In case you haven’t yet read Part I of An Illustrated Guide to Indian Food-Tech, now would be a good time.

So in summary:

  1. You have a lot of orders.
  2. You are losing money for every order.
  3. You are growing faster than you expect.
  4. You have lesser time to deliver every order.
  5. All these orders happen in a couple of bursts during the day.
  6. Your co-founder thinks the whole thing is your fault.

This is why the food-delivery business is so hard.

The worst part about it is that it’s seductively hard – there’s a real customer need that sounds tempting enough to solve, but the economics of solving it are equally formidable.

This is why most logistics guys try to stay away from food delivery – it’s just not possible to make it work. But remember these guys?

The biggest chunk of their deliveries is food.

But surely, you ask – surely there must be something they can do? What options do these companies have?

Okay, let’s talk about options.

First, you need to cut costs. And the most obvious thing you can do is you can change how you pay your delivery guys. As we found out earlier, most food delivery happens for just four hours a day, so paying employees a regular salary isn’t optimal. That’s because you have delivery guys who are bustling around for a few hours, and are being paid for sitting around doing nothing for most of the day.

So you go from a per hour payment to a per delivery payment. This makes perfect financial sense. Roadrunnr tried this out last year. And the results were spectacular.

Protesting against the revised salary structure, over 100 delivery boys of Bangalore-based logistics startup Roadrunnr, damaged the office furniture in Ejipura on Saturday, reports the Deccan Chronicle.

According to the the protesters, they were earlier being paid on an hourly basis, but as per the new compensation policy, compensation will be on a per delivery basis. The protestors alleged that the new policy will drastically reduce their salary by nearly half of the current amount

Source: Inc42

Fine. Forget it, you say. You continue to pay by the hour. What else can you do?

You can try to increase revenue. This gives you a choice – you can either charge the restaurant more for the delivery, or you can charge the customer. Let’s start with the restaurant.

So you go to the restaurant and tell them that the Rs. 20 they are paying for per delivery isn’t working out, and you need to hike the amount. You assure them this is a temporary thing, and once you have more orders, you can go back to the earlier rate.

AUTHOR

Praveen Krishnan

Praveen has over 9 years of experience in product management. Prior to The Ken, he was the Director of Product at InMobi. He holds an MBA from IIM, Bengaluru and an engineering degree in Electronics & Communications from NIT, Tiruchirappalli.

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