The Numbers Don’t Add Up For Restaurants: Third-party Delivery Apps

How restaurants profit using third-party delivery apps like Uber Eats, DoorDash, and Grubhub is a mystery to some. The numbers simply don’t add up.

The restaurant industry’s razor thin margins coupled with insanely high commissions and service fees is a perfect storm for any restaurant, especially during these times of pandemic.

So how exactly do we go about it? Why do some restaurants make it with third-party delivery apps while others shuttered their doors for good? Let’s start with the cost of running a restaurant business.

The Average Cost of Running a Restaurant Business

Restaurants are among the lowest in terms of profit margin. Believe it or not, 90% of the total revenue is actually spent by restaurants on things like food and beverage, payroll, bills, and upkeep. That leaves them with a measly 10% or less.

Here’s a rundown of the average cost of running a restaurant business. To illustrate, we’ll use a typical small quick serve restaurant (QSR) with a staff of less than 10 and a monthly sales average of $30,000.

Food and beverage costs35%$10,500
Payroll costs30%$9,000
Other controllable expenses12%$3,600
Occupancy costs9%$2,700
Depreciation4%$1,200
TOTAL $27,000

In this example, the owner pays himself around $3,000 depending on actual sales. This is the profit after all expenses have been deducted from the gross revenue. Some of these expenses are either fixed or variable or semi-fixed. Rent, insurance, and loan payments are fixed expenses while repairs, marketing, and taxes are not. Salaries and utility bills, on the other hand, are considered semi-fixed expenses.

Getting that much needed cash flow during the pandemic is a matter of survival for millions of restaurants across the globe.

That means trying every possible way to bring more business through the door whether it’s curbside pickup, online orders, or using third-party delivery apps like Uber Eats, Doordash, or Grubhub.

Let’s see what happens if we try to put third-party delivery apps into the picture.

How Much Restaurants Pay for Food Delivery Apps

Food delivery app is a hot topic in the restaurant community. For some it’s a game-changer because it levels the playing field for everybody. Others, however, aren’t so happy, particularly with the 30% to 35% commissions plus other charges.

Here’s a rundown of what restaurants actually pay using these apps. This is based on an actual summary sent to a food truck owner in Chicago on March 2020.

46 Prepaid Order$1,042.63
Commission– $206.51
Delivery Commission– $94.99
Processing Fee– $38.52
Promotions– $231.00
7 Order Adjustment– $131.19
Commission$9.75
Delivery Commission$4.88
Processing Fee$1.49
Promotions$20.00
Pay me now fee0.00
46 Orders in March$376.54

People were shocked to know how much these food delivery apps are costing the business – way, way more than the advertised 30% commission fees!

The food truck owner is literally operating at a loss! No wonder many restaurant owners were crushed during the pandemic all the while using these food delivery apps.

Let’s say you want to include third-party delivery apps into your budget. There are two ways to go about it.

You’ll either have to take it as part of your payroll cost (30%), in which case you’ll reduce your workforce and work extra hard with just a few people or work alone as a one-man band.

The other option is to use it primarily as a customer acquisition tool or as an alternative for dine-in or take out to supplement your restaurant’s income (50/50 or 60/40, and so on).

Hence, you might include it in one of your controllable expenses (12%), i.e. advertising, albeit a very expensive one. Later in this article, we’ll introduce you to the third option which would allow you to take advantage of third-party delivery apps and regain control of your restaurant’s income.

Why Restaurants Struggle with Third-Party Delivery Apps

So why are some restaurants making more with third-party delivery apps while others are losing big time?

Aside from sky high fees and commissions, some food delivery apps make it impossible to compete with other restaurants or circumvent the app by encouraging customers to order directly from them at a cheaper price.

So for instance, in one particular lawsuit filed againsts some of these delivery apps, it showed they have a non-competing clause (“No Price Competition Clause” or “NPCC”) where restaurants agree to keep their check-in prices consistent with the menu items in the app.

In other words, instead of helping, these apps might actually hurt your loyal customer base who’ll have to put up with your marked up items even when they’re coming in to check in or pick up their order.

Here’s how much restaurants bump up the price while subscribed to the service.

Another reason is that, as an advertising platform, it can put a big hole in your marketing budget. It’s just too expensive, especially for a small restaurant who just got started.

Before the pandemic, you can get away not using any of these apps. But since the new reality came, it became more of a necessity – or rather a necessary evil. Restaurants are now caught between a rock and a hard place, so to speak.

Lastly, these apps seem to favor more popular restaurants or those with a big enough customer base and a sizeable income.

These allow them to bid higher and stay top of mind, and they have economies of scale to make up for the high cost of using the app. There’s a sweet spot where you start feeling the gains of using these app. Otherwise, it becomes a slow slide to the bottom.

A Smart Way to Use Third Party Delivery Apps

We’re not here to discourage you from using third-party delivery apps. In fact, you can keep using it if it helps with getting more business to your restaurant. We’re offering a better way to help you transition from using third-party delivery apps to doing your own food delivery.

You might not expect this to come from us but using third-party delivery apps is actually a great way to learn the ins and outs of food delivery. We’ve devoted an entire article about the 10 Delivery Apps Your Restaurant Must Try.

The third option we told you about is learning how to do your own food delivery while using third-party delivery apps. Now you might be tempted to jump right away into doing your own deliveries.

While it’s a good way to get rid of delivery apps and commission fees, you might actually find that it puts a lot of stress on your staff, especially if it’s your first time doing it.

Moreover, you’d have to spend a lot of money building your own online food ordering and delivery system, including those that didn’t work or required a lot of fixing.

To give you an idea, Panera Bread spent more than $100 million to develop its own online ordering system. It paid off eventually in 2016 and now they’re offering $5 to as low as $3 flat rate on all food deliveries.

Enough said, here’s a much better way of doing it.

The 7 Steps to Doing Your Own Food Delivery

We’ve prepared a short video that explains the whole process. Watch till the end and try to visualize how you’re going to apply this for your own restaurant.

Here’s the gist of how it’s done from start to finish.

Step 1: Get your own food delivery app.

Step 2: Develop your kitchen and front of house processes.

Step 3: What food delivery service options will you use?

Step 4: Who will do your delivery and how?

Step 5: Food packaging and delivery bags

Step 6: Have a delivery, curbside pickup, and takeout menu.

Step 7: Tips and Fees

Need Small Business Advice?

We want to reach out and talk with you through our FREE 45-minute business consultation where we can discuss some solutions to get you through the new reality.

We lay out every possible means to keep you in business, whether it’s through LinkedIn, Facebook, Twitter, email series, sales funnels, landing pages or business directories.

Download SBD Sales and Marketing Automation App for your mobile and keep tabs on your business anywhere, anytime.

10 Delivery Apps Your Restaurant Must Try

Assuming there were 10 delivery apps you must try for your restaurant, what would they be and how would you rank them? We’ve done our homework to see which ones are worth your time, literally sifting through dozens of third-party delivery apps on Google Play and App Store.

We’ll be focusing on key areas considered crucial for your survival such as reach (total number of users), profit margin (commissions & delivery fees), and the app’s main selling point.

1. DeliveryBizConnect

10 delivery apps
  • Commission Fee: 0%
  • Delivery Fee: 0% (set by restaurant)

DeliveryBizConnect came out as a response to the call of many restaurant owners in dire need of help at the height of the pandemic. This app stands out among all others as being truly restaurant and customer-friendly. Its main goal is to help owners stay afloat by offerring zero commission fees which in turn reduces markup cost for their customers, so it’s a win-win on both sides.

By far, it’s the only app on our list that offers total control on how restaurants could profit from their businesses. They get to decide how much delivery fees to collect, minimum orders (if any), payment method, closing hours, etc. It comes with all the standard features like delivery tracking, push notifications, geofencing, curbside pickups, and even works as a contract tracing app.

DeliveryBizConnect is more than just a delivery app. It’s a full suite of tools for restaurants and similar businesses with features like CRM, sales and marketing automation, 3-page website (great for online and touchless ordering), branded mobile app, loyalty program, referral program, and has addded its newest features, the POS and Check-in/out module for contact tracing (also great for signing customers up for newsletter and updates).

DeliveryBizConnect is continuously being developed to meet the growing needs of restaurants, other businesses, and delivery drivers, especially those who have been affected by rising unemployment rates (opportunities for delivery drivers working with local restaurant owners).

2. DoorDash

  • Commission Fee: 20%
  • Delivery Fee: $5-$8

DoorDash is among the ‘Big 3’ in North America alongside Grubhub and Uber Eats. It’s currently available in more than 4,000 cities across the U.S., Canada, and Australia.

DoorDash accepts Google Pay, Apple Pay, card payments and has an optional loyalty program (DashPass) which waives delivery fees on orders upwards of $12. It has no minimum order required and offers real-time delivery tracking. Customers like it for being one of the most user-friendly and among the fastest in terms of delivery.

3. Uber Eats

  • Commission Fee: 30%
  • Delivery Fee: $2-$8

Although second only to DoorDash, Uber Eats has become more ubiquitous, connecting local restaurants to customers in more than 6,000 cities across 45 countries worldwide. Standard features include real-time tracking, hassle-free ordering, and curbside pickups.

Uber Eats accepts payments via PayPal, credit and debit cards, but is also experimenting cash payments in certain areas. Users pay a “small order” fee on orders that fall below a certain minimum. Like DoorDash, it has a loyalty program (Eats Pass) offering zero delivery fee, plus 5% off on orders $15 and above.  Customers like it just by the fact that it’s everywhere and among the easiest to come by.

4. Grubhub

  • Commission Fee: 30% (marketing fee included)
  • Delivery Fee: $4-$8 (set by restaurant)

Grubhub is among the first food delivery service predating DoorDash and Uber Eats. It’s available in all 50 states in the U.S. with 115,000 associated restaurants across 3,200 cities. Features are also very similar to Uber Eats with things like delivery tracking and curbside pickups.

Grubhub accepts card payments, PayPal, Google Pay, Apple Pay, and even cash. “Small order” fee will apply on orders below $10. It also has a loyalty program (Grubhub+) offering zero delivery fees much like in DoorDash and Uber Eats. Customers like being able to split the bill for group food orders via Venmo integration as well as quick ordering using Favorites and Quick Re-order.

5. Postmates

  • Commission Fee: 30%
  • Delivery Fee: $0.99-$3.99 (partner merchants)/$5.99-$9.99 (non-partner merchants)

Postmates connects more than 500,000 local and national restaurants and retailers to customers in 4,200 cities across the U.S. It features real-time order tracking, pickup and takeout orders as well as a loyalty program (free delivery on orders over $12 with an Unlimited Membership).

Postmates has partnered up with popular names like McDonald’s, Burger King, Taco Bell, Wendy’s and Starbucks, and only accepts Google Pay, Apple Pay, and card payments. The app collects a “small cart” fee on orders below the minimum. New customers can take advantage of the $100 delivery fee credit valid for 14 days upon redemption (code: EATNOW) which is great for customer acquisition.

6. Seamless

  • Commission Fee: 30% (marketing fee included)
  • Delivery Fee: $4-$8 (set by restaurant)

Seamless became a part of Grubhub Inc. after its merger in May 2013. It’s a much older company and had a larger market compared to Grubhub. Seamless currently partners with over 12,000 restaurants and serves 4,000 companies. It’s available in over 900 cities in the U.S.

Seamless is strikingly similar in many ways to Grubhub from the user experience to fees and payment method. One extra feature is the “Preorder” which allows customers to place an order 2 hours to up to 4 days in advance (Seamless had this feature as a catering service before the merger). It also has “Express Reorder” similar to Grubhub, and of course, Venmo integration for group orders so everyone gets their food all at the same time.

7. Skip the Dishes

  • Commission Fee: 20%
  • Delivery Fee: $4-$7 (set by restaurant/free, depending on minimum order)

Skip the Dishes is Canada’s most popular food delivery app serving more than 25,000 restaurants nationwide, including popular brands like McDonald’s, Tim Horton’s, Wendy’s, 7-Eleven, KFC, and more. It’s also available in major cities across the U.S.

Skip the Dishes comes with all the standard features like delivery tracking, curbside pickup, and re-order function. Its loyalty program doesn’t offer free deliveries but comes in the form of referral bonuses, cash backs, coupons, and discounts. Skip the Dishes is quite competitive when it comes to commission fees and delivery fees. It also offers grocery deliveries which made it one of the most-used apps during the pandemic.

8. Deliveroo

  • Commission Fee: 30% (5% when doing staff deliveries)
  • Delivery Fee: variable (distance-based)

Deliveroo is a London-based food delivery company operating in over 200 cities across 12 countries worldwide. It’s currently being used by more than 35,000 restaurants and well-known brands such as KFC and Pizza Hut. It also delivers grocery items.

Deliveroo accepts PayPal and card payments. It has the standard features like delivery tracking, curbside pickups, and has a loyalty program (Deliveroo Plus) offering unlimited free deliveries to subscribers. It also started introducing a “small order” fee on orders below $10.  Deliveroo has an “offers” tab which allows customers to find the best deals on quality food items.

Deliveroo’s selling point from a restaurant owner’s perspective is the commission fee, which makes it a great “in-between” from using third party deliveries to doing staff deliveries. This allows for a smoother transition until you’re ready to start having your own food delivery system.

9. Zomato

  • Commission Fee: 7-15%
  • Delivery Fee: 1$-2$ (USD conversion)

Zomato is an Indian food delivery service open in more than 10,000 cities across 24 countries worldwide including Canada and the U.S. Its rapid growth comes mainly from aggressive marketing, even as far as dropping the commission fee at some point for qualified restaurants.

Features are pretty much what you’d expect from similar apps such as delivery tracking but with an added “Book a Table” functionality for restaurant check-ins (available in selected markets). Zomato accepts card payments, PayPal, and Paytm. It doesn’t have a minimum order. Signing up to Zomato Pro entitles users to promos, exclusive bonuses, discounts. It also tells users what their friends were ordering and what they like best. Overall it’s a great way for getting more exposure and as a customer acquisition tool.

10. Foodpanda

  • Commission Fee: 15%
  • Delivery Fee: 1$-2$ (USD conversion)

Foodpanda is a subsidiary of Delivery Hero SE after its acquisition in December 2016. It’s based in Germany and currently working with over 27,000 restaurants across 50 countries worldwide (Asia, Europe, Latin America, Middle East, and Africa). This includes popular brands within the locality. You can think of it as the European counterpart of Uber Eats and Postmates.

Foodpanda comes with all the standard features such as delivery tracking and has a minimum order of $10. Users can also get their groceries done through the app. It has a referral program which is great for customer acquisition as well as discounts and coupons to encourage customer loyalty. By far, it’s one of the strongest competitors when it comes to commission fees and delivery fees outside Canada and the U.S.

Where Do We Go from Here?

We recommend testing these apps for your restaurant and find out which are the better ones at getting new customers. Go for two or more apps whenever possible to maximize your chances. Get familiar on how the app works and visualize how you can apply this to your restaurant when you start doing your own deliveries.

When you’re confident enough, introduce staff deliveries little by little (Deliveroo might help you with this using the 5% commission fees when doing your own delivery). Eventually, you’d be very good at handling food deliveries that you can start having your own food delivery system with your own personal branding on it.

We’ve prepared a video that explains everything in greater detail.

How to Do My Own Food Delivery vs. Using Uber Eats

Need Small Business Advice?

We want to reach out and talk with you through our FREE 45-minute business consultation where we can discuss some solutions to get you through the new reality.

We lay out every possible means to keep you in business, whether it’s through LinkedIn, Facebook, Twitter, email series, sales funnels, landing pages or business directories.

Download SBD Sales and Marketing Automation App for your mobile and keep tabs on your business in the comfort of your homes.

Quick Guide on Setting up Your Restaurant Online Ordering System

Keeping up with today’s “new normal” highlights the importance of online orders and deliveries. It actually costs more not to have a restaurant online ordering system with dining and check-ins running at only half the capacity. If you’ve never tried one or needed something better, now’s the right time to dip your hands into it.

Which Restaurant Online Ordering System is Right for You?

When we think food delivery, the first thing we think about are mobile apps like Uber Eats and Grubhub. It’s the quickest route to get you started with online orders and delivery.

But there are a couple more ways to set up your own online ordering than just using third-party delivery apps. There are basically 3 ways to set up your online ordering system:

1. Third-party delivery apps. The most popular choice, but not necessarily the cheapest for every kind of restaurant. You might have ordered food yourself through one of these apps on your smartphone. Setting up is relatively easy but there are tradeoffs to be aware of.

  • Pros – hassle-free sign up and set up, widest reach, can be great for customer acquisition
  • Cons – 10-30% commission on every sale, poor delivery can affect your ratings

2. Restaurant websites. Popular among tech-savvy restaurant owners. It’s like owning a regular website purposely built for taking online orders from visitors. They’re mobile responsive so the experience is almost the same with third-party delivery apps.

  • Pros – you have full control and you only pay a flat fee for maintaining your site
  • Cons – setting up can take a while, requires third-party integration to work well

3. CRM-based delivery apps. Customer relationship management (CRM) is an excellent sales and marketing tool for any type of business. If you’re lucky, you might stumble into one of these specially designed CRMs that allow you to take online orders and deliveries.

  • Pros – you get the best of both worlds of running a fully functional restaurant website plus sales and marketing automation
  • Cons – they’re not easy to find (we’ll help you find one at the very end)

Let’s go through the process of setting up using 3 different methods.

Signing up to a Third-party Restaurant Online Ordering System

You go to their website, type in your restaurant details and hit submit. The app team will decide if your restaurant is a good fit. You’ll get a call or email approving your request and continue with the sign-up process. Log-in to your account and start setting up your online menu. It usually takes 1-2 days before your menu items are posted on the ordering app. Any changes you make on your online menu might also take 1-2 days to take effect. You then have to hook it up to your receipt printer to be printed and processed in the kitchen.

Some platforms allow you to use your own driver but they also need approval or certification by the app company. This greatly reduces your running expenses, considering they take up to 30% commission when you let them do the deliveries. You can offset this big chunk by charging delivery fees, but it doesn’t compare to having your own staff doing your deliveries. Over time, you may want to transition to having your own online order and delivery unless you’re really making it on third-party delivery apps.

Try our Break-even Calculator to see how much orders you need to start making profits.

Creating Your Own Restaurant Website

You start by choosing a website building platform like Wix or WordPress. Use the restaurant template and tweak it to your heart’s content. Or, you can outsource web experts to do this for you.

You’ll need to purchase your domain name and pay for hosting if your want to make the site truly your own. It’s basically renting server space to put in all your data which also includes how much bandwidth you need to handle all the traffic. You only pay server fees as opposed to paying 30% commissions on every sale. In most cases, this is way cheaper when you consider the monthly average you lose on third-party delivery apps.

Next, you need to integrate an online ordering platform for your restaurant website. Gloria Food app offers this for free where you can literally have your online menu on your restaurant website within minutes. You have total control of everything, including online checkouts and deliveries. Payments go straight to your bank account or payment processor and Gloria Food app won’t take commissions on every sale. You only pay a flat fee to connect your ordering system to your payment gateway. Hook it to your receipt printer for printing and processing same with any other delivery app.

Once you have online presence, you need to get the word out so people will start coming to your site. Gloria Food app also offers a paid option to help you with marketing. This includes sales optimized website, advanced promo marketing, and branded mobile apps. Add all these and you’re looking at around $1,000 to $2,000 per year. It’s a decent amount but relatively cheaper compared to using third-party delivery app.

You can still do your own marketing via social media and so on, but you need more than one approach to make it actually work. You need a 360° solution which encompasses everything from website setup to mobile marketing.

This brings us to our third method.

Using CRM to Build Your Web Presence and Your Own Restaurant Online Ordering System

CRMs are great for building web presence, allowing you to market your business with sales and marketing automation. And, with the latest addition of online ordering, delivery, and other restaurant functionality, there’s no need to shop around finding all these different pieces. It’s essentially an all-in-one package.

We promised to find you one so we’ll use DeliveryBizConnect and show you how it’s done. Simply go to the website and sign up to get your own account. You’ll get a 3-page website automatically built from your DeliveryBizconnect listing details. You can generate as many as you like for whatever purpose you need it for. Here’s a quick video on how easy it is to set up your online menu and start taking online orders with DeliveryBizConnect

As you can see, it’s almost like having your own restaurant website. You don’t have to get approved and you don’t have to pay commissions – ever. You’re completely in control from setup to checkout and delivery.

If you’re curious how this works, here’s how you handle different types of orders using DeliveryBizConnect:

One more thing. Because it’s a CRM you don’t have to go elsewhere to get the word out. DeliveryBizConnect is a full-on sales and marketing automation custom-built for restaurants owners during these challenging “new reality” we’re facing. This includes mobile app with your own personal branding, push notifications, as well as a driver app for doing staff deliveries. So there’s literally nothing else to look for.

Need Small Business Advice?

We want to reach out and talk with you through our FREE 45-minute business consultation where we can discuss some solutions to get you through the pandemic.

We lay out every possible means to keep you in business, whether it’s through LinkedIn, Facebook, Twitter, email series, sales funnels, landing pages or business directories.

How Can DeliveryBizConnect.com’s team help your restaurant?

Deliverybizconnect.com helps restaurants rapidly grow from Step 1 to Step 9 of our Rapid Restaurant Sales Growth – A Proven 9 Stage “New Reality” Plan. We’ve done extensive research on how to rapidly grow restaurant sales in this new reality and how DeliveryBizconnect fits right in.

We at DeliveryBizConnect enables ANY LOCAL business, not just restaurants, to take online orders within 30 minutes and increase sales 30%

Deliverybizconnect.com helps restaurants do local deliveries using existing staff (20% additional sales).

Deliverybizconnect.com helps restaurants reduce 30% paid to food delivery service apps.

DeliveryBizConnect is an all-in-one system that enables restaurants to take phone and online orders for additional 30% increase in sales, delivery route optimization, driver tracking, automatic customer follow-up and built-in CRM (use the DeliveryBizConnect check-in function to subscribe check-in customers to your list for a 25% increase in sales)

DeliveryBizConnect has you covered on pretty much everything you need as a restaurant owner in this new reality and beyond.

Reach out to us at https://deliverybizconnect.com and we’ll be more than glad to talk with you on how you can rapidly grow your restaurant business like you never thought possible.

Using a Restaurant CRM can Maximize Sales by 25% and it is automatic!

Restaurant CRM helps you increase sales by at least 25%.

Now that you have all set up and you’re sitting on a big pile of data, what’s next?

With a restaurant CRM you can take back that control instead of relying solely on third party delivery apps. Setting up your restaurant CRM is actually easy once you have it all figured. It won’t even take an hour of work per week to fine tune your system.

Restaurant CRM helps you keep tabs of your ROI, so you know the system does exactly what it’s supposed to do.

Need a 25% increase in sales? https://DeliveryBizConnect.com enables you to use customer data from your online orders, telephone or walk-up orders and keep them coming back again and again. Subscribe your check-in customers to your email list and get as high as 83% conversion rates every single time.

DeliveryBizConnect.com helps you save plenty of time by allowing you to take online orders, increasing your sales by up to 30% and an additional 11% from mobile app orders.

Restaurant CRM enables you follow-up on your local deliveries to increase customer satisfaction and get a 20% increase in profit.

DeliveryBizConnect has you covered from online orders, restaurant CRM and deliveries. Find out more on https://DeliveryBizConnect.com

Have you ever wondered how much Staff done Delivery would Cost you per order?

Staff-done restaurant deliveries are easier than you think if you have tools like the Driver App from DeliveryBizConnect. It’s optimized to give the fastest route so they arrives fresh and kitchen perfect. That’s 20% more sales coming from a happy, satisfied customer.

The cost-benefit of turning your staff into your own delivery service like Uber Eats and Skip the Dishes is huge!

If you really want to get into the numbers, here it is:

30 Days/month x 8 hr., 4 deliveries/hr. = $2.19/order

OR

20 Days/month x 4 hr., 3 deliveries/hr. = $6.77/order

Right away, you can see a HUGE difference between staff-done restaurant deliveries and using 3rd party delivery apps on how much you’ll spend on each delivery. Note: we didn’t put the 75% wage subsidy and delivery fees into the equation just yet.

So all things considered, this actually brings in an increase in your profit margins by 20% or more! (We’ll give you the spreadsheet if you’re interested).

DeliveryBizConnects lets you do staff-done restaurant deliveries including takeouts. Get as high as 83% conversion rate when you subscribe your check-in customers to your list using Deliverybizconnect check-in function and CRM for an additional 25% increase in sales. 

Increase restaurant sales by 30% or more taking online orders vs. just phone and walk-up orders, plus another 11% thru mobile app orders.

Find out how you can rapidly grow your restaurant business at https://deliverybizconnect.com