Our Client’s Restaurant Was Getting More Delivery Orders. We Wanted to Know How Much Money It Was Actually Keeping.
By ProfitWise - a Visa Business Plans company
A family-owned Italian restaurant came to ProfitWise because the owners wanted a better understanding of how much they were earning from delivery orders.
Over the previous year, orders through third-party delivery platforms had increased considerably. The additional business was welcome, particularly during slower periods, but the owners had started questioning whether those sales were as profitable as they appeared.
They knew the platforms charged commissions, but they hadn’t calculated how much the restaurant was actually keeping after accounting for the various fees, discounts and other costs associated with delivery.
We decided to look at the numbers separately from the restaurant’s dine-in and direct takeout sales.
A $60 Delivery Order Doesn’t Mean $60 in Revenue for the Restaurant
Consider a customer who places a $60 order through a delivery platform.
Depending on the restaurant’s agreement, the platform might charge a $15 commission. If the restaurant also funds a $6 promotion and spends $3 on takeout containers and packaging, the amount remaining is $36 before accounting for ingredients, labor and other expenses.
The actual costs vary by platform and agreement, but the example illustrates why delivery sales need to be evaluated differently from dine-in orders.
For our client, we wanted to understand the effective cost of each delivery channel and how much those orders contributed toward the restaurant’s operating expenses.
That required looking beyond the total sales reported by the platforms.
We Separated Delivery Sales From Dine-In and Takeout
One challenge with third-party delivery is that the amount deposited into the restaurant’s bank account may already reflect commissions, promotions, refunds and other adjustments.
If those transactions aren’t recorded correctly, the financial statements may not clearly show gross delivery sales or the expenses associated with generating them.
Through specialized bookkeeping, we could reconcile the platform statements with the restaurant’s sales records and bank deposits, while tracking the relevant fees and adjustments separately.
We also wanted to compare the economics of third-party delivery with orders placed directly with the restaurant.
A customer ordering takeout directly might purchase the same pasta and appetizers without the restaurant incurring a substantial platform commission.
Understanding those differences helped us evaluate how much each sales channel contributed to the business.
The Timing of Delivery Orders Also Matters
Delivery orders can be particularly attractive when a restaurant has available kitchen capacity.
If the kitchen is relatively quiet on a Tuesday afternoon, additional orders may help generate revenue without requiring significant increases in staffing.
Friday evening can be a different situation.
If the kitchen is already busy preparing meals for customers in the dining room, delivery orders may create additional pressure on employees and increase preparation times.
We wanted to understand whether the restaurant was generating enough contribution from those orders to justify the additional workload, especially during peak periods.
This is where reviewing the financials alongside the restaurant’s actual operations becomes useful. The same delivery order can have a different financial impact depending on when it arrives and what resources are needed to fulfill it.
Should the Restaurant Raise Its Delivery Prices?
One option was to evaluate whether the restaurant’s delivery menu prices adequately reflected the additional costs of using third-party platforms.
However, increasing prices wasn’t necessarily the only solution.
We could also examine whether certain promotions were producing enough additional business to justify their cost, whether packaging expenses could be reduced and whether encouraging repeat customers to order directly might improve margins.
Through our Fractional CFO services, we could compare different scenarios and estimate how changes to pricing, promotions or order volume might affect the restaurant’s financial performance.
We also needed to consider customer behavior. A higher delivery price might improve the margin on each order but reduce demand, so any proposed changes needed to account for both possibilities.
More Orders Aren’t Always Better Business
For our client, the important question was whether delivery was adding meaningful profit to the restaurant.
An order that contributes toward covering fixed expenses can still be worthwhile, even if its margin is lower than that of a dine-in order. But if delivery demand requires additional staffing, disrupts dining-room service or generates too little contribution after the associated costs, the owners need to understand that.
At ProfitWise, our specialized bookkeeping services help restaurant owners maintain accurate financial records and understand where revenue and expenses originate.
During our monthly meetings, we review the numbers together and discuss how they’re affecting the business. When owners are considering changes to pricing, operations or sales channels, our Fractional CFO services can help evaluate the financial implications.
For this Italian restaurant, separating delivery from other sales gave the owners a clearer way to evaluate a growing part of their business. They could see how much those orders were contributing and make decisions about the platforms based on their actual financial impact.
