How Margins Break Down On Delivery Orders

By DoorDash 6/20/19

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How is the restaurant industry changing?

Being a restaurant owner has always been hard: long hours, meticulous planning, and servicing Yelp-hungry customers are only a few requirements of the job. But it doesn’t just stop there. As today’s restaurant industry continuously evolves, this already-complicated job is becoming even more intense. In addition to overall administration, restaurant owners are now left worrying about things that are beyond their control.

Let’s start with rising labor costs. This year, 21 states and 22 cities have increased the minimum wage; it now ranges anywhere from $9 to $15, depending on location. The widespread increase in the minimum wage means that restaurateurs now pay more per each employee. Furthermore, these employees now also require healthcare due to the employer mandate in the Affordable Healthcare Act. This mandate clearly affects bigger corporate restaurants, but puts a particular strain on small-business owners since they now have to research, find, and pay for insurance plans.

These struggles are enhanced by increasingly demanding customers. Customers want their food to be local, organic, handmade. They want their food to be cheap. And they want it now. 90% of millennials order from restaurants at least once a week.

Challenging customers, coupled with skyrocketing labor and rent costs, mean that your margins are getting slimmer and slimmer. Restaurants are shutting down left and right, while the remaining are searching for solutions.

How can restaurants survive these changes?

From this, many have discovered the power of third-party logistics. Takeout orders are more profitable than dine-in, which is causing restaurant owners to realize that this is the future if they want to make money. Here’s how it breaks down:

→Profits from dine-in orders are typically about 10% after the costs below

  • Labor costs: 30%
  • Real Estate costs: 30%
  • Food costs: 30%

→Profits from delivery orders can be 40-60% as most costs do not increase with the incremental orders

  • Additional Labor costs: 0% - If your restaurant gets an additional 10 delivery orders per day will you need to hire another chef? Probably not. Will you need to hire additional waiters, hosts or bussers? Definitely not.
  • Additional Real Estate costs: 0% - Will you need to rent or buy more space to make these additional orders? Definitely not.
  • Food costs: 30% - The costs of the ingredients needed to make the additional food.
  • Delivery costs: 30%

Orders using third party logistics are way more profitable and DoorDash is able to bring in more orders without the operational overhead of increased labor or maintenance. As a result, over 100,000+ restaurants across the country have partnered with DoorDash. The industry is changing, but third party logistics companies like DoorDash can give you back control and improve your bottom line.

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