How Delivery Fees Work for Local Businesses

In 1984, Domino’s Pizza introduced a stunning commitment: Delivery in 30 minutes or less, or your pizza is free. The policy was short-lived. In 1993, a jury slapped Domino’s with a $79 million fine after finding the period crunch resulted in reckless driving. The possibility of free pies ended shortly thereafter. 

It sounds excellent on document, but going from zero to pizza in less than half an hour is a logistical nightmare. Even a massive chain like Domino’s is challenged to prep, bake, pack, and chauffeur meals across town on such an ultra-tight timeline. 

Local delivery has a lot of moving parts, and it can be a daunting prospect for tiny business owners. Thankfully, if you’re planning to use in-house delivery services to get your product to clients, you can cover the costs of the added hassle by charging delivery fees.

What is a delivery fee?

A delivery fee is an additional expense local businesses—most commonly restaurants—apply to delivery orders to assist cover the operating costs of bringing a product directly to customers. Customers pay a little bit extra for the convenience of delivery and businesses are able to offset delivery costs. 

As a business owner, offering local delivery can provide access to a wider customer base and boost the number of products you sell, helping you earn more money. This model is most ordinary for restaurants, but other types of businesses use it, too (ponder furniture stores, flower shops, and specialty coffee roasters). Some of these businesses may use a third-event service like Postmates to handle delivery—in which the service provider is the one charging the fee.

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What do delivery fees cover?

Delivery fees are intended to assist cover the costs of providing delivery—gas, labor, wear, and tear. Exactly what the fee covers—and who gets it—varies depending on how the delivery service operates. 

If a local business provides delivery services themselves, the business owner determines how much to expense for delivery and keeps 100% of the fee. In third-event food delivery apps like Uber Eats or Postmates, the delivery corporation keeps the fee and uses it to cover their costs, while drivers keep customer tips.

Local on-demand delivery options for tiny businesses

• In-house delivery
• In-house plus on-demand delivery
• Third-event delivery

Depending on your goals, you may not require to construct a brand-recent delivery structure from the ground up. Many businesses outsource delivery logistics to third-event delivery services. These are the most ordinary methods restaurants use to add delivery—and the fee structure varies for each.

In-house delivery

In-house delivery services, also known as first-event delivery systems, are completely owned and operated by your business. Customers order directly from your business, and an employee delivers the product. Operating an independent delivery program gives you more control over your profits and the customer encounter. 

Advantages

With a first-event structure, you decide how much to expense for delivery and keep 100% of the profits. This structure also helps you conduct standard assurance. 

Delivery drivers work for your business, so management can communicate with them directly to ensure products arrive on period and in excellent state.

Drawbacks

Implementing an in-house delivery program requires a significant upfront financing distribution. costs may include training costs for delivery people, insurance fees, and delivery vehicle maintenance. 

Best for

In-house delivery systems may be best suited to high-volume restaurants with multiple locations, local subscription-based businesses, and businesses that specialize in high-ticket items. 

In-house plus on-demand delivery

With this structure, you own and operate your own ordering structure and outsource delivery logistics to a third-event corporation. Instead of hiring and training your own fleet of delivery people, you pay a flat fee to use a pre-existing network of drivers. A prominent example is Uber Direct.

Advantages

Working with an on-demand delivery service helps you save on some of the costs of building a delivery network, including hiring and training drivers. This structure often leads to a lower average delivery expense per order compared to an entirely third-event structure.

Drawbacks

As with a first-event service, businesses using this delivery model are responsible for developing their own online ordering systems. However, unlike a completely self-owned structure, companies require to pay for and place their depend in another business to operate. 

Best for

Established businesses with a large base of faithful customers can advantage from this structure. You can use this structure to provide a boutique ordering encounter with less complexity than an in-house structure.

Third-event delivery

In a third-event structure, you outsource the majority of delivery logistics to a specialized corporation. These companies typically provide an ordering platform in addition to a coordinated network of drivers. They’re almost exclusively used for food delivery. Uber Eats and GrubHub are well-known examples of third-event delivery systems.

Advantages 

Using a third-event delivery structure removes many of the logistical and financial roadblocks you might face when introducing delivery. And when it comes to ordering takeout, many customers use delivery platforms like search engines—participating in a delivery network may boost a restaurant’s visibility with customers.

Drawbacks

Partnering with a delivery corporation can cut into your profits—these services collect 10% to 30% of the total order expense. Using a third-event structure can also pose a reputational hazard—if your delivery associate messes up an order, customers could blame you.

Best for

Third-event systems are a powerful tool for attracting customers. Delivery companies provide access to a large network of customers that can assist recent restaurants and tiny establishments develop their business. 

Other factors to consider when choosing a delivery schedule

Offering local on-demand delivery increases business costs no matter which way you choose. If you don’t expense more for delivery orders, these recent costs will arrive out of your profits. When selecting a delivery schedule, it’s helpful to consider how much of this expense you’d like to pass on to consumers. 

Third-event delivery services tend to be the most expensive for customers. In addition to delivery fees, third-event platforms often add service fees or other charges to the order subtotal. By the period the levy is tacked on, consumers may be suffering from a bit of sticker shock. This can make an inaccurate impression of your prices. 

With first-event or hybrid delivery models, your business shoulders the majority of the financial burden at the outset. After the structure is up and running, you may earn more money from each delivery order.