Why do some restaurants lose money on delivery orders, and how can they avoid it?
Delivery can increase sales volume, but higher revenue does not automatically mean higher profit. In many restaurants, delivery orders look busy on reports while margins quietly shrink in the background. The issue is rarely delivery itself—it is how costs, pricing, and operations are structured around it.
Some restaurants lose money on delivery orders because commission fees, packaging costs, discounts, and poorly calculated menu pricing reduce or eliminate profit margins. To avoid this, operators must calculate true delivery costs, adjust pricing strategically, control food and labor expenses, and manage their delivery menu separately from dine-in operations.
Why Restaurants Lose Money on Delivery Orders
1. High Commission Fees
Third-party delivery platforms typically charge commission on each order. In many markets, this ranges from 15% to 35% of the order value. If your average food cost is already 30–35%, adding commission on top can eliminate most of your contribution margin.
This is one of the most common reasons delivery becomes unprofitable, especially for restaurants that price their delivery menu the same as their dine-in menu.
2. Packaging and Extra Costs
Delivery requires containers, bags, cutlery, and sometimes branded packaging. These costs are often underestimated. A few small packaging expenses per order can significantly reduce margin over hundreds of transactions.
3. Discounting Without Margin Analysis
Promotions and platform-driven discounts may increase order volume but reduce profitability. If a 20% discount is applied on top of commission and food cost, the restaurant may effectively operate at break-even—or worse.
4. Poor Menu Engineering for Delivery
Some items that perform well in the dining room do not travel well or have low profit margins. Selling low-margin or labor-intensive items through delivery can strain the kitchen while generating minimal return.
5. Increased Operational Pressure
When delivery orders arrive in high volume during peak hours, they can disrupt service flow. If the kitchen becomes overloaded, mistakes increase, refunds rise, and overall efficiency declines. In many restaurants, delivery is added without adjusting staffing or production planning.
How Restaurants Typically Avoid Losing Money on Delivery
Experienced operators treat delivery as a separate business channel with its own structure and controls. The process usually includes the following steps:
- Calculate the true cost per delivery order (food cost + packaging + commission + labor impact)
- Create a separate delivery pricing strategy if necessary
- Limit delivery to high-margin, travel-friendly items
- Set minimum order values to protect contribution margin
- Control discounting and promotional frequency
- Monitor performance weekly, not just monthly
Adjusting Delivery Pricing Strategically
It is common practice to price delivery items slightly higher than dine-in items to offset commission and packaging costs. This is widely applied across independent restaurants and chains. The key is transparency and consistency, not aggressive price increases.
Designing a Delivery-Optimized Menu
Many profitable operators build a smaller, focused delivery menu. For example, a casual restaurant might exclude complex plated dishes and instead promote bowls, burgers, pasta, or combo meals with strong margins and stable food cost percentages.
This reduces kitchen stress and protects profitability at the same time.
Managing Digital Menu Structure Carefully
Clear item descriptions, accurate pricing, and controlled availability are essential. If items are out of stock or incorrectly priced, refunds and negative reviews increase quickly.
Digital menu management platforms can support this process by allowing operators to manage availability, pricing, and item visibility from a single dashboard. For example, systems like Menuviel make it easier to separate delivery menus from dine-in menus and adjust items centrally, which helps reduce pricing errors and margin leakage.
A Practical Example
Consider a café selling a sandwich for $10 dine-in with a 35% food cost. If a delivery platform charges 25% commission and packaging costs $0.80, the effective margin may shrink dramatically unless pricing is adjusted. Without reviewing these numbers carefully, high delivery sales can create the illusion of profitability while cash flow tightens.
Delivery can be profitable when structured correctly. The difference usually comes down to disciplined cost calculation, menu engineering, and operational control—areas that experienced restaurant operators monitor consistently.
