3rd party delivery, 20 to 30% commission, is it that high?
Explore the impact of 20-30% commission rates in 3rd party delivery services. Is it a fair cost or an excessive burden? Gain insights into the dynamics of these fees and make informed decisions for your business.
Publishing date 12/14/2023
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As a restaurateur, you’ve likely grappled with the decision to offer delivery through third-party services like Uber Eats, DoorDash, etc. On the one hand, these platforms expand your reach and provide a convenient delivery option for customers. On the other, their commission fees, often between 20 to 30 percent of the total bill, cut significantly into your profits. Before signing on with a delivery service, you owe it to yourself and your business to explore alternative options to keep more money in your pocket while still meeting customer demand for delivery. Setting up your delivery program may seem daunting, but with some planning, you can build an efficient system, promote it to your customers, and ultimately save thousands per year in commission costs. This guide will walk you through how to ditch the 30 percent commission fees and set up your food delivery service.

The Rising Costs of 3rd Party Delivery and 30% Commissions

The fees charged by third-party delivery services have been steadily rising over the years. What used to be a 10-15% commission on orders has now ballooned to 20-30% for many restaurants. While the convenience and expanded reach these services provide are appealing, the costs are becoming increasingly difficult for restaurants to absorb.

The True Cost of Delivery

After accounting for food costs, labor, and other operational expenses, restaurants operate on very tight profit margins. Losing nearly a third of revenue per delivery order significantly impacts the bottom line. Some restaurants have had to raise menu prices to offset costs, but this risks driving away dine-in customers.

Options Outside the Big Players

Some restaurants have found success by setting up their delivery operation or using smaller regional delivery services, which typically charge commissions of 10-15%. While managing your delivery logistics requires extra work, the cost savings may well be worth it, especially for high-volume restaurants.

Renegotiating With Delivery Services

If ditching the major delivery companies altogether is not feasible, restaurants could try renegotiating their contracts to push for lower commission rates, especially if they can demonstrate the volume of business they drive to the platforms. Multi-year contracts also provide more leverage to lock in better terms.

While third-party delivery will likely remain an important sales channel, restaurants must find ways to mitigate the fees to maintain strong profitability. With some creative thinking, restaurants can take back more control over their delivery operations and boost their bottom line.

Options for Restaurants to Reduce Delivery Commission Fees

To reduce hefty third-party delivery commission fees, which can range from 20 to 30% or more of each order, restaurants have a few options to consider:

Offer In-House Delivery

By handling delivery in-house, restaurants can avoid paying any commission fees to third-party services. However, this requires hiring dedicated delivery drivers, managing the delivery logistics, and marketing the delivery option to customers. For many restaurants, especially smaller ones, this may not be feasible or cost-effective.

Negotiate Lower Commission Rates

Some delivery services may be open to negotiating lower commission fees, especially if a restaurant can commit to a certain volume of orders or exclusivity. Restaurants with a strong brand and loyal customer base have more leverage to negotiate. Multi-restaurant groups or restaurant collectives can also join together to negotiate lower rates.

Use Multiple Delivery Services

By making your menu available on more than one delivery platform, restaurants can play the services against each other to get better terms. However, this also means more work managing multiple accounts and order flows. And customers may need clarification on having the choice of delivery services for the same restaurant.

Offer Pickup Discounts

Encouraging more customers to pick up their food rather than get delivery is an easy way for restaurants to avoid any commission fees. Offering 10-15% discounts, free add-ons or other perks for pickup orders may entice more customers to skip the delivery. With the pickup, the restaurant also has an opportunity to upsell at the point of sale.

In summary, while third-party delivery services have revolutionized how people order and receive restaurant food, their hefty commission fees cut deeply into already tight profit margins. Restaurants should explore ways to negotiate lower rates, diversify delivery options, emphasize pickups, or scale up their in-house delivery to pay less in fees and keep more of their hard-earned revenue.

How to Set Up Your Online Ordering With Milagro

To set up your online ordering system and avoid paying high commission fees to third-party delivery services, consider using a platform like Milagro. This allows restaurants to easily create a customized online ordering website and mobile app.

Create Your Menu

First, you’ll need to build your digital menu on the Milagro platform. Input your menu items, descriptions, photos, and pricing. Be sure to include all options and modifiers to give customers the full experience of ordering from your restaurant. Keep your menu up to date with your latest offerings.

Customize Your Branding

Customize the look and feel of your online ordering platform to match your restaurant’s branding. Incorporate your logo, images, color scheme, and font. This helps to provide a seamless experience for your regular customers and makes a good first impression on new customers discovering your restaurant for the first time.

Promote Your Online Ordering

Once your online ordering is set up, promote it on your website, social media, in-store, and via email marketing. Offer incentives like free delivery, discounts, or gift cards to encourage customers to place their first order. Word-of-mouth marketing from happy customers can also help raise awareness.

Fulfill Orders

When orders start coming in, have a streamlined system in place to fulfill them accurately and on time. Meet or exceed your normal speed of service to provide a great experience for off-premises customers as well. Take extra care to ensure quality and freshness since the food will be eaten away from your restaurant.

Make Improvements

Monitor feedback and make improvements to your online ordering over time. Look for ways to simplify the ordering process, expand your menu options, or improve the customer experience. Small tweaks can go a long way toward building loyalty and increasing sales. With your platform, you have control over any changes needed.

By setting up online ordering with a service like Milagro, you can provide customers with a convenient way to order food for delivery or takeout without paying the typical high commission fees charged by third-party companies. With some work on the front end to set it up, this can become an easy and lucrative revenue stream for your restaurant.

Keeping More Profits in-House With Direct Ordering

To increase profits, restaurants should consider implementing direct ordering systems in place of third-party delivery services that charge exorbitant commission fees. By cultivating direct relationships with customers and streamlining the ordering process, restaurants can retain a higher percentage of sales.

Establishing your own online ordering platform or phone system enables customers to place orders directly with your business rather than through an intermediary. Many affordable services exist to help set up online ordering. Promoting your direct ordering system through social media, email marketing, and your website will drive customers to order directly from you instead of through delivery apps.

Offering incentives for direct orders, such as discounts, free items, or loyalty programs, gives customers motivation to order directly. For example, you might offer 10% off or a free side for customers who place 5 direct orders.

Streamlining the direct ordering process through an easy-to-navigate website or phone menu makes the experience more convenient for customers. Displaying your menu, hours of operation, and contact information on your website and social media accounts enables customers to easily find the information they need to place an order.

By providing quick and accurate service for direct orders through hiring sufficient staff, restaurants can deliver a good experience that fosters customer loyalty. When customers receive prompt, correct orders through your direct system, they will continue ordering directly from you.

While third-party delivery services offer convenience, their high commission rates cut into profits. Cultivating relationships with your customers through direct ordering and providing an efficient system and good service helps restaurants maintain financial viability. By following these steps, your business can gain freedom from exorbitant fees and keep a higher percentage of sales.

How to Ditch 30% Commission Fees on Third-Party Apps using Milagro Online Ordering

Restaurant owners are well aware of the high commission fees charged by third-party delivery services, often 20-30% of the total bill. While the convenience and reach of these apps are appealing, the fees cut significantly into profit margins. However, there are ways for restaurants to offer delivery while avoiding excessive fees.

Set up Your Online Ordering System

Rather than relying solely on third-party apps, restaurants can establish their online ordering platform. Services like Milagro Online Ordering provide the infrastructure to handle online orders, payment processing, and delivery dispatch at a fraction of the cost of other services. With their system, restaurants keep 100% of sales and have full control over the customer experience.

Establishing an online ordering system requires an initial investment but can pay off quickly. Key steps include:

  1. Choose an online ordering platform services and set up your customized platform. Options like Milagro offer simple setup and integration with your point-of-sale system.
  2. Market your new online ordering system through social media, email campaigns, and in-store promotions. Let your customers know they can now order directly from you for delivery or curbside pickup.
  3. Provide the same convenient options as third-party apps like saved payment info, reordering, and tracking. Customers expect an easy experience.
  4. Consider offering special promotions or discounts for customers who order through your platform. This incentivizes them to order directly from you instead of through an app.
  5. Continue improving your online ordering system by gathering customer feedback and making requested enhancements. Staying up-to-date with trends in technology and user experience is key.

By taking control of their online ordering and delivery, restaurants can boost profits while still meeting customer demand for convenience. An investment in your robust platform is well worth ditching the excessive 30% commission fees charged by third-party services. With some initial effort, restaurants can build loyalty through a great customer experience on their platform.

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