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Everything You Need to Know to Launch a Successful Restaurant Delivery Service!
How to Start a Restaurant Delivery Service
STARTING A RDS
Many people contacting RDUSA for additional information are simply looking for places to begin, for some golden hint as to what needs to be done, and how to start the process of opening their own RDS. This page is intended to assist you – and them – by filling in some of the gaps, and to provide a basic structure as well as a few possible starting points for your business.
A Quick Overview of the Restaurant Delivery Service (RDS) Model
So what is the traditional RDS model? In short, a traditional RDS will contract with local restaurants to deliver prepared meals to customers. The RDS will typically prepare and distribute their own marketing that contains their contracted restaurants’ menus, and will then take the customer’s meal order via phone or web. The RDS then faxes and/or emails the order to the restaurant, dispatches a driver to pick up the prepared meal and delivers it to the customer. The driver collects payment for the meal from the customer, and returns it to the RDS at the end of his/her shift. The RDS then pays the restaurant for the ordered meals at the end of the agreed upon payment schedule (typically weekly or bi-weekly).
In order to successfully make this model work, an RDS owner/operator must stay on top of the following areas:
- Order Taking
- Driver Management & Check-out
- Professionally Created Content
- Production and Distribution of Material
- SEO Services
- Non-Stop Social Media & Email Marketing Campaigns
- Selling services/Contracting with Restaurants
- Up-selling meal/in-house items to customers
- Balancing a tight RDS budget
- Short-term cash flow management
Keep in mind that many of these key tasks can be outsourced and by doing so will save you time, money and liability. RDUSA provides the following outsourced services. Outsourcing these tasks to our team of professionals will allow you to focus on managing orders and growing your business.
- National Dispatching Center
- National Call/Order-Taking Center
- National Customer Service Support
- Online Chat Support
- Driver Application Processing (Background/DMV check)
- Driver Training & Certification
- Driver Management & Payroll
- Driver Insurance Management
- Website Development
- Search Engine Optimization (SEO)
- Gift Certificate Sales & Management
- Portal Relations – Get orders from Grubhub, Delivery.com, and others
- Restaurant Negotiations (28% average commission)
- Hotel Room Service Program
- Gift Certificate Sales & Management
- Corporate Catering Program
Financial and Accounting
- Driver Payroll
- Dispatch and Office Payroll
- Restaurant Payables
- Quickbooks online Accounting
- Driver 10-99 processing
Choosing the Right Company Name
The first thing I always tell a prospective client when they ask this question is…”a name doesn’t make a business, a business makes a name”. So, although it’s important to have something that can easily be remembered and also matches your Dot com, the name will not make or break you. Choosing a name for your business is an important first step because it represents a fundamental shift in thinking. Once you have chosen a name for the business, your idea has suddenly begun to take form. Your idea is now an entity, a THING that can be solidly talked about in conversation. Even without filing a single document with the state or writing down a single note on a piece of paper, by coming up with a name you will feel a little bit different about the enterprise you are about to tackle.
Your company name doesn’t have to be your web site or your “doing business as” name. You can be Mike Handy Inc, and do business as (or DBA) Takeout Waiter, and name your site: www.TakeoutWaiter.com. The key is to have a catchy, easy to spell, name. If it helps people understand what you do, great. If it tells people where you are, even better (ie www.TakeoutWaiterofOrlando.com) . This also helps with your local SEO.
Descriptive vs Non-Descriptive Names
A descriptive name is indicative of what – exactly – you do. For example Takeout Waiter, describes the person that is going to be making contact not only at the door with customers, but also when they pick up orders from your partnering restaurants. They pick up a customer’s takeout food, and act as a waiter by bringing it to them. And the word “waiter” precludes a 15% to 20% tip is customary, helping the drivers. Because this name is descriptive, a consultant may tell you that it will be very hard to trademark if you plan on being a national brand someday. On the other hand, a non-descriptive name can be unique and may be easier to trademark. If you have the marketing money to transform a name into a brand, you may want something unique. Companies like Bing, Google, etc. have gone that route.
10 years ago, the most important part of that trio was the phone number. Nowadays, it’s your website. As soon as you have implemented a good name (that people can spell and remember), visit a web domain registration company such as www.godaddy.com to find out if it is available. If it is, grab it. (It should cost you less than $10.00 to get it for a year). From there, your business name is a snap (e.g. TakeoutWaiter.com).
Look at your Geography, Cuisine, Demographics, etc…
Now that you have a very rough idea of your delivery range, take another look at what’s inside that circle. What types of customers are there? Do you mainly see residential customers? Do you see businesses? What about the types of restaurants? Do you have mainly chain restaurants, or “Mom & Pop” restaurants?
Another primary idea to keep in mind is balance of cuisines to offer. It is much more important to have a balance of cuisine, than a high number of restaurants from which to choose (It will do you no good to contract with all 10 Italian restaurants in your area). Remember, to a delivery customer “Lasagna in a styrofoam box, is Lasagna in a styrofoam box”. Without atmosphere, there is not much difference.
By physically sketching a loose circle around your primary area, and studying all of the items contained in that circle, you can get a much better sense for the potential of your delivery area.
Sole Prop vs. S Corp. vs. LLC
The S-Corp, LLC (Limited Liability Company), or LLP are more complex to set up and maintain, but they do offer additional protection in the area of liability. In the world of the Sole-Proprietorship, a customer has the ability to attack (and possibly TAKE) your personal assets through the process of a law-suit. Suddenly any equity you may have built up in your home is at stake should one of your drivers accidentally knock a customer’s priceless garden gnome over when delivering a meal.
It is at this point that we will remind you – again – that RDUSA is not, and does not represent a legal opinion, and that it is in your best interests to seek the advice of an attorney regarding this subject.
Business Plans and Contracts
So you have all of your ducks in a row. You have your company name. You have your phone number and your domain name in your possession. You are legally established with the state. You have done your geography homework.
It is at this time we highly recommend purchasing and downloading our sample document kit for a startup RDS. The price is $500.00 for a sample of the following:
- Sample Restaurant Contract, Restaurant Value Presentation, RDS Industry Support Materials, FAQ’s for Restaurants
- Sample RDS Business Plan, Operations Manual, Marketing Manual and Start Up Timeline & Tasks
- Sample Marketing Materials, Sample Print Material & Coupons, Sample Press Release and more
- Sample Driver availability chart, application, Independent Contractor Form, Insurance Requirements, etc…
- Corporate Lunch Program Outline & Tools
- Hotel Room Service Program Outline & Tools
- Supplier contacts for Insurance, Equipment, Supplies, Printing, SEO, Social Media, Menu Entry, Call Center, Accounting & Software And much more
Signing Restaurants and overcoming objections
Signing restaurants is probably one of the most difficult tasks in this industry. Think back to your model: you have to convince the restaurant to part with around 30% of their food markup for orders processed and marketed through your system, and – if you are lucky – agree to a marketing fee in exchange for their menu items available throughout your marketing materials distributed to homes, offices and hotels as well as Social Media and email databases. (This marketing fee is typically used to offset your printing and mailing costs).
While we can’t make the sales pitch for you, we can give you a few pointers to help you with the difficult process.
“I can’t possibly afford to discount my food 30%!” – Restaurants will never tell you, but the $10 hamburger they sell to the public usually only costs them around $3 to produce. That means, $3 to cook it, staff a waiter to take the order and bus the table after the dining customer completes their meal. The Restaurant is still making money on this deal, since they are able to utilize excess kitchen capacity. They no longer have to worry about busing the table, washing the dishes, or keeping a waitress around to order the food because you – the RDS – take care of all of these items.
“You will be stealing my customers!” – This is the most difficult one to deal with. The majority of restaurants don’t understand that there are actually THREE types of customers in reference to the food industry.
- “Let’s go out to eat.” – This is a dine-in customer. This customer has made the decision to eat at a specific restaurant prior to leaving their house.
- “I’ll pick something up on the way back from work.” – This is a restaurant to-go customer. This customer has already made the decision to pick up a meal at a particular restaurant prior to leaving their office or home.
- “Let’s get something delivered”. This is the RDS customer – YOUR customer! The customer has decided upon a cuisine (“I feel like Italian”) but has not yet decided on a restaurant. If you have marketed your business correctly, this customer will be calling you – or logging on – to see what menus are available on your site.
The most important item to stress to the restaurants is that they are not losing 30% of their revenue in this process, but rather, they are in fact GAINING 70% of additional revenue they would not have had without contracting through your service. Training restaurants in this idea is key: you are not competing for the customers they already have; you are bringing them new customers they wouldn’t have gotten in the first place.
Even though we have provided valuable information here, many people will not be able to sell and close the deal. Contact us for help. We can provide you with all of the tools and presentation material you need, or we will come to your site and sign them for you.
Get Your URL and Buy the Software
Example: Your local restaurant sells drinks for $1.00 a can. From that $1.00 per can, you will get .30 (assuming a 30% discount agreement). However traveling to your local super-store you will most likely find that the same can of soda will only COST you .28 per can. By keeping a house menu stocked with common items, such as drinks, you can turn that .30 profit from the restaurant into a .70 profit just by selling your own drinks. In our start up package we give you a floor plan of how your office should be set up in order to track and sell beverages in your system.
The debate rages on and on between RDSs and state tax agencies, but it is sufficient to say that most RDSs – IF THEY COULD – would choose to utilize Independent Contractors as drivers instead of hiring employees.
The benefits are:
- – Independent Contractors offer an additional layer of protection to the RDS when it comes to liability. Any problem that occurs as the result of the driver (e.g. car wreck, knocking over the priceless garden gnome) exposes the Independent Contractor doing the delivery, not the RDS.
- Insurance costs are the responsibility of the IC, not the RDS. Although, you will need to carry other insurance as an umbrella.
- Employee motivation is much higher with an IC relationship. An IC knows s/he is paid per delivery, so it’s not in their best interests to be sitting around. An employee, however, is paid the same hourly rate whether they do 1 delivery or 10; and their performance usually reflects it.
Develop Your Marketing Plan
This is traditionally done through the publishing of a menu guide, and has been the most effective tried-and-true way to marketing a Restaurant Delivery Service and obtain orders over the past 20 years. In the past five years, some delivery services have survived by focusing on internet marketing, SEO, Social Media and limited printing to succeed. A menu guide will contain the menus for all of your partnering restaurants, and an easy-to-read map describing which restaurants they can have delivered in their area. Although relatively expensive to print and mail, it is still one of the best ROI (Return On Investment) marketing techniques still utilized.
The goal of your menu guide is to be just important enough to warrant a place right next to your customers’ most referenced literature, while simultaneously being inexpensive enough to mass-produce and distribute as needed. Usually this is done by using a full-color, high-pound menu guide, with a lower pound (4 color) insert. Typically, a RDS will publish 20,000-30,000 menu guides twice a year depending on size of market as well as the RDS’s budget.
What kind of return can you expect to gain from a mass mailing? Typically, the response is low (around 4%-6%). This means that if you obtain a mailing list of 5000 names for your delivery area, and deliver a menu guide to each of them, you can expect to generate somewhere between 200-300 orders. (Note that’s ORDERS; also see the RE-MARKETING section).
The new marketing techniques that have picked up momentum and ROI over the past five years are SEO, EDDM and Social Media campaigns. For details on how to grow your business contact us.
Payment Methods and Credit Cards
First of all, don’t accept checks! There is no reason to risk the fraud, and at the end of the day, you will still need to pay the restaurant for the food. Most persons that have a checking account also have a branded check card (stamped with Visa or MasterCard), so you are much less likely to alienate a customer from this policy than you were 4 or 5 years ago.
On average, credit cards will represent over 80% of your business. Some smaller towns for some reason, average up to 50% cash payments. FYI – Be wary of handling large amounts of cash. Even the best closing managers have convinced themselves that part of that cash was theirs. With so many of our customers accepting credit cards individually, we were successfully able to partner with North American Bancard; aggregating together individual companies and negotiating for lower credit card rates. North American Bancard is able to achieve this by looking at each business separately, and tailoring a credit card rate to their average ticket and number of transactions. While each rate is different for each customer, on average North American Bancard has been able to beat the typical “shot-gun” rate quote an RDS can get individually by roughly 40 basis points. The credit card processing is built right into our software, so there is no extraneous equipment, and all orders are authorized prior to being placed automatically.
Other Parts and Pieces You Will Need
There are some other parts and pieces you need to assemble for successful RDS; some are obvious, while others are only obvious after their mention.
Our drivers need something to carry with them that will ensure the hot food stays hot, and cold food cold. If your drivers are ICs, they may “rent” the equipment from you; in either case, you still need to supply it. You can check out suppliers, but I’m pretty sure that our supplier will provide the best bags for you buck.
Your business needs some way of answering calls, taking messages as well as being able to place customers on hold. This can range anywhere from a single analog phone with an answering machine to a full-blown VOIP system. Whatever it is, you need to consider it proactively,and make sure it enhances your customers’ experience while using your service. If you are considering using a call center, then you will only need one or two lines for outgoing calls to your drivers and restaurant partners, and a basic two-line phone with several speed dials (phone drivers and restaurants) will suffice.
You need the right software to make it in this industry. We suggest using the one we have partnered with for over 10 years. We can give you a free walkthrough and your own password for review.
Drivers should have their own smartphones and vehicles. It is preferred that they have smartphones, so that they can self-dispatch. If you get into the habit of buying phones for drivers, you soon own several broken phones. Even renting phones to drivers can be a losing proposition.
Develop a Re-marketing Plan
Many people when doing the “legwork” of seeing if an RDS is viable in their geographic area often hear comments such as “If there was a delivery service in my area, I would order there all the time!”.
As exciting as those words are to hear, the truth is that having a customer ordering 3,4 or 5 times a week simply isn’t realistic; and sadly the novelty of having a new delivery service in the area wears off too soon.
In addition to MARKETING your company and services, you also need to REMARKET your company and services. Many startup RDS’s find it difficult not in their first month of business, but rather their third or fourth month, simply because they have not taken the time to remind the customer of their business. This can be as easy as a quick post-card in the mail, in the form of a coupon or a “customer comment card”… something is better than nothing, and keeping your existing customers is always cheaper and easier than finding new ones. You must constantly nurture your database. Post Cards and Social Media are the best ways to do this.
One of the most important pieces of advice we can give may sound a little on the self-serving side, but it is a truthful statement. That advice is OPEN YOUR DOORS. Simply put, you will learn more in the first 2 days of being open than you will in 6 months of research and planning. Your first few days of business will be painful and unpleasant (unless you have purchased an on-site RDUSA consultant), filled with ordering errors, dispatch oversights, and general mayhem; but the best teacher in the RDS world is personal experience. There is no substitute.
Be ready for immediate competition
Competition from other entities will quickly start to appear, especially if you are the first RDS to open up in your area. The best you can do is prepare for it, and be looking for it from the most common places:
Keep your ear to the ground with your restaurants. You had a great idea in starting up an RDS, but every single customer you delivery to now has that great idea exposed to them. Listen to your restaurants. Typically someone wanting to break into your industry will start by talking to a restaurant you have a contract with, asking about their cost structure and such. A typical move for someone that doesn’t know the industry is to try to undercut you on the discount; offering to do business with the restaurant at 25% instead of your 30%. Keep your ears open for these sorts of ploys.
It won’t take long for your restaurants to be tempted by the large orders you are turning in. Again, it’s a battle of the 70/30 split that we discussed earlier. For example, if you take a large catering order worth $300.00 and fax it to the restaurant, the manager will again latch on to the idea that they are LOSING $100.00, not making $200.00. If the customer information is on the fax that is sent over, the restaurant will be extremely tempted to contact the customer directly and offer them a discount on the food if they agree to go directly through them next time around. If a restaurant offers the customer a 10% discount by cutting you out of the deal, they gain back 20%, and you get 0. Effectively, all you have done is market the restaurant for free. Make sure you hide your customer information from the faxes that are sent over to the restaurant. (The RDS software has this ability).
Be careful of former employees or drivers. Many of the new startups that open up in a market are a former driver or CSR of an existing company, and has decided that s/he can do a better job. The only advice in this regard is to focus on your level of customer service. Inevitably, you are training your competition… the most you can do is keep the bar raised high enough for no one else to jump over.
Have more questions? We would love to hear from you.
Mike Handy, Team RDUSA:
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