Third-party delivery has reshaped the restaurant industry in ways that are still being fully understood. The platforms — DoorDash, Uber Eats, Grubhub, and others — have made restaurant food more accessible to more customers than at any prior point in history. They have also, for many operators, created a channel that generates significant revenue while quietly destroying margin.
The challenge is not that third-party delivery is inherently bad for restaurants. The challenge is that many operators have not done the actual math on what it costs them, and are managing a channel with significant volume and almost no visibility into its true profitability. That changes when you build the model.
The Fee Structure
Third-party delivery platforms generate their revenue primarily through commission fees charged to the restaurant on each transaction. These fees vary by platform, market, and negotiated agreement, but the industry standard sits in the range of 15 to 30 percent of the order subtotal. A restaurant paying a 25 percent commission on a $30 order remits $7.50 to the platform before a single other cost is considered.
Beyond the commission, most platforms also charge a payment processing fee, typically in the range of 2.5 to 3 percent. Some charge separate tablet or software fees. Marketing placement fees — the cost of appearing prominently in the app — are an additional layer that restaurants operating in competitive markets increasingly find themselves paying to maintain visibility.
The all-in cost of a third-party delivery order, when commissions, processing fees, and any marketing or placement costs are combined, frequently falls between 25 and 35 percent of the order value. On a $30 order, that is $7.50 to $10.50 leaving the restaurant before food cost, labor, or any other expense is considered.
What You Actually Keep
To understand the real economics, it helps to model a specific example. Assume a restaurant selling a delivery order with a menu value of $30, running a food cost of 32 percent on that order, and paying a combined platform fee of 28 percent.
- The math looks like this:
- Order revenue: $30.00
- Platform fee (28%): -$8.40
- Food cost (32% of $30): -$9.60
- Net after food and platform: $12.00
That $12.00 must cover labor (both kitchen prep and any packaging labor), packaging materials, a proportionate share of occupancy and overhead, and still leave something for profit. In many restaurant models, it does not. An operation running a 30 percent labor cost on delivery orders, for instance, spends another $9.00 on labor against that same order, leaving $3.00 — 10 percent of the original order value — to cover all remaining costs.
This is not a universal outcome. High-volume delivery concepts with streamlined menus, efficient prep workflows, and favorable negotiated rates can make the channel work. But the default assumption that delivery orders are incrementally profitable — that they are essentially found money on top of the dine-in business — is one of the more costly misperceptions in the industry.
The Pricing Problem
The economics of third-party delivery improve significantly when delivery menu prices are set higher than in-restaurant prices to offset the commission. Most platforms allow restaurants to do this, and many operators have moved in this direction. A menu item priced at $14 in the restaurant might be priced at $17 or $18 on the delivery platform, bringing the effective commission impact back in line.
The risk is guest friction. Customers who notice the price disparity — and the transparency of delivery apps makes comparison easy — may feel overcharged, particularly if they are also paying a delivery fee and a service fee on top of the restaurant’s prices. The perception of value shifts.
There is no clean answer to this pricing dilemma. The right approach depends on your market, your concept, your average order value, and how price-sensitive your delivery customer base is. What matters is that the decision is made deliberately, with the math modeled out, rather than by defaulting to the same prices as the in-restaurant menu without examining the consequences.
Deciding Whether the Channel Is Worth It
Third-party delivery is worth keeping when it is generating incremental revenue from customers who would not otherwise visit the restaurant, at margins that are acceptable within the overall business model. It is worth examining critically when it is cannibalizing dine-in traffic, when it is running at a loss, when the operational strain on the kitchen is degrading the in-restaurant experience, or when the platform is capturing the customer relationship in a way that prevents the restaurant from building any direct loyalty.
The decision framework is not binary. Some operators run delivery only during off-peak hours, when kitchen capacity would otherwise go underutilized. Others limit delivery to a curated subset of menu items that travel well and carry higher margins. Others have exited the channel entirely and found that the financial improvement more than offset the lost top-line revenue.
What the data consistently shows is that operators who have actively modeled the channel — who have calculated their actual per-order profitability, compared it against their in-restaurant economics, and made deliberate decisions about pricing, menu selection, and platform participation — perform better on delivery than those who treat it as a passive revenue stream.
The platforms have an interest in restaurant participation. They market to your potential customers, they make onboarding frictionless, and they make exiting feel like leaving money on the table. Managing this channel well means approaching it with the same financial discipline you apply to every other part of the business — understanding the costs, protecting the margin, and making sure that the volume it generates is actually contributing to the bottom line.
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*Spencer Houlihan is a former CFO for a multi-unit restaurant brand. RestaurantBottomLine.com is dedicated to helping restaurant operators protect their financial model.*
PROTECTING THE BOTTOM LINE 