Food Delivery company in South Africa

Shubham Sanghal DM15155 Section 1

INDIA ON WHEELS

India on
Wheels

Market Trends in South Africa

The gross national income per capita of South Africa has risen by 69%, from $3600 to
$6000 (approximately) during the period 1995 to 2014. Post the liberalization the country

has seen a rise in the middle class, migration of rural people to urban areas and women
taking up jobs in the corporate world. The increase in per capita income along with the
change in the mentality of the middle class has led to increased spending by the upper
middle class on food and consumer products. South Africa recently became a part of the
BRICS, giving it a high status compared to the other African nations. This speaks volumes of
the growth story in South Africa. A common trend which has been observed across the
Emerging economies is that as the per capita income increases, people prefer outside food
to home cooked meal, same is the case with South Africa. With the increase in income and
the standard of living, more people can afford to eat meals outside.
The changing eating habits of the people due to globalization and westernization has had
an impact in people spending more on outside food. There is a huge demand from the
foreign tourist as well as other international visitors. There is a need for improving the
service offerings, customer responsiveness and innovation.
During the year 2013-2014, majority of the South Africans have been restricted in spending
due to the rising cost of living and the uncertain economy of the country. The people who
have been most affected by this are the middle income group. On the other hand the upper
middle income and the high income group have remained immune to the adverse economic
conditions in the country. Thus, the affluent consumer group has fueled the growth of the
restaurants and the eating joints. This encourages us to target the growing restaurant
business in South Africa despite the economic difficulties the country has been into. Hence,
we came up with an idea to cater to the people who want to get food delivered at their
doorsteps.

Summary of the idea

We are opening a food delivery company in South Africa. The food delivery company will
deliver from the different restaurants present in a particular area. The concept is to
provide a home delivery channel to restaurants who cannot afford to start delivering food
to their customers. The customers also gain as they get access to many restaurants at home.
This saves time and travelling cost for the customers.

Service Details
The delivery model would be simple. The orders would be collected through a website or a
mobile app. Once the order has been collected it will be communicated to the restaurants
on real time basis. Once the order is prepared our delivery boy would pick the order and
deliver it to the respective customer. The payment would be collected upfront from the
customers. We will include restaurants with a wide range of cuisines like Chinese, Italian,
Thai, Mexican, American and Indian.

What is the problem?

The no. of restaurants in South Africa are huge, whereas out of the total no. of restaurants
very few provide home delivery service to the customers. There is huge demand for food
delivery in South Africa. The working class do not have the time to cook food at home as
well as to go out to eat every day. Seeing the tight schedule many of the working class
people prefer to get the food delivered at home. This is where our food delivery company
solves the problem of the people, by connecting the customers with the restaurants.

How do we solve the problem?

We help the customers satisfy their hunger pangs by delivering their favorite food at their
door steps. By using our services the customer saves on the cost and time incurred on
travelling to restaurants to pick food.

Each restaurant will have a separate menu

displayed online. This menu will be provided by the restaurant. The customer could
choose from a variety of restaurants with in a particular area. Currently our customers
visit these restaurants and make the payment then and there.

How it works?

Customers place their order along with the payment through our website or mobile
app.

The order is simultaneously sent to the respective restaurants.

The delivery boy near to the area would be noted about the order.

He would collect the order after confirming the items.

The delivery boy would deliver the order to the customer.

Revenue Model
Our major revenue will come from the transactions done between our customers and the
restaurants. We have two sources of revenue. The first source is the additional delivery
charges being charged from our customers. These charges would vary on the bill amount
of the order. The minimum charges for delivery would be around 10 to 20 ZAR per
transaction. The second source is from the commission which we get from our partners.
We would strike a special deal with the restaurants in terms of as to what percentage of
the total order they will be giving us as commission. These rates would vary from one
restaurant to another. The pricing of our product would be as per the menu rates being
provided by the restaurants plus a delivery charge.
We also plan to introduce a membership model. Under which we would charge a onetime
membership fee from our customers. This membership scheme would be for the services
and offers which we would be providing to our customers. The offers which we would
provide to our members would be something like 10% off when they eat at the restaurant,
a desert free on an order of a main course, etc. Such offers would be exclusive for the
members who subscribe to our membership. We would also charge a fixed amount to the
restaurants to promote their offers and drive sales for them through the members.

Business Model

Customer Profile- Our target audience will be the people in the following category

Working couples

Upscale families

Corporates

People in the age group of 18 to 40 years.

People with a disposable income of 20000 50000 ZAR per month.

Target city

Cape Town

Durban

Johannesburg

Pretoria

We would be targeting the densely populated city as it would give us more traction and
customers.
Key activities - Our key activities would include the following

Tie up with the restaurants and provide them with additional business.

Collect orders from customers and place the orders with the respective restaurants.

Deliver the orders through our fleet of delivery boys.

Market the membership model to the customers so as to increase sales for the
restaurant and provide additional benefits to our customer.

Key Resources As a food delivery the resources we would be using is the human capital
available in South Africa. We at least need around delivery boys in one city. Along with this
we would also want to set up an IT team that would take care of the website, the app and
the other technological resources. We would need around 5 sales representative who
would pitch to the restaurants and bring them on board.

Cost Drivers The main cost centers would be the IT team along with the sales

representative and the delivery boy.

We would also incur cost in marketing and

promotion.
Channels We will be targeting the restaurants through Zomato. We would create a
database of all the target restaurants within a radius of 5 to 8 km. We would push sales
through online channel. Would place ads on Facebook, Google ads, and would run live
offers. We will also ask the restaurants to allow us to put a small kiosk which would inform
the customer about the delivery service being offered by us.
Customer Relationship - In order to retain our customers we would run customer royalty
programs. We would give the customers discounts and offers on their repetitive orders. We
would also have a referral system in place wherein if any customer refers a friend, relative
or colleague will get extra points on his order. These points could be redeemed in the
membership scheme. We will also offer discounts on our membership cards.
Revenue Streams -Presently we have two sources of revenue streams

Firstly we charge a delivery service charge for delivery of all food products.

Secondly we get a commission from the various restaurants we have a deal with.

In future we plan to introduce a membership model, through which our customers

would be able to get a discount from their favorite restaurants whenever they go out to
eat. We would receive fixed amount for promoting restaurants through this
membership model. We may also get commission on the sales we help the restaurant
achieve during a particular period such as monthly, quarterly, annually.

Marketing and Promotion

Few ways by which we would try to promote our venture is by the means of social media
channels. We would have our presence on the following social media platforms

Facebook Online store to drive sales and release new offers

Twitter To initiate a chat with the prospect clients and to see the trending topics

Instagram Post pictures of the restaurant and the special dishes being served by
them

Pinterest we would use this medium to gather traction through the pictures and
attract customers.

Zomato an ad on the zomato page would help us gain a lot of customers.

Here is one example of a campaign we would run on Facebook. Its a campaign about
Women day, where in we provided 10% discount to all the women who placed orders with
us. Similarly we would have campaigns running through- out the different events which
take place in South Africa. Our marketing and promotion events will also focus cricket and
rugby as these sports are closely followed in South Africa. People in South Africa religiously
follow cricket and can be attracted through offers like free match tickets, discount on
cricket merchandise and other offers.

Financial Analysis
Operating expenses

Year 1

Year 2

Year 3

Advertising and promotion cost

300,000.00

450,000.00

1,350,000.00

Delivery Boy salary

1,200,000.00

1,500,000.00

2,000,000.00

IT Support team

720,000.00

900,000.00

2,700,000.00

Sales Representative & customer support

900,000.00

1,800,000.00

2,700,000.00

Rent

360,000.00

720,000.00

1,080,000.00

Miscellaneous expenditure

500,000.00

750,000.00

2,250,000.00

Setting up a business and Legal

500,000.00

250,000.00

250,000.00

Total Expenditure

3,980,000.00

6,120,000.00

12,080,000.00

The values are given in terms of ZAR (South African Currency). 1Zar = Rs. 5.70
In the above table we have calculated the rough estimate of the expenditure we will be
incurring in starting our business in South Africa. We will start our operations from Cape
town, which is the capital city of South Africa. There are around 2500 restaurants in this
city (Source Zomato). We will be deploying our delivery boys within a radius of 15-10
kms so that most of the restaurants can be covered.
We will incur an initial set up cost of around 500000 ZAR. This would reduce in the
subsequent years. The total expenditure incurred in the first year is 3,980,000 ZAR. The
expenditure would double in the next year as we would be expanding our operations in one
more city Durban. The figures are a rough approximation we have not taken into account
inflation.
Revenue We are assuming that we have around 150 transactions in a day from one city.
On every transaction we hope to around 75 ZAR. Multiplying these values to get annual
revenue from delivery charges and commission from restaurants. We get an annual income
of 3757500 ZAR.

Income Statement
Revenue
Operating expenses
Profit

Year 1

Year 2

Year 3

3,757,500.00

7,515,000.00

15,030,000.00

3,980,000.00

6,120,000.00

12,080,000.00

(222,500.00)

1,395,000.00

2,950,000.00

35,000,000.00
30,000,000.00
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
Year 1

Year 2

Year 3

(5,000,000.00)
Revenue

Operating expenses

Profit

In the second year of operations we will break even and will incur a loss of 222500 ZAR in
the first year of operations. We estimate that we would earn around 2950000 ZAR by the
end of three years of operations.