Franchising and food delivery: a possible combination?

Just published on the “Franchise Opening” portal, my new article on the topic of food delivery. It’s a well-established commercial reality more than a sector trend, now under the scrutiny of investors both in the role of franchisors and franchisees. Below is an excerpt from my article:

“According to the 2018 report by FIPE, the food delivery sector in Italy generated over 250 million euros in revenue last year. The survey reveals that 30.2% of Italians have ordered lunch or dinner online from food delivery platforms. The reasons mainly lie in the combination of a lack of desire to go out (37.1%) and/or cook (31.5%), and the absence of products at home (35.6%). The striking fact is the shift in purchasing trends. Users increasingly prefer convenience over the in-store experience, or rather, they alternate between the in-store experience and the convenience of the service. We are facing a kind of “multitasking” in consumption that is setting new rules in the food market.

As we know, the food delivery landscape features major players like JustEat, Deliveroo, and Glovo, but noteworthy are also the small operators who are capturing their market share with intelligent formulas.

This is possible because:

• Firstly, not every city has coverage from the major players in the sector. Therefore, food delivery companies can easily establish themselves in “peripheral” and provincial territories.
• The food delivery business model is streamlined and easy to start, making it attractive to young people or “second-time” entrepreneurs who want to start their own business or get back into the game. The investment costs for a food delivery business are not prohibitive.
• However, the real and main challenge lies in managing employees. Riders are hired on extremely flexible contracts that allow for too quick a turnover. Therefore, the entrepreneur may face frequent staff shortages. There may be valid management solutions, but it is necessary to evaluate the reality and the user base to be intercepted case by case: cities with a large presence of young people, or small towns, etc., may dictate peculiar human resource management policies.

The revenues of this business model come from fixed commissions for the end customer and percentages for restaurateurs. It goes without saying that these are not small revenue volumes but rather the need for a broad revenue regime that includes at least a thousand deliveries per month to break even with fixed operating costs. However, an entrepreneur (or franchisee) particularly inclined to commercial activities can negotiate advantageous agreements with the operators (remember that food delivery still provides visibility and increases the sales volumes of the affiliates), as well as exponentially expand their customer portfolio.

In conclusion, the food delivery phenomenon is a business model that is growing significantly and, not requiring patents, licenses, and certifications, can be managed by anyone with a commercial attitude. In short, we are facing what is defined as a good opportunity… if you’re willing to “pedal.”