It’s 2023 and bicycles are flooding the roads in Nigeria. If you spend ten minutes observing urban areas in places like Lagos or Ibadan, the sight of bike riders with backpacks and boxes will surely attract your gaze.
It’s almost ironic that with the unfavourable economic conditions that currently persist in Nigeria, the fast food delivery industry is experiencing obvious growth.
Fast food businesses have been around for a while in Nigeria but this modern fast food delivery business model is fairly recent. The past few years have been quiet in this industry but it seems that the fast-food delivery industry has arrived at its inflection point — On August 2 2023, the CEO of Chowdeck, one of the respected fast-food logistics businesses in Nigeria announced that Chowdeck made over ten thousand deliveries in a day. You don’t need to be a finance expert to understand the business implications of this figure. The announcement was made on Twitter.
The fast food delivery business model Nigeria
Just like Amazon provides sellers with the opportunity to do business with their buyers, these businesses connect fast-food vendors with buyers. If you’ve ever doubted that these businesses own the bikes you see on the road, your doubts are reasonable. Whilst some of these platforms own some bikes, most of them employ riders who already own bikes. This idea is brilliant because it helps these businesses keep their capital spending and operating spending at the barest minimum. This of course translates to a lesser need for debt funding.
These fast food delivery platforms solve two problems — they provide a platform for sellers of food to meet their buyers; they allow sellers of delivery services (dispatch riders) to meet their buyers. Of course, on each sale every food vendor makes, these delivery platforms get a commission. Findings reveal that these food delivery platforms usually take about 20% to 30% of the revenue from food sales and leave the rest to the food vendors. However, vendors with a strong presence can negotiate a better rate.
It’s really hard to identify the origin of this style of fast food delivery business in Nigeria but Jumia Food which was introduced in 2013 is probably the first notable attempt
Opportunities in the fast food market
It seems those who work corporate jobs are the target of these fast-food delivery companies. Most corporate workers get an hour of break each day. These fast food delivery businesses do a good job of helping these workers save the time spent queuing up at eateries.
Mayowa owns a kitchen in Lagos. Her kitchen is listed as a vendor with four of these fast-food delivery platforms. Mayowa spoke about the opportunities that these platforms create. She said that this business model is a win-win for everyone. According to her, many chefs who can’t afford to set up a walk-in space can now compete in the food market. She said it is a great arrangement and the opportunities are limitless.
The race to market leadership
In the past few years, a reasonable number of businesses have tried to break into the Nigerian fast-food delivery market. Recently, two of these businesses (Glovo and Chowdeck) have been trying to “entice” Nigerians. Interestingly, both companies entered the Nigerian space in 2021.
It’s really hard to identify the number one fast food delivery platform in Nigeria. And quite frankly, it’s probably too early to conclude. However, one thing is sure – all these platforms are trying hard to be number one.
I did some opinion sampling on what users think about these food delivery apps.
Ogechukwu works in Lagos Island and she uses Glovo and Jumia Food. According to her, there isn’t much difference between these fast food delivery platforms and it’s hard to tell which one is best. “They are both great apps but I don’t like that Jumia food has a minimum order value of N1,500. Sometimes I don’t want to spend up to N1,500,” Ogechukwu said.
Like every industry, competition exists and in August 2023, Chowdeck seems to be taking the lead in the media space with their ongoing 25% discount and referral bonus. Adesope Abiodun, an Engineering student at the University of Ibadan has earned over N130, 000 from Chowdeck referrals. “This referral strategy is good. I have been sharing my referral code and many people are signing up and placing orders,” Adesope said. “However, when this promo ends, patronage of this platform might reduce,” he added.
A short trend or a sustainable venture?
Is this fast food delivery a trend or has it come to stay? All of the customers and riders I interviewed believe that this business model has come to stay. Of course, this means that those who intend to compete in the fast-food market must quickly align with this “online kitchen” model.
I believe that the fast-food delivery space will experience more innovation in the coming months. Indicators also suggest that more investors will be attracted to the fast-food delivery market in the near future.
Olushuyi is a chartered accountant and a business writer.