Delivery Fees: Here's How Much To Charge (based on data)

Most restaurant owners want to reduce how much they pay to third party delivery apps.

To do this, you must make it a no-brainer for your customers to order directly from you. Ordering from you should be at least as good as the experience they get with third party apps.

Delivery fees are a major factor in this experience. Your delivery fee has to be competitive with what third parties charge.

In this post, we’ll discuss how we solve this problem for restaurants that use Owner.com. We’ll also show the math behind our recommendations.

How delivery works with Owner.com

We’ve negotiated deals with all the major delivery networks. Delivery through the Owner.com online ordering platform is a flat fee of $7.

We don’t make money on offering delivery. We do not make any profits on delivery. See more about our approach to delivery here.

That’s because our goal is to help restaurants increase their direct orders. That’s why we offer delivery fees at cost. This way you can offer lower prices to your customers, which means you'll convert more of them to order directly.

How you can compete with third parties

To convert customers to order from you directly, it’s not enough to have an online ordering platform. Delivery fees matter.

You can’t give customers sticker shock on the delivery fee when they check out.

Think about it: how excited would you be to pay $7 for delivery?

You can get your customer to your website, get them to start an order then start building their cart. But if you pass on that whole $7 delivery fee to your customer, you’ll scare them off.

Customers today really hate seeing high delivery fees. 

If customers see that you charge a $7 delivery fee, a lot of them will just go back to the third party apps. They’ll do this even if you’ve raised prices on the delivery apps. They’ll do this even if the apps charge a 15% service fee!

In the past, we used to let restaurants choose how much of the $7 delivery fee they wanted to cover. But we stopped this. Because we found that restaurants who covered part of this delivery fee converted more sales, and that's what you really want.

Make sure customers only pay $4 for delivery

To maximize your online sales from your website and your branded mobile app, your customer should pay a maximum of $4 for delivery. 

Yes, this means restaurants cover $3 in delivery fees. This is totally worth it for both parties.

Your customers save money:

Restaurants often inflate their prices on the delivery apps to offset the 30% commissions they have to pay, resulting in higher prices for your customers. 

You get more direct sales:

More customers will order from you directly, since It's cheaper than the delivery apps. More direct orders mean you get customer data for future marketing. Best of all, you save on the 30% in third party fees you'd normally pay.

But why is a $4 delivery fee the magic number? Let’s dig into the math.

What the research says about delivery fees

Researchers at Cornell University looked into how delivery fees impacted the customer experience. You can read the study here. They found that customers responded best when delivery fees were $4 or lower. Customers were not as receptive to a $7 delivery fee – more on this later.

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We wanted to better understand this data, so we ran our own test. We already help thousands of restaurants increase online orders here at Owner.com, so we ran a small experiment to better understand these findings. Here’s what we found.

Delivery fee data from real restaurants

We took 100 restaurants that were charging their customers $7 for delivery, then asked them to charge only $4 for delivery. We then measured the change in conversion rate.

Our hypothesis was that customers paying less for delivery would mean more orders for the restaurant.

And you know what? The results were consistent with Cornell's findings. All 100 restaurants saw an uptick in their online orders at a $4 delivery fee.

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Again, this could seem obvious: when customers pay lower fees, sales go up. 

But this test allowed us to verify the research and get important insights beyond the Cornell research, like how to keep profits high.

Increase profits by using minimum orders

One concern I've heard from owners is "What if someone just wants one item? I don't want to cover $3 of the delivery fee." Fair point. 

That's why we recommend a $30 minimum order value before your customer can “unlock” the cheaper $4 delivery fee. If you’re already using online ordering, this should be a simple change. 

For example, this is what that looks like if you’re an Owner.com customer – just edit these in your dashboard and you’re done. You can also ask us to do it for you.

Delivery costs $7 for most restaurants, so covering $3 will result in a $4 delivery fee for the customer.

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Customers see right in the ordering process that they need to reach $30 to get cheaper delivery. This is fair for you, fair for your customers. 

If their order is below $30, they can still get delivery, but at a higher price.

The right delivery fee helps both you and your customers

Think back to the last time you got delivery sticker shock. I'm sure it's happened to you. You might have been ordering food or buying something else online.

You go to order something, but you get hit with an unexpectedly large delivery fee just before you check out. As a result, you pause before you hit "complete order" and in many cases you decide not to buy it at all.

Delivery fees that are too high are a total conversion killer that leaves profits on the table.

Charging $4 for delivery is a better experience for your customers. It increases your sales. .The research shows this and so does our own internal data. 

But it’s better for you too. The more customers you convert to order direct, the bigger your customer email list, and the more people in your loyalty program, and the more profits for you overall.

Frequently Asked Questions

How much should restaurants charge for delivery?

Restaurants should charge $4 if they want to increase their delivery sales. This is supported by research from Cornell University along with data from Owner.com.

How much should a delivery fee be?

For most restaurants, the delivery fee should be $4 to maximize sales. But you may want to change the delivery fee depending on a minimum order amount, like charging more for delivery under a certain threshold.