Take Back Control: How Restaurants Can Avoid Third-Party Commissions and Boost Profits
In the competitive world of restaurants, every dollar counts. With the rise of third-party delivery platforms like DoorDash, Grubhub, and Uber Eats, many restaurants have found themselves paying hefty commissions—often as high as 30%—on every order. While these platforms can help expand your reach, the cost can significantly eat into your profits, especially on smaller orders.
Fortunately, there’s a way to take back control: using point-of-sale (POS) and online ordering systems that allow you to process sales commission-free on your native website. Solutions like ChowNow and Owner.com provide restaurants with the tools to offer direct online ordering, helping you keep more of your hard-earned revenue.
Why Go Commission-Free?
Before diving into the strategies for shifting orders away from third-party platforms, it’s important to understand why this move is so critical for your business.
The Cost of Commissions
Let’s break down the math. Imagine you sell a basic cheeseburger and fries for $15 through a third-party delivery platform that charges a 30% commission. That’s $4.50 per order going directly to the delivery service, leaving you with $10.50. From that amount, you still have to cover the cost of ingredients, labor, packaging, and other overhead expenses. The margins get razor-thin, making it difficult to sustain profitability.
Breaking Down the Math: The True Cost of a Marketplace Delivery Cheeseburger
Let’s look at how third-party commissions impact the profit on a $15 cheeseburger and fries:
Cheeseburger & Fries Price: $15.00
Third-Party Commission (30%): $4.50
Revenue After Commission: $10.50
Now, subtract the costs:
Food Cost: $5.00
Packaging Cost: $0.75
Labor Cost: $2.50
Waste Cost: $0.50
Total Costs: $8.75
Profit: $10.50 - $8.75 = $1.75
In this scenario, after paying for the commission, food, packaging, labor, and waste, you're left with only $1.75 in profit. This highlights how much third-party commissions can reduce your earnings. Shifting to direct orders can significantly increase your profit margin.
On the other hand, if that same order is placed directly through your website using a commission-free platform like ChowNow or Toast, you keep the entire $15. This difference can add up quickly, making a significant impact on your bottom line.
How to Transition to Commission-Free Orders
Making the shift to direct, commission-free orders requires a strategic approach. Here are some effective ways to encourage your diners to order directly through your website.
1. Leverage Your POS and Online Ordering Systems
Invest in a POS system that integrates with an online ordering platform to seamlessly process orders from your native website. Systems like ChowNow, Toast, and Owner allow you to customize your online menu, manage orders efficiently, and most importantly, avoid paying commissions on each sale. These platforms also offer valuable data insights, helping you better understand your customers and refine your operations.
2. Train Your Customers to Order Direct
Educating your customers about the benefits of ordering directly from your website is key to making this transition successful. Here are a few strategies:
Signage and Flyers: Place clear signage in your restaurant and include flyers in every takeout bag that thank customers for supporting your business by ordering directly. You can even offer a small discount or free item for first-time direct orders to incentivize the switch.
Honest Communication: Use your social media platforms to honestly explain the impact that third-party commissions have on your business. Let your customers know that by ordering directly, they’re helping you keep more of your revenue, which allows you to continue providing high-quality food and service.
Email Campaigns: Send out regular emails to your customer base highlighting the benefits of ordering direct, including any special offers or loyalty programs that are only available through your website.
In-Store Promotions: Offer in-store promotions or loyalty rewards for customers who place their orders directly through your website. This not only encourages direct orders but also builds a stronger relationship with your customers.
3. Be Strategic About Third-Party Platforms
While moving away from third-party platforms can boost your profitability, completely abandoning them may not be feasible for all restaurants. Instead, consider using them strategically:
Convert Third-Party Customers: If you choose to remain on platforms like DoorDash, Grubhub, or Uber Eats, make it a priority to convert those customers to order directly from your website in the future. Include promotional material with every order, such as a coupon code for their next direct order.
No Direct Links: Ensure that your restaurant’s website does not include direct links or buttons to third-party delivery services. Instead, prominently display your native online ordering options, making it easy and enticing for customers to order directly from you.
At Violet Hospitality, our consultation services are designed to help you navigate the profitability challenges posed by third-party commissions. We’ll guide you in optimizing your ordering systems, reducing unnecessary costs, and maximizing your profits. By working with us, you’ll not only keep more money in your business but also lower your stress, streamline operations, and create a more sustainable future for your restaurant. Let us help you take control.
