How to make third-party delivery profitable

Third-party marketplace commissions commonly run from about 15% to 30% of the order subtotal, depending on the plan, before packaging, promotions and refunds. That is why delivery sales can grow while delivery profit doesn't. The only way to know which is happening at your store is to work the numbers through, first on one order and then on a full week.

This guide shows the formulas, a worked order and a worked week, the levers that actually change delivery margin, and a short routine for checking it each month.

Start with one order

Take a single $30 order and follow the money before labor.

The same food sold at the counter would leave $21.00 before labor, because there is no commission and usually less packaging. A delivery order may still be worth taking. It may be a customer you would never have served, on a night your kitchen had spare capacity. But it is a different business with a different cost structure, and it should be tracked as one.

The formulas

Delivery contribution is what an order leaves to pay for labor, rent and profit after the costs that only exist because it was a delivery order.

• Delivery contribution = subtotal − commission − platform fees − promotions you fund − refunds and adjustments − packaging − food cost.
• Effective commission rate = all platform charges for the period ÷ delivery subtotal for the period.
• Delivery contribution margin = delivery contribution ÷ delivery subtotal.
• Refund rate = refunds and adjustments ÷ delivery subtotal.
• Full-recovery price = in-store price ÷ (1 − commission rate).

The effective commission rate matters more than the headline rate on your contract. Marketing fees, promotion costs and per-order charges often push the real figure several points above the plan's quoted percentage. Pull it from the platform's payout statement, not from memory.

The full-recovery formula is a useful reality check. To leave the same dollars after a 25% commission, a $30 order would need to be priced at $40, which is 33% higher. Few brands can mark up that far without losing orders, so most operators recover part of the commission through price and the rest through the other levers below.

Work a full week

One order shows the shape. A week shows whether the channel is earning its place. Here is a week of marketplace orders at one store.

At the counter, the same $8,400 at 30% food cost would leave $5,880 before labor. The gap, $2,556 in this week, is the true price of the channel. Whether it is worth paying depends on how many of those 300 orders were incremental, and whether the kitchen needed extra hourly labor to make them.

Two things to note. First, refunds at 2% look small, but they cost $168 in a single week at one store, and most of it comes from a few avoidable errors. Second, the promotion line is easy to forget because it often comes off the payout rather than appearing as an expense. Read it every week.

The levers you have

Menu pricing

Some operators price delivery menus above in-store. At 15% higher, the $30 order above becomes $34.50 and leaves $15.68 before labor instead of $12.30, assuming the same 25% commission, packaging and food cost. Check your franchise agreement and brand policy first, and the platform's own pricing rules. For how to pick which items to move and how to measure the effect on traffic, see how to raise menu prices.

Plan tier

A lower commission usually means a smaller delivery radius or less visibility in the app. Compare what each tier actually sold for you, not what it promised. If the cheaper plan cut orders by 10% but cut commission by 8 points, run the contribution formula on both and see which leaves more.

Accuracy

A missing item can mean a full refund on the order, not just the item. Track refunds as a share of delivery sales, per store and per week. A refund rate that sits well above the store's usual range usually points at one daypart, one station or one packing step.

Packaging

Packaging is a fixed cost per order, so it hurts small tickets most. A $1.20 pack on a $12 order is 10% of the subtotal. Review whether every item needs its own container, and whether a cheaper pack holds up as well.

Food cost on the delivery menu

Delivery customers often order differently. If the delivery menu leans toward lower-margin items, the 30% assumption is wrong for that channel. Check item mix by channel and look at how to lower food cost for the items that carry the most volume.

Direct ordering

Your own ordering avoids marketplace commission but not processing fees, and customers need a reason to use it. A simple, honest one, such as the same price as in-store, often works better than a discount that gives away the margin you were trying to keep.

Prep time

Set quoted prep times from real ticket times at each daypart, so drivers aren't left waiting and food isn't left sitting. Cold food and long waits turn into refunds and low ratings, both of which cost more than a few extra minutes on the quote.

A monthly delivery check

1. Download the platform payout statements for the month, by store.
2. Add up every charge and divide by delivery subtotal to get the effective commission rate.
3. Add refunds and adjustments and divide by delivery subtotal to get the refund rate.
4. Pull delivery item mix from your POS and check food cost for that mix, not the store average.
5. Calculate delivery contribution and contribution margin for each store.
6. Compare each store with its own last three months, not just with the other stores.
7. Pick one lever per store for the next month, such as fixing a packing step or reviewing a plan tier, and write down what you expect it to change.
8. Check the same numbers next month before deciding on the next change.

Common mistakes

• Tracking delivery sales and not delivery margin. Sales can rise while the channel earns less.
• Using the contract rate instead of the effective rate. Fees and promotions often add several points.
• Counting refunds as a platform problem. Most refunds start with a missing or wrong item in the store.
• Assuming every delivery order is incremental. Some are counter customers who switched channels, and those cost you the commission.
• Raising delivery prices across the board without checking brand rules or watching order counts afterward.
• Ignoring the hourly labor a delivery rush needs. A channel that leaves 40% before labor can leave much less once an extra person is on the line.

For franchisors

System-wide marketplace agreements often set the commission franchisees pay. Reporting delivery margin per store, not just delivery sales, shows whether those terms still work for owners. It also shows which stores carry high refund rates, which is usually an operating fix rather than a contract one. For broader context on owner economics, see how to improve franchisee profitability.

Where Franlever fits

Franlever reads sales by channel from your POS and separates a channel losing orders from one losing order size, so a delivery drop is described accurately before anyone acts on it. Each store is measured against its own normal range and the brand's median, and when something needs attention, the store's GM gets one specific lever by email or text.

General information for restaurant and franchise operators, not legal, tax, accounting or financial advice. Figures in examples are illustrations, not predictions or promises of results. Laws and platform policies change and differ by location, so check the current rules and talk to a qualified advisor about your situation.