How Much Do Food Delivery Apps Cost Restaurants?
At the peak of hospitality closures during the COVID 19 pandemic, food delivery apps proved a lifeline for many restaurant businesses – and their customers stuck at home.
According to a recent survey by the National Restaurant Association, 60% of U.S. adults—and 71% of millennials—said they’re more likely to get delivery now than they were before the pandemic.
Plus, now they’re well and truly accustomed to the ease of ordering restaurant food from the comfort of their own front room, it’s unlikely they’ll simply stop doing so in the coming months and years either, even when the threat of the COVID 19 pandemic all but dissipates.
But though food delivery apps kept many restaurants afloat in the last year, is this behavior change in the long term a positive one for your business?
To give you a greater insight into whether food delivery apps make sense for your restaurant first, take a look below to see how costs and experiences compare across the biggest delivery apps in the US.
Then use our free calculator to calculate whether or not it makes sense for your business to continue with a delivery app and – if it does – which one could create the best returns.
Yes, it’s true that delivery apps are a great way to raise a restaurant’s profile, allowing instant discovery on platforms that reach millions. By using these third-party sites, business owners also benefit from an available network of drivers, automated payment systems and an instant ecommerce channel, among other benefits.
But at the same time, the cut these platforms take from each sale can reach as high as 30%. So great was concern at the damage this could do to restaurant businesses that last year the New York City Council even proposed a fee cap of 20%.
The reality is that food delivery apps only make financial sense to a degree. Exactly what that threshold is varies from restaurant to restaurant too – with labour, ingredient costs and exactly which platform a business opts for all slightly altering the price matrix.
How do food delivery platforms compare on cost?
Getting started: UberEats charge a one-time activation fee of $350, which covers a tablet with their ordering software installed, a complimentary food photoshoot and set-up support. This fee was waived during the pandemic though.
Ongoing costs: Each order placed via the UberEats app attracts an additional fee. The company says exactly what this fee is depends on a number of factors, but it’s thought to be around 20-30%.
Customer costs: Variable delivery fee depending on location / distance from restaurant, that averages at $3.99. From March 2021, the company also added a 10% service fee for users of the platform. The fee is 10% of their order value, with a minimum of $1 and a maximum of $4. This is calculated based on the order value prior to any promotions or discounts.
Getting started: According to Postmates, there are no upfront costs for restaurants partnering with their service
Ongoing costs: The minimum commission fee a restaurant pays when working with Postmates depends on which services they select and are privately negotiated between the restaurant, and Postmates. However, restaurants have reported paying as much as 30% of the cost of an order to the delivery company. There are also several reports of Postmates adding ‘Merchant fees’ onto each order of around $1.
Customer costs: Customers pay a delivery fee of $0.99–$3.99 for Partner Merchants and $5.99–$9.99 for all other merchants. There is an option for customers to sign up as unlimited members and avoid all delivery fees on orders of a certain size for $9.99 per month.
Getting started: There is no upfront cost to joining Grubhub.
Ongoing costs: Standard Grubhub fees include a 20% marketing fee applied as a percentage of each order received directly through the Grubhub platform, and a 10% delivery fee for restaurants that use its delivery services. Plus, it charges a processing fee of 3.05% + $0.30.
Customer costs: Delivery fees reportedly range from $1-10 depending on distance from the restaurant, though typically fall in the $2.50-7.50 range.
Other inclusions: Restaurants can partner with Grubhub ‘to list and promote their restaurant to our loyal customers.’
Getting started: There is no upfront cost to joining DoorDash
Ongoing costs: From April 2021, DoorDash offers three different plans to restaurants: DoorDash Basic, where restaurants only pay a 15% commission on deliveries, with a smaller delivery area and higher fee shifted to the customer; DoorDash Plus, where restaurants pay 25% to be part of the company’s DashPass subscription program and get increased visibility in the app; and DoorDash Premier, where restaurants pay 30% in exchange for the lowest customer fees, the largest delivery area and a growth guarantee of at least 20 orders per month across pickup, delivery and DoorDash-owned Caviar.
Customer costs: As above, delivery fees for customers depend on which level plan a restaurant selects. With the subscription based DashPass though, they can benefit from free deliveries across thousands of restaurants.
How else can you save on delivery fees?
All major third-party delivery apps will lower commission where restaurants opt to oversee delivery of a food order themselves. Particularly where restaurants already have a direct-to-consumer takeout business in place that sits alongside the third-party app, this might be a way to save significant costs.
To see if that makes sense for you, use our free calculator to adjust third party fees and - using preset admin costs, labour and cost of ingredients - easily and instantly compare how each scenario impacts cost of sales. For example, on $100,000 monthly sales - in which the cost of sales is $60,000 and operating costs are $23,000, and in which all orders are handled direct - a restaurant stands to secure restaurant business $17,000 EBITDA, or 17% of sales. With the same costs, funnel half of deliveries through a third-party delivery platform, and that falls all the way to $2,000, or 2% of sales.
Another option is to see food delivery apps as a temporary marketing activity, a way to raise a restaurant’s profile before weaning happy new customers off the app and either into the venue, or ordering direct. Discounts or promotions on direct orders is one way to encourage this behavior.
Alternatively, if quitting these platforms altogether feels like too much of a leap, consider signing up to one of the lesser known alternatives emerging, often set up with the explicit aim of supporting restaurants. Examples include Toast, TouchBistro, and more.
No, you won’t get the reach of an UberEats but you will be nudging the delivery channel toward a more sustainable business model that’ll provide customers with all the ease they’ve come to know and love in the last year, without decimating restaurant margins in the process.