ONLINE COMMISSIONS CALCULATOR

How to use the tool?

This intuitive tool is designed to help restaurant owners and managers quickly and accurately calculate the commissions they share with third-party online delivery platforms.

Using the Online Commissions Calculator is an efficient way to manage and understand your commission costs.

How online order commissions effects business?

Here’s a detailed look at the various ways commissions can affect your bottom line.

1. Increased Operational Costs

Online delivery platforms typically charge a commission fee on each order processed through their service. These fees can range anywhere from 15% to 30% of the order value. For restaurants with slim profit margins, these additional costs can significantly reduce profitability.

Example:

• Order Value: $30
• Platform Commission: 20%
• Commission Cost: $6

In this scenario, a $30 order results in $6 paid to the platform, leaving the restaurant with only $24 from the sale.

2. Impact on Pricing Strategies

To offset the high commission fees, some restaurants might increase menu prices on delivery platforms. However, this approach can lead to several issues:

• Customer Deterrence: Higher prices may discourage customers from ordering, especially if they notice a significant price difference between dine-in and delivery options.
• Competitive Disadvantage: Competitors with lower delivery prices might attract more customers, reducing your order volume.

3. Reduced Profit Margins

The direct consequence of high commission fees is reduced profit margins. When a substantial portion of your revenue goes towards paying commissions, the remaining profit is often insufficient to cover other operating expenses, such as labor, rent, and utilities.

Example Calculation:

• Total Monthly Sales: $50,000
• Total Commission Paid (20%): $10,000
• Net Sales after Commissions: $40,000

After deducting $10,000 in commissions, the restaurant must manage all other expenses with the remaining $40,000, which can strain financial resources.

4. Dependency on Delivery Platforms

Relying heavily on third-party delivery platforms can lead to a dependency that might be detrimental in the long run. Changes in platform policies, commission rate increases, or market competition can unpredictably affect your profitability.

5. Strategic Shifts in Marketing

To combat high commission costs, restaurants may need to invest more in direct marketing strategies to encourage customers to order directly through their own website or app. This shift can involve costs for:

• Website Development: Creating and maintaining an efficient online ordering system.
• Digital Marketing: Running campaigns on social media, email marketing, and search engine optimization (SEO) to attract direct orders.
• Loyalty Programs: Implementing programs that incentivize repeat customers and reduce reliance on third-party platforms.

6. Customer Experience and Retention

Delivery platforms control a significant part of the customer experience. Poor service by the platform can reflect badly on the restaurant, affecting customer satisfaction and retention rates. Investing in in-house delivery solutions can help maintain control over the customer experience, but this comes with its own set of costs.

Mitigating the Impact of Commissions

While online commissions can pose challenges, there are strategies to mitigate their impact:

• Negotiate Lower Rates: Engage with delivery platforms to negotiate lower commission rates, especially if your restaurant generates high order volumes.
• Promote Direct Ordering: Encourage customers to order directly through your website or app by offering discounts, loyalty points, or exclusive deals.
• Optimize Menu for Delivery: Design a delivery-friendly menu with items that travel well and have higher profit margins.
• Increase Operational Efficiency: Streamline kitchen operations and delivery logistics to reduce costs and improve service quality.

Online commissions are a double-edged sword for restaurants, providing access to a broader customer base while simultaneously cutting into profit margins. By understanding these impacts and strategically managing costs, restaurants can better navigate the complexities of online ordering and maintain profitability. For more insights and tailored strategies to boost your restaurant’s profitability, contact us for a consultation.