Food delivery continues to be an important revenue stream for restaurants and other D2C businesses. In 2024 alone, revenue from meal delivery was over $90 billion. Today’s customers expect convenient delivery as part of the dining experience. For restaurants, offering delivery is a no-brainer. But understanding the true cost of delivery and the factors affecting it can be confusing. This post explains these factors and how you can offer a more cost-effective delivery experience.
Unpacking Food Delivery Cost
When you want to set up your restaurant’s food delivery offering, there are two main options: in-house and outsourced delivery. Each option has its own peculiarities, and there’s a third possibility of using a bit of each in your delivery operations.
Factors That Affect the Cost of In-House Food Delivery
Vehicle Cost
Many restaurants start by hiring drivers who use their own vehicles. These drivers are typically classified as independent contractors, meaning you don’t need to provide vehicles or cover fuel, insurance, or maintenance.
The other option is to build an in-house fleet from the ground up. This requires procuring or leasing vehicles, which involves a significant upfront or recurring cost. You’ll also need to factor in fuel, commercial insurance, and regular maintenance like oil changes and tire replacements. This route gives you full control over the delivery process, but it’s more capital-intensive.
Labor Cost
Labor cost is a significant consideration when setting up an in-house fleet for last-mile delivery. If you work with independent contractors, your labor costs are limited to their per-delivery or hourly rates. You don’t need to pay payroll taxes, benefits, or handle HR admin.
However, if you hire drivers as employees (W-2), the labor cost increases. You’re responsible for wages, payroll taxes, and possibly benefits. You’ll also need to spend time hiring and training drivers to align with your brand’s standards and delivery protocols.
In both cases, someone, often a restaurant staff member, needs to manage delivery operations. While this might save money compared to hiring a dedicated dispatcher, it can distract from daily restaurant management and stretch your team thin during peak hours.
Tech Cost
Manually dispatching and tracking deliveries is inefficient and time-consuming. Every modern delivery operation needs delivery management software to run efficiently. With this, you can manage dispatch more accurately, track drivers in real-time, and respond faster to unexpected delays. Therefore, the ongoing cost of such software is an additional cost you have to factor into your calculations.
Pro Tip: FULFLLD delivery management software offers real-time updates on deliveries and connects you to a network of on-demand delivery service providers.
Packaging and Supplies
Branded packaging, insulated bags, tamper-proof seals, and containers to maintain food quality are also important expenses to consider. These items ensure the food arrives in good condition and reflect your brand's professionalism and care. While they add to the operational cost, they play a critical role in customer satisfaction and repeat business.
Cost and Trade-Offs of Outsourced Food Delivery
With outsourced delivery, most of the upfront costs associated with an in-house delivery fleet, like vehicle and labor costs, are off the table. Instead, you partner with external services to handle the last-mile delivery. There are two common forms of outsourced delivery for restaurants:
- Third-party marketplaces (e.g. Uber Eats, DoorDash): These platforms manage everything from logistics to customer acquisition and payment. They are convenient and often charge a specified commission per order.
- On-demand delivery partners: This also involves working with 3rd party delivery service providers. You take orders through your website or POS while they fulfill the delivery, offloading the complexities of last-mile logistics. Fees are typically charged per delivery, mile, or hour.
You can also enjoy the best of the two systems by combining in-house and outsourced delivery. This hybrid delivery setup lets you maintain a high-quality delivery experience for your customers.
Tips to Make Food Delivery More Efficient and Cost-Effective
A recent Toast survey showed that most customers have a threshold for what they are willing to pay for food delivery. This means you must strike a careful balance between operational costs and customer expectations.
To stay competitive, it’s not just about offering delivery. You must offer it in a way that keeps costs down without compromising speed, food quality, or the customer experience. Here are some practical tips to make your food delivery segment more efficient and cost-effective.
- Leverage on-demand delivery networks: Use a delivery management platform that connects you to a network of service providers. This helps avoid the fixed costs of running your own fleet and gives you the flexibility to scale with demand.
- Optimize your delivery zones: Stick to zones where you can ensure food quality and timely service. Overextending your reach increases delivery time, mileage costs, and the risk of poor customer experiences.
- Batch deliveries when possible: For high-volume periods, group nearby orders to reduce trips. Smart routing software makes this easier and more efficient.
- Use delivery management software: A centralized system improves dispatching, real-time tracking, and communication. Choose one that integrates with your POS and external delivery partners.
- Invest in quality packaging: Good packaging keeps food intact and at the right temperature. It lowers complaints and reflects well on your brand.
- Track and analyze delivery metrics: Monitor key data like delivery time, customer feedback, and cost per order. Use this to optimize routes, staffing, or pricing.
- Train your staff on delivery protocols: Even if you outsource delivery, staff must package, label, and hand off orders efficiently. Proper training keeps things running smoothly.
Final Thoughts
Keeping delivery fast, affordable, and on-brand without draining your resources is achievable. Understanding the nuances of in-house and outsourced delivery models allows you to be more proactive in managing costs and meeting customer expectations. This means with the right setup, you can cut costs without cutting corners. Smart routing helps you deliver more in fewer miles, and integration with third-party providers lets you scale delivery without the chaos. FULFLLD brings both into one delivery management platform—built to help restaurants run their fleet or partner network with ease.
FULFLLD is how modern brands manage delivery without the chaos. Join the league of brands cutting delivery costs, improving on-time rates, and saving 500+ hours every year.
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