The Hidden Costs of Food Delivery for Restaurants

4 min read
  • Keina Stewart
  • May 23, 2023
  • 6:52 pm
  • 0 comments

A Surge in Food Delivery 

During the 2020 COVID-19 pandemic, many consumers opted to have their food delivered as opposed to dining in. However, now that normalcy has returned, many Americans are finding their way back to the dining scene. 

With most of the concerns of Corona behind us, restaurants are also getting back to normal. However, the plague of delivery service fees still proves difficult for countless restauranteurs. 

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HIGHLIGHTS

Admittedly, food delivery fees can be a bit confusing. Need more clarity? 

Continue below for a breakdown of merchant delivery fees, how you can avoid them, and if this service is worthwhile for your business.  

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Food Delivery Costs 

Most delivery platforms have resource pages for interested merchants on which they list costs and fees transparently. However, some restaurant owners claim that certain fees are “hidden” and only appear on the final billing statement. What an unpleasant surprise.  

Fortunately, we’ve done the dirty work for you and collected the most common fees of the top delivery platforms in the US. Get the breakdown below!   

Most Common Fees 

  1. Activation fee: a one-time onboarding fee for new merchant partners 
  2. Marketplace commission: a set percentage of in-app sales for exposure on said app (approx. 15-30%)
  3. Delivery commission: a set percentage of in-app sales when a merchant uses said platform’s drivers versus their own delivery staff (sometimes included in the marketplace fee)
  4. Software fee: a fee for using the delivery platform’s POS (point of sale) integration software or tablet with said software installed 
  5. Processing fee: a fee for processing customer debit and credit transactions
  6. Instant transfer fee: a fee for an instant funds transfer versus waiting for the pre-determined direct deposit date (i.e., Grubhub’s “Pay Me Now” fee) 

Additional Costs 

  1. Order Adjustments: the cost of customer refunds due to order issues (i.e., poor food quality, food damage, wrong or missing items, etc.) 
  2. Promotions: the cost of any in-app promotions you launch will be deducted from your in-app sales and reflected on your final billing statement
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How to Avoid High Service Fees

Have fees left you feeling frustrated? Check out a few ways you can avoid or mitigate fees below.  

  1. Sign up for a free trial
  2. Use your own delivery staff
  3. Set a minimum order amount
  4. Markup menu prices to account for the commission charge 
  5. Choose the most economic delivery service plan
  6. Create a delivery-specific menu
  7. Check for waived fees- During the pandemic, certain platforms waived specific fees in order to help local businesses stay afloat. Some offers may still be available, so check that platform’s merchant page for more information.
  8. Try a different marketing strategy

Are Food Delivery Services Worthwhile? 

Delivery apps are great for increasing exposure. However, if you operate a small business, its cost may exceed your profits, leaving you in the red. 

According to the National Restaurant Association, the average pre-tax profit for restaurants is approximately five percent. They also add that “significant cost increases are not sustainable for most restaurants.” 

Consequently, there’s not much room for additional expenses, so, it depends on your marketing budget. If you have a more conservative budget, you’ll want to explore other options for growth.  

Consider partnering with Dinefits. We help restaurants maintain a steady flow of foot traffic. 

Look here for more information on how Dinefits can improve your bottom line!

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Citations: 

National Restaurant Association. (2022, August 24). Bottom line impact of rising costs for restaurants. NRA. Retrieved April 7, 2023, from https://restaurant.org/research-and-media/research/economists-notebook/analysis-commentary/bottom-line-impact-of-rising-costs-for-restaurants/ 

Perri, J. (2023, March 14). Which company is winning the restaurant Food Delivery War? Bloomberg Second Measure. Retrieved April 7, 2023, from https://secondmeasure.com/datapoints/food-delivery-services-grubhub-uber-eats-doordash-postmates/ 

Statista Research Department. (2022, October 17). Topic: Coronavirus (COVID-19) : Impact on restaurant food delivery in the U.S. Statista. Retrieved April 7, 2023, from https://www.statista.com/topics/9996/coronavirus-covid-19-impact-on-restaurant-food-delivery-in-the-us/#topicOverview