deliveroo-business-model

How Does Deliveroo Make Money? The Deliveroo Business Model In A Nutshell

  • Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013. Shu developed the platform in response to a lack of high-quality food delivery in London.
  • Deliveroo makes money by collecting 25-45% of every order it facilitates. It also charges delivery fees and onboarding fees for restaurants that wish to be featured on the platform.
  • Deliveroo for Business is a service designed for corporate clients needing to order food in bulk. The company also charges a higher commission to businesses that utilize a network of digital kitchens to process orders.

Origin Story

Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013.

After moving from New York City to London and working long hours at a desk, Shu was surprised to find that it was nearly impossible to get high-quality food delivered.

He observed that existing takeaway food was subpar at best and limited to low-end restaurants already providing a takeaway service.

Deliveroo was then launched in February 2013 by Shu and childhood friend Greg Orlowski with the motto “proper food, proper delivery“. Shu initially worked as the first Deliveroo rider, picking up food from restaurants and delivering it to customers to get a sense of how the whole process worked.

Starting with just three restaurant partners, Deliveroo secured a critical round of funding in mid-2014 to allow it to operate in the British seaside city of Brighton.

By January of the following year, the service was launched in Berlin and Paris. At this point, Deliveroo had approximately 1,500 restaurants onboarded with over 500 delivery drivers.

In 2019, the success of Deliveroo caught the attention of Amazon who subsequently invested $575 million to secure a stake in the fast-growing European food-delivery space.

The company also successfully navigated the coronavirus pandemic in 2020, adding over 15,000 couriers to cope with increased demand.

Today, Deliveroo operates in 12 countries with more than 115,000 restaurant and grocery partners.

Deliveroo’s flywheel and business model explained

deliveroo-flywheel
The Deliveroo claimed flywheel moves around a wide selection of products on the platform, which brings in consumers, thus making the platform also more appealing for riders, as they have the option to choose what food to deliver. As more riders join in, the service improves thus making it more valuable for restaurants looking to expand their customer base, by providing quick deliveries. Therefore, the positive feedback loop is triggered by a wider selection, at better value, with a wide range of partners (riders and restaurants) – Image Source: Deliveroo Financial Prospectus.

To kick off its operations Deliverro needs to build up local network effects.

Indeed, one of the limitations of a platform that operates locally is the fact that in each new location it needs to kick off its network effects, by attracting enough riders to make the service valuable for consumers and therefore the platform valuable for restaurants.

The positive side is that as the brand grows in various locations, it becomes easier to kick off operations in new ones, thus triggering local network effects more quickly.

The loop is straightforward. As more local consumers join the platform, and orders flow in, restaurants and groceries also join in more easily and in greater numbers.

This improves product selection and gives choices to consumers in terms of pricing. Thus generating also earnings opportunities for riders, who might use Deliveroo as the go-to platform to earn an additional income.

Thus, a wider network of riders, with a wider selection, better prices, makes more consumers join in, making the platform even more valuable to restaurants and grocery partners.

Deliveroo revenue generation

deliveroo-income-statement
Deliveroo Income Statement – Deliveroo Financial Prospectus.

Deliveroo has a revenue generation model typical of many food delivery companies.

This model is discussed in more detail below.

Order commissions

Deliveroo collects a commission of 25-45% for every food order it facilitates. The exact commission depends on the particular restaurant partner and the country of operation.

Delivery fees

Deliveroo customers must also pay a delivery fee which is then forwarded to the courier by the company. 

Delivery fees are based on the distance between the restaurant and the customer and also the estimated travel time.

Onboarding fees

Deliveroo also charges an onboarding fee for new restaurants wishing to be included on the platform. 

Ostensibly, this fee covers the cost of photographing the menu and also the equipment that connects with online ordering software. A typical onboarding fee is in the vicinity of $300.

Deliveroo Plus

Deliveroo Plus is a subscription membership plan for members giving them access to free delivery, 24/7 customer service, and exclusive restaurant offers.

Prices vary according to country. In Australia, for example, the cost of Deliveroo Plus is:

  • $14.99/month for the Gold plan, which offers free delivery on all restaurants, takeaway, and grocery deliveries.
  • $6.99/month for the Silver plan, which offers the same free delivery provided the order amount is at least $40.

Deliveroo for Business

Deliveroo for Business is a service provided to corporate customers who wish to order food in bulk for their employees.

The fee structure for this service is unclear, but the company likely earns a commission from its existing restaurant partners. Given the bulk nature of these food orders, the commission is likely to be significant.

Deliveroo Editions

Deliveroo Editions is a network of kitchens where several restaurants and food brands work together in a single space to streamline the food delivery process.

These kitchens are built and fitted out by Deliveroo and leased free of charge to the restaurants and brands.

However, the company takes a higher commission for every order placed through the app. This commission may be as high as 50% in some cases.

Read Next: Uber Eats Business ModelGrubHub Business ModelDoorDash Business ModelInstacart Business ModelPostmates Business Model, Last-Mile Delivery, Amazon Business Model.

Connected Last-Mile Delivery Business Models

Deliveroo Business Model

deliveroo-business-model
Deliveroo is a British online food delivery company founded by Greg Orlowski and Will Shu in 2013. Shu developed the platform in response to a lack of high-quality food delivery in London. Deliveroo makes money by collecting 25-45% of every order it facilitates. It also charges delivery fees and onboarding fees for restaurants that wish to be featured on the platform. Deliveroo for Business is a service designed for corporate clients needing to order food in bulk. The company also charges a higher commission to businesses that utilize a network of digital kitchens to process orders.

DoorDash Business Model

how-does-doordash-make-money
DoorDash is a platform business model that enables restaurants to set up at-no-cost delivery operations. At the same time, customers get their food at home, and dashers (delivery people) earn some extra money. DoorDash makes money by markup prices through delivery fees, memberships, and advertising for restaurants on the marketplace.

Glovo Business Model

glovo-business-model
Glovo is a Spanish on-demand courier service that purchases and delivers products ordered through a mobile app. Founded in 2015 by Oscar Pierre and Sacha Michaud as a way to “uberize” local services. Glovo makes money via delivery fees, mini-supermarkets (fulfillment centers that Glovo operates in partnership with grocery store chains), and dark kitchens (enabling restaurants to increase their capacity).

GrubHub Business Model

grubhub-business-model
Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. In 2018 the company connected 95,000 takeout restaurants in over 1,700 U.S. cities and London. The Grubhub portfolio of brands like Seamless, LevelUp, Eat24, AllMenus, MenuPages, and Tapingo. The company makes money primarily by charging restaurants a pre-order commission, and it generates revenues when diners place an order on its platform. Also, it charges restaurants that use Grubhub delivery services when diners pay for them. 

Lyft Business Model

lyft-business-model
Lyft is a transportation-as-a-service marketplace allowing riders to find a driver for a ride. Lyft has also expanded with a multimodal platform that gives more options like bike-sharing or electric scooters. Lyft primarily makes money by collecting fees from drivers that complete rides on the platform.

OpenTable Business Model

how-does-opentable-make-money
OpenTable is an American online restaurant reservation system founded by Chuck Templeton. During the late 90s, it provided one of the first automated, real-time reservation systems. The company was acquired by Booking Holding back in 2014 for $2.6 billion. Today OpenTable makes money via subscription plans, referral fees, and in-dining with its first restaurant, as an experiment in Miami, Florida.

Postmates Business Model

postmates-business-model
Postmates is a food delivery service built as a last-mile delivery service platform connecting locals with shops. Postmates makes money by collecting fees (commission, delivery, service, cart, and cancellation fees). It also makes money via its subscription service (called Unlimted – $9.99/month or $99.99 annually), giving free delivery on orders of more than $12.

Uber Eats Business Model

uber-eats-business-model
Uber Eats is a three-sided marketplace connecting a driver, a restaurant owner, and a customer with Uber Eats platform at the center. The three-sided marketplace moves around three players: Restaurants pay commission on the orders to Uber Eats; Customers pay small delivery charges and, at times, cancellation fees; Drivers earn through making reliable deliveries on time.

Main Free Guides:

About The Author

Scroll to Top
FourWeekMBA