery-delivery service
- America Grocer
- Austin Grocer
- Big Apple Grocer
- Blue Ribbon Foods
- Coborns Delivers
- Door-to-Door Organics
- Fresh Direct
- Gopher Grocery
- Groceries – Express
- Homeland Delivery
- Max Delivery
- My Brands
- One-Click Grocery services
- Pink Dot
- Planet Organics
- Roche Bros.
- Schnucks Express Connection
- Suburban services
e. Are There County or State Regulations or Zoning Laws for Grocery Delivery Business?
Yes, there are county or state regulations and zoning laws for grocery delivery businesses, and players in this industry are expected to work with the existing regulations governing such businesses in the county or state where their business is domiciled.
f. Is There a Franchise for Grocery Delivery Business?
Yes, there are franchise opportunities for the grocery delivery business. Here are some of them;
- Time To Eat Delivery
- Takeout Waiter
- We Go Shop
- Uber Eats.
g. What Do You Need to Start a Grocery Delivery Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- Delivery Vans or Bikes
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
Choose a Memorable Business Name
When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.
Some of the catchy business name ideas suitable for a grocery delivery business are;
Creative Grocery Delivery Business Name ideas
- Kenny Grocery© Grocery Delivery, Inc.
- Praise Vitalis® Grocery Delivery, LLC
- Evergreen© Online Grocery Delivery, Inc.
- Grocery Solutions® Grocery Delivery Company, Inc.
- Grocery King™ Grocery Delivery Company, Inc.
- Grocery Line™ Grocery Delivery Company, LLC.
- Frenzy Gang© Grocery Delivery Company, LLC
- Grocery Guys® Grocery Delivery Company, Inc.
- Star Grocery© Grocery Delivery Company, Inc.
- Eight Twenty™ Grocery Delivery Company, LLC
- Grace 2 Grace® Grocery Delivery Services, LLC
- Tango & Charlie® Grocery Delivery Company, Inc.
- Thomas Page© Grocery Delivery Company, LLC
- White Angels® Grocery Delivery Company, Inc.
- Mike Pentagon® Grocery Delivery Company
- North End™ Grocery Delivery Company, Inc.
- Zaps® Grocery Delivery, Inc.
- The Vintage Group© Grocery Delivery Company, Inc.
- Finger Snaps™ Grocery Delivery Company, LLC
- Timely People™ Grocery Delivery Company, Inc.
Register Your Business
a. What Type of Business Structure is Best for Grocery Delivery Business?
When it comes to the business structure of a grocery delivery business, the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Grocery Delivery Business?
- General Business License
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- Zonal Permits
- Signage Permit
- Proof of ownership, proper identification, and vehicle license
- Proof of district-issued food manager identification card
- Food purchase record storage and record-keeping
- Depot, commissary, or service support facility meets vending unit operation needs
- Copy of license for the service support facility and/or a recent inspection report.
d. What Type of Certification is Needed to Start a Grocery Delivery Business?
You don’t need any certifications to start a grocery delivery business.
e. What Documents are Needed to Open a Grocery Delivery Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval (For your kitchen and parking)
- Certificate of Incorporation
- Commercial Driver’s License (CDL) (at least a Class B CDL)
- Food Handlers’ License
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering starting a grocery delivery business, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Grocery Delivery Business?
A grocery delivery business will cost from $5,000 – $100,000 to start and that can easily go higher depending on your overall business goals and objectives.
b. What are the Cost Involved in Starting a Grocery Delivery Business?
- The total fee for registering a business in the United States of America – is $750.
- Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines, and other software) – $1,300.
- Marketing promotion expenses for the grand opening for $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of – $3,580.
- The cost for hiring a business consultant including writing a business plan – is $2,500.
- Insurance (general liability, workers’ compensation, and auto insurance) coverage at a total premium – of $2,400.
- Other start-up expenses include stationery ($500) and phone and utility deposits ($2,500).
- Operational cost for the first 3 months (salaries of employees, fueling of the grocery delivery vans and bikes, payments of bills et al) – $60,000
- The cost of storage hardware (bins, rack, shelves, food case) – is $3,720
- The cost for store equipment (cash register, security, ventilation, signage) – $3,750
- The cost of purchase of grocery delivery vans and bikes – is $30,000
- The cost of launching a website – is $1,200
- Miscellaneous – $5,000
c. What Factors Determine the Cost of Opening a Grocery Delivery Business?
- The size of grocery delivery business (number of vans and bikes you intend to start the business with)
- The choice of location
- The required licenses and permits
- The cost of branding, promotion, and marketing of the grocery delivery business
- The cost of insurance
- The cost of registering the business
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new grocery store or parking facility for your grocery delivery business. This is because the nature of the business makes it possible for you to get everything done on the go or online without owning a grocery store.
e. What are the Ongoing Expenses of a Grocery Delivery Business?
- Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
- Salaries of employees
- Delivery vans and bikes maintenance
- Marketing costs
f. What is the Average Salary of your Staff?
- Chief Operating Officer (Owner) – $38,000 Per Year
- Manager – $30,000 Per Year
- Delivery Van and Bike Drivers – $26,800 Per Year
- Call Center Agents – $26,500 Per Year.
g. How Do You Get Funding to Start a Grocery Delivery Business
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Source for soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
The Vintage Group© Grocery Delivery Company, Inc. is a licensed grocery delivery company that will be based in Oklahoma City, Oklahoma but operate all across major cities in Oklahoma.
The Vintage Group© Grocery Delivery Company, Inc. has been able to secure all relevant licenses and permits to operate throughout the United States. We will ensure that we abide by the rules and regulations guiding the food and grocery delivery industry and we will only hire qualified drivers with valid commercial driver’s licenses (CDL) to handle our delivery.
b. Products and Service
Delivery of groceries such as;
- Bakery and Bread.
- Meat and Seafood.
- Pasta and Rice.
- Oils, Sauces, Salad Dressings, and Condiments.
- Cereals and Breakfast Foods.
- Soups and Canned Goods.
- Frozen Foods.
- Dairy, Cheese, and Eggs.
c. Mission Statement
Our mission is to build a grocery delivery business that will meet the needs of our customers in the regions and cities we will cover and also sell franchises all across the United States of America and Canada.
Our vision is to become one of the preferred choices when it comes to the grocery delivery business in the whole of Oklahoma City, Oklahoma.
d. Goals and Objectives
The goals and objectives of a grocery delivery business are to breach the gap between grocery stores and customers; to make it easier for people to order their groceries from their homes or offices and get them delivered to them.
e. Organizational Structure
- Chief Operating Officer (Owner)
- Delivery Vans and Bikes Drivers
- Call Center Executives.
a. SWOT Analysis
- Excellent operational history
- Robust relationships with key stakeholders
- Experience and trained professionals.
- Excellent customer testimonials.
- Reliable and efficient grocery delivery vans and bikes and service.
- The owner is new to large scale marketing
- We will need a loan to purchase the latest grocery delivery vans and bikes
- The owner is currently running the business solo
- Lack of economies of scale.
- Growing eCommerce activities such as people ordering groceries online
- Build upon existing clientele
- Online market, new services, new technology, and of course the opening of new markets.
- Increase the number of grocery stores that would want to leverage online ordering.
- Loans diminish profitability until they are paid off
- The first year will be financially tight while we gain customers and pay off loans
- Competition in the area could increase
- Management of employees requires time, money, and efforts
- The regulatory department could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses.
b. How Do Grocery Delivery Businesses Make Money?
Grocery delivery businesses make money by charging clients for the delivery of groceries.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your grocery delivery company by sending introductory letters to fast-food restaurants, households, assisted living homes, nursing homes, hostels, dormitories, camp houses, and other stakeholders in and around the city you intend to cover.
- Advertise your grocery delivery in community-based newspapers, local TV and radio stations
- List your business and services on yellow page ads (local directories)
- Leverage the internet and mobile apps to promote your grocery delivery brands
- Engage in direct marketing and sales
- Deliberately brand your grocery delivery vans and bikes
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
Most grocery delivery businesses charge based on the quantity of the groceries and the distance the grocery is to be delivered. Generally, fixed fees range from $2 to $6+ and are paid by the customer, while percentages range from 20 percent to 30 percent and are paid by the restaurant.
b. How Much Profit Do Grocery Delivery Business Owners Make a Year?
It depends, but available reports show that on average, a grocery delivery business owner should net more than $60,000 per year assuming they have a steady clientele.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the grocery delivery business (number of grocery delivery vans and bikes owned)
- The location the grocery delivery business is covering
- The management style of the grocery delivery business
- The business approach of the grocery delivery business
- The advertising and marketing strategies adopted by the grocery delivery business.
- The number of years the grocery delivery business is in business
d. What is the Profit Margin of a Grocery Delivery Business?
The profit margin of a grocery delivery business is not fixed. It could range from 15 percent to 25 percent.
e. What is the Sales Forecast?
Below is the sales forecast for a grocery delivery business. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year: $240,000
- Second Fiscal Year: $430,000
- Third Fiscal Year: $550,000
Set Up your Office
a. How Do You Choose a Perfect Location for Grocery Delivery Business?
- The demography of the location
- The demand for grocery delivery services in the location
- The purchasing power of businesses and residents of the location
- Accessibility of the location
- The number of grocery delivery businesses, and grocery stores in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Grocery Delivery Business?
- New York City, New York
- Dallas, Texas
- Columbus, Ohio
- Oklahoma City, Oklahoma
- Chicago, Illinois
- Boston, Massachusetts.
- Los Angeles, California
- Las Vegas, Nevada
- Miami, Florida
- Washington DC
c. What Equipment is Needed to Operate a Grocery delivery business?
- Grocery delivery vans, bikes, or drones
- Grocery bags and casing
- Relevant software (Apps).
When it comes to hiring employees for a standard grocery delivery business, you should make plans to hire a competent chief executive officer (you can occupy this position), a manager, delivery van and bike drivers, and call center executives.
Launch the Business Proper
In recent times, no grocery delivery business opens its door for business without first organizing an opening party to officially launch the business. You can do a soft opening party if you are operating on a low budget or you can go for a grand opening party.
The bottom line is that with the proper launching of the grocery delivery business, you will officially inform people in your city that your grocery delivery business is open for business.
a. What Makes a Grocery Delivery Business Successful?
- Choose a good location, and reliable grocery delivery vans and bikes to launch the business
- Partner with the leading grocery stores in your city
- Build reliable and easy to use grocery ordering apps
- Hire only competent, hardworking, and trustworthy staff
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your grocery delivery business
- Leverage all available online and offline platforms to promote your grocery delivery business
b. What Happens During a Typical Day at a Grocery Delivery Business?
- The business is open for the day’s work
- The grocery delivery vans and bikes are washed, cleaned, and ready for business
- Customer’s requests are taken and they are delivered
- Schedule maintenance of delivery vans and bikes are carried out
- Marketing/website upkeep
- Supply ordering
- Administrative duties
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Grocery Delivery Business?
- Good driving skills
- Customer services skills
- Interpersonal skill
- Business management skills
- Work experience in a grocery delivery services industry
- Experience in managing people
- Experience in business administration
- Experience in handling relevant software apps.