January 13, 2025
The restaurant industry has transformed dramatically in recent years, with digital ordering and delivery becoming essential parts of daily operations. At the heart of this transformation lies third-party delivery platforms.
The pandemic transformed Canada’s food delivery landscape, ushering in the age of delivery. Online orders increased by 36% in the first year.
In 2023, 25% of Canadians dined out at least once a week.
“No doubt that it has helped reach more customers, but on the contrary, it has hit hard on the hard-earned profits of restaurants.”
Think of a third-party commission as the slice of your sales that goes to delivery platforms and ordering services to connect you with customers.
For many restaurants, these commissions range from 15% to 35% per order, a significant portion that directly impacts your profitability.
For instance, if a customer orders a $50 meal through a popular delivery app. With a 30% commission rate, $15 goes to the delivery platform, leaving you with $35. Now multiply this across hundreds of orders each month.
The impact on restaurant profitability can be substantial. While these platforms promise increased visibility and access to new customers, the high commission rates often force restaurants to either absorb the costs or increase their prices.
Today's restaurant owners are standing at a crossroads of decision-making: continue with traditional third-party platforms and their hefty commissions or explore alternative solutions that put control back in their hands.
Now, let's explore the types of commissions you face with these platforms. Understanding these models could transform your business strategy.
As we explore the world of restaurant commissions, it's essential to understand the various commission structures offered by delivery platforms.
Each model comes with its own set of advantages and challenges, impacting your restaurant's profit margins differently.
The most common commission structure in the restaurant delivery ecosystem is the percentage-based model.
Third-party platforms typically charge between 15% to 35% of the total order value. This rate often varies based on factors like your restaurant's location, order volume, and the level of services provided.
For example, if your restaurant processes $10,000 in monthly delivery orders with a 25% commission rate, you're paying $2,500 in commission fees alone.
Moving away from percentage-based models, some platforms offer flat-rate commissions. Under this structure, restaurants pay a fixed fee per order, regardless of the order size.
This model mainly benefits restaurants with higher average order values. For instance, rather than paying 30% on a $100 order ($30), you might pay a flat fee of $5-$10 per order.
Tiered commission structures offer more flexibility than the above structures. These plans adjust commission rates based on various factors, such as order volume, service level, and customer ratings.
For example, a platform might charge 25% for basic delivery services but reduce the rate to 20% when your monthly orders exceed $5,000.
Some platforms even offer premium tiers with enhanced visibility and marketing support, though these often come with higher commission rates.
The latest evolution in commission structures combines different payment models. These solutions offer hybrid systems that can work with your existing POS, and you can simultaneously work with third-party delivery platforms.
Platforms like iOrders provide subscription-based models in which restaurants pay a monthly fee plus for a range of services, including commission-free ordering, delivery-as-a-service, smart campaigns, and much more.
This approach aims to increase profitability by saving huge amounts on commission payments while reaching the masses through third-party delivery portals.
Now, let’s explore the commission structures of major third-party delivery platforms. Understanding these different models is necessary for making informed decisions about choosing the right food delivery partner.
The right choice depends on various factors unique to your restaurant, including order volume, average ticket size, and target profit margins.
This insight will help you make informed decisions about which platforms align best with your restaurant's goals and profit margins.
SkipTheDishes has established itself as a dominant player with a multi-faceted commission approach. Their base commission typically starts at 20% but can vary significantly based on your restaurant's location and partnership level.
Restaurants participating in their premium placement program might see rates climb to 25-30%, though this includes enhanced visibility on the platform and priority customer service.
What sets SkipTheDishes apart is their performance-based adjustments. Restaurants maintaining high customer ratings and order acceptance rates can qualify for commission reductions of up to 2-3%.
However, these savings come with strict performance requirements, including maintaining a 4.5+ star rating and a 95% order acceptance rate.
Transitioning to Uber Eats, their commission structure typically ranges from 15% to 30%, with several distinguishing features. Their basic delivery partnership starts at 30% for delivery orders and 15% for pickup orders.
However, they've recently introduced a flexible pricing model where restaurants can choose lower commission rates in exchange for reduced visibility on the platform or by passing some costs to customers.
Uber Eats also offers a unique "Lite" package for restaurants handling their delivery, charging around 15% commission.
This option particularly appeals to restaurants with existing delivery infrastructure who want to expand their digital presence without paying premium rates.
GrubHub takes a different approach to its marketplace commission structure. Their base commission starts at 20%, but the total can reach up to 30% when marketing services and premium placement are included.
What's notable about GrubHub's model is its marketing commission structure, which charges additional fees (5-15%) for orders from customers acquired through their platform versus orders from customers who specifically search for your restaurant.
They have also introduced a sliding-scale system in which commission rates can decrease as order volume increases, encouraging restaurants to drive more business through their platform.
This volume-based incentive can reduce effective commission rates by 3-5% for high-performing restaurants.
DoorDash has revolutionized the commission landscape with its partnership plans. Their basic plan starts at 15% for pickup orders, while delivery orders typically incur a 25-30% commission.
What distinguishes DoorDash is its introduction of partnership tiers with varying levels of service and visibility. Their Premium tier (around 30% commission) includes priority customer service, expanded delivery radius, and promoted placement in search results.
Meanwhile, their Basic tier (around 15% commission) offers reduced services but might better suit restaurants with established customer bases looking to maintain profitability on delivery orders.
It's notable that these platforms continuously adjust their models in response to market conditions and restaurant feedback.
Having said that, knowing the benefits and challenges of these restaurant commissions can help you negotiate better terms and potentially explore alternative solutions that better serve your business needs.
We explored the various commission structures. Now, let’s examine the advantages these platforms offer despite their costs. Understanding these benefits helps restaurant owners make strategic decisions about their delivery partnerships.
One of the most compelling advantages of partnering with third-party platforms is immediate access to an established customer base.
These platforms invest millions in marketing and customer acquisition, bringing instant visibility to your restaurant. Their existing infrastructure means you can start accepting delivery orders within days rather than months.
Third-party platforms provide sophisticated ordering systems, GPS tracking, and customer communication tools that would be costly to develop independently.
Their automated dispatch systems efficiently match orders with drivers, while real-time tracking reduces customer service inquiries.
This technology infrastructure allows restaurants to focus on their core competency, preparing great food, while the platform handles delivery logistics.
These platforms offer an excellent opportunity to test new menu items or explore different market areas without significant upfront investment. You can fulfill demand in new neighborhoods through delivery data before considering physical expansion.
Their analytics tools provide valuable insights about customer preferences, peak ordering times, and popular menu combinations that can improve overall business operations.
During rush hours or special events, third-party platforms help manage overflow orders with their pool of delivery drivers. This flexibility allows restaurants to handle larger order volumes without hiring additional staff or investing in delivery vehicles.
The 2024 Restaurant Operations Report indicates that restaurants using delivery platforms can handle up to 40% more orders during peak hours compared to managing deliveries in-house.
While commission rates might seem high, they often include marketing benefits that would otherwise require significant investment.
Platforms regularly feature restaurants in their promotional campaigns, email newsletters, and app notifications.
Some even offer professional food photography services and menu optimization consultations as part of their partnership packages.
Third-party delivery services help maintain revenue during inclement weather or seasonal downturns.
When dining room traffic slows due to rain, snow, or extreme temperatures, delivery orders often increase. This countercyclical benefit provides revenue stability throughout the year. However, these advantages must be weighed against their costs.
While third-party platforms offer valuable services, the high commission rates have led many restaurants to explore hybrid approaches or alternative solutions like the iOrders commission-free model.
The key is finding the right balance that works for your specific business model. As we discuss the drawbacks of commission-based services, you'll see why many restaurants are beginning to diversify their delivery strategies.
Moving from the advantages, it's necessary to explore the significant challenges that come with third-party commission structures.
These drawbacks have pushed many restaurant owners to rethink their delivery strategies and seek alternative solutions.
The most pressing concern with third-party delivery platforms is their heavy toll on profitability. With commission rates reaching up to 30%, restaurants often find themselves in a difficult position.
Usually, on a $50 order with a 30% commission, you're immediately losing $15. Breaking it down further, the food costs are typically 28-32%, labor costs 25-30%, and other overhead expenses, making the profit margin becomes razor-thin and sometimes even negative.
Thus, it is evident that delivery orders are significantly less profitable than dine-in orders due to these high commission rates.
To avoid this unnecessary profit drain, you can subscribe to iOrders services like Commission-free Ordering and Delivery-As-A-Service.
But that's not all; other challenges make relying on third-party platforms risky. Let's examine them next.
Another significant drawback is the loss of direct customer relationships. Third-party platforms own the customer data, including ordering habits, contact information, and preferences.
This creates an intermediary between you and your customers, making it challenging to build loyalty or implement targeted marketing strategies. When customers order through these platforms, they often become loyal to the platform rather than your restaurant.
You not only lose on direct connection but also rely entirely on third-party delivery platforms to bring them back to your restaurant.
On the contrary, iOrders services like Smart Campaign, Loyalty and Review Programs, and AI-powered Review System help you stay directly connected with your customers.
While platforms handle delivery logistics, they also introduce variables outside your control that can affect food quality and customer experience.
Late deliveries, cold food, or unprofessional drivers can damage your restaurant's reputation, yet you need more ability to address these issues directly.
Most negative reviews on third-party platforms relate to delivery issues rather than food quality, yet restaurants bear the brunt of customer dissatisfaction.
With iOrders AI-powered Review System, you can instantly manage your online brand reputation.
Many restaurants feel compelled to raise their delivery menu prices to offset high commission rates. This creates a challenging dynamic where delivery customers pay significantly more than dine-in customers for the same items.
Additionally, some dishes may not travel well or require special packaging, leading to limited delivery menus that might not fully represent your restaurant's offerings.
With iOrders “Delivery-As-A-Service” and “White-label Mobile App,” you can easily handle the special packaging and serve all your restaurant offerings directly to your customers.
Managing multiple tablet devices, coordinating with different platforms, and handling various commission structures adds operational complexity.
Kitchen staff must juggle orders from multiple sources, each with its own timing and packaging requirements. This can lead to increased labor costs and potential errors during busy periods.
While platforms provide their ordering systems, these often need to integrate more seamlessly with existing restaurant point-of-sale (POS) systems.
This disconnect can lead to manual order entry, increased error potential, and complicated end-of-day reconciliation processes. Some restaurants report spending an extra hour daily just managing platform-related accounting tasks.
Restaurants need options that provide the convenience of digital ordering without sacrificing profitability or customer relationships.
It's clear that while third-party platforms offer certain benefits, their drawbacks have created a strong demand for alternative solutions.
Pretty comprehensive, right?
Let's summarize and see why shifting to a model like iOrders is the smartest move for your restaurant.
After examining the challenges of traditional third-party delivery platforms, let's explore how iOrders provides a transformative solution that addresses these pain points while empowering restaurant owners to maintain control over their businesses and profits.
Unlike traditional third-party delivery platforms that take up to 30% of your revenue, iOrders operates on a transparent, flat-fee subscription model. This commission-free approach means you keep 100% of your order revenue.
For instance, a restaurant processing $50,000 in monthly delivery orders through traditional platforms might lose $15,000 in commissions.
With iOrders, you maintain control of your revenue while accessing modern ordering capabilities.
This shift from percentage-based commissions to a predictable monthly fee helps restaurants better forecast their expenses and protect their profit margins.
iOrders reimagines delivery services by offering a hybrid approach that puts you in control.
Through strategic partnerships with local delivery providers, restaurants can choose between managing their delivery fleet or accessing a network of professional drivers at competitive rates.
This flexible model allows you to scale delivery operations based on demand without the overhead of traditional platforms. You decide the delivery radius, pricing structure, and service levels that work best for your restaurant.
Moving beyond basic ordering capabilities, iOrders empowers restaurants with complete access to customer data and ordering patterns.
This proprietary data access means you can build direct relationships with your customers, understand their preferences, and create targeted marketing campaigns.
The platform's integrated CRM system helps you track ordering history, capture customer feedback, and implement personalized loyalty programs, all without a third party standing between you and your customers.
The platform's AI-powered marketing tools transform customer data into actionable insights.
Create targeted promotions based on ordering patterns, send automated birthday rewards, or launch win-back campaigns for lapsed customers.
Unlike third-party platforms, where marketing efforts benefit the platform first, Smart Campaigns feature ensures your marketing investments directly strengthen your restaurant's brand and customer relationships.
iOrders goes beyond basic ordering and delivery with a full spectrum of restaurant management tools.
These features work seamlessly together, eliminating the need for multiple vendors and reducing operational complexity.
The integrated approach means you spend less time managing technology and more time focusing on your restaurant's success.
Most importantly, iOrders pricing structure aligns with your restaurant's growth. Rather than taking an increasing percentage as your sales grow, the platform's flat-fee model becomes more cost-effective as your digital orders increase.
This scalability ensures that success doesn't come with a higher commission rate. Instead, your profit margins can improve as your digital presence expands.
iOrders represents more than just an alternative to traditional delivery platforms. It's a comprehensive solution designed to help restaurants thrive in the digital age while maintaining control over their profits and customer relationships.
Traditional third-party platforms, once seen as innovative solutions, now present significant challenges for restaurant owners seeking sustainable growth.
With commission rates eating into profits, limited customer data access, and complex operational requirements, restaurants need a smarter approach.
iOrders emerges as a comprehensive solution that addresses these fundamental challenges.
By offering a commission-free model, complete customer data control, and integrated marketing tools, the platform provides restaurants with the technology and flexibility needed to thrive in the digital marketplace.
Ready to break free from high commission structures and take control of your restaurant's digital future?
Visit iOrders Today To Book A Demo and see how commission-free ordering can boost your profitability.
