Meal Delivery

Group Case: Mazud’s Meal Delivery
Mazud is a BC resident who has been involved with part time entrepreneurship for the past two years.
He maintains good relations with certain local restaurants and his customers to sustain a business
involving picking up meals and delivering them to people. Being employed as a software engineer,
Mazud worked from home with flexible employment hours which permitted him to sustain a side
business. However, he is now finding it more difficult to find adequate leisure and rest time.
It all started with his cousin Farnoosh’s new restaurant. As Mazud was helping advertise Farny’s Wraps,
he realized a lot of customers were asking about food delivery. Since Farnoosh was hesitant to register
with DoorDash, Uber Eats, or SkiptheDishes prior to getting the business rolling, Mazud asked him if he
was okay with delivering meals for a small fee (most of the interested customers were within a 5 km
radius, so $2 to $3 fees were sufficient). Farnoosh agreed this was a great way to boost sales and he
trusted Mazud, so they went ahead with the idea. Mazud would pay for the order when he picked it up
and keep the money the customer gave him (for the order, delivery fee, and potentially a tip).
Many of Mazud’s customers are older, so they appreciated his attention to detail with their orders and
his friendliness. He gave them fillable weekly paper schedules which was a lot easier than having to call
the store and place orders each time. Plus, Mazud was always available on the phone and willing to pick
up what they wanted. Mazud found that some customers appreciated him so much that their tips
regularly exceeded his delivery fees! By printing newsletters and putting them into local mailboxes
(monthly cost of $50), Mazud has been able to steadily grow his customer base. He is wondering if other
forms of advertising would help.
Over time, Mazud was able to convince other small restaurants in the area to use his services. With
more cuisine options, several of Mazud’s customers decided to get all (or almost all) of their meals
delivered by him! However, that meant multiple hours being spent in the morning, mid-day, and
evening commuting between various restaurants and customers. Being so busy with a side job has
resulted in Mazud regularly falling behind in his full-time job.
Mazud is looking at a couple of options going forward. The simplest solution would be to request his
current employer to cut his working hours in half, which would result in a salary of $30,000 annually
instead of the current $60,000. Mazud is strongly considering this option because he believes his
employer will accept the deal. Also, Mazud hasn’t gotten a salary increase in three years and isn’t
expecting any significant raises in the near term.
Another option is for Mazud to hire his friend, Sameera. She works as a DoorDash driver so the training
would be minimal. Additionally, she decides her own work hours so serving Mazud’s customers well
with precise timing wouldn’t be an issue. Since Mazud’s engineering work is slow in the morning and
evening, he would continue to take care of breakfasts and dinners, while Sameera would handle lunch.
To keep things simple (and fair), Mazud is considering letting Sameera keep all revenues for her
deliveries. Historically, lunch time has made up 40% of Mazud’s total revenues.

Group Case: Mazud’s Meal Delivery
If he hires Sameera, Mazud is planning to continue making all deliveries on weekends, but wants to take
two full weeks off for vacation, since he hasn’t travelled in the past two years. He would coordinate time
off from his business with his employment vacation. Mazud wants a detailed pros and cons analysis of
these two options, as well as any other possible solutions.
In his first year of business, Mazud delivered an average of 12.5 meals per day (all Farny’s Wraps) with
an average delivery fee of $2.33 and tip of $1.20. Mazud owned an older car at the time, so expenses
amounted to about 30% of revenues. Mazud estimated he spent about 1.5 hours daily on deliveries in
the first year.
In the second year, the daily average doubled, with an average delivery fee of $2.48 and tip of $1.18.
With a newer vehicle, Mazud was able to reduce expenses to 25% of revenues (expected to be
sustainable for five more years). Mazud estimates he worked an average of 3 hours a day in the past
year.
As things got busier, Mazud slightly increased his delivery rates. Hence, he is projecting an average
delivery fee of $2.75 in the upcoming year and tip of $1.25. He is also expecting the number of orders
per day to increase to 30 on average. If he did all deliveries himself, it would amount to four hours of
work per day. For the following five years (after next year), Mazud expects the daily order volume to
grow at a rate of ten percent per year (with no change in average delivery fees and tips).
Mazud wants to see some trend/budgetary analysis on these numbers. Also, he is interested in learning
more about tax impacts, as he simply hands his sales numbers and expense receipts to his accountant
each April without knowing any details about how his tax calculations are performed. Mazud is
wondering if there are elements outside of tax that are essential to running an ethical business.
Having expertise in software engineering, Mazud is considering developing his own app to grow his
business. However, he recognizes he will eventually need help from someone more experienced with
developing apps specifically to bring his project to life. He expects this project would take 50 hours of his
own time and a $10,000 payment to a high-level app developer. Sameera has offered to cover the
payment and work lunch hours along with full weekends in exchange for 50% ownership of the business.
Alternatively, Mazud can borrow the money at a rate of 6% per year from the bank. Mazud estimates
that an app would increase delivery fees and tips by 5%, with daily volume getting a 20% bump. He
wants advice on if this project is worth pursuing, since he would likely have to quit his job once the app
is up and running.
Finally, Mazud is thinking about purchasing a second automobile, an electric vehicle. If he used the car
for deliveries and encouraged Sameera to also use it, the energy cost per hour would be $1.50. There
would also be lease costs of $415 per month (for 5 years) and insurance costs of $120 per month. With
the new car, Mazud would alter Sameera’s compensation to be half of delivery fees and the entire tips
she would earn. Mazud wants advice on this plan, as well as details on accounting and tax treatment of
a new car.

Group Case: Mazud’s Meal Delivery
Advise Mazud on his career path and the current and five-year outlooks of the meal delivery business.
Produce a business report, including comprehensive analysis, recommendations, and any questions you
may need to ask Mazud.