A third-party delivery service is a digital platform that allows food business owners to sell their products online. Delivery services often work by charging commission fees on orders and providing delivery drivers. Third-party delivery services also sell marketing packages designed to showcase your menu to customers who place frequent orders.
Third-party delivery platforms like Uber Eats and DoorDash have become ubiquitous in the food industry. In 2023, about a third of US customers turned to a third-party delivery platform1 for ordering takeout or delivering food.
These services offer convenience for customers and can lead to a high volume of orders, but they have downsides, such as higher costs and a lack of control for food business operators. It’s important to weigh the pros and cons of third-party delivery platforms, and how the major services work, so you can decide if they are a fit for your business.
Pros & Cons of Food Delivery Services
| pros | cons |
|---|---|
| Convenience for your restaurant | Lack of control |
| Exposure to new customers | Credit card payments deposited once a week |
| Labor savings | High commissions |
| Convenience for customers | No direct customer contact |
Pros
Expanding your business through third-party platforms has three major benefits: exposure, reduced administration, and customer satisfaction.
First, third-party platforms expand your customer base by introducing your brand to the platform’s users. Since DoorDash alone had around 37 million monthly users at the end of 2023, the potential for growth on these platforms is obvious. If you are a small mom-and-pop operation selling popular items like pizza or burgers, you’re pretty much guaranteed to see an immediate uptick in business volume.
The second advantage of using third-party platforms is that they handle the delivery staff. You don’t have to add the administrative work of holding and distributing driver tips, worry about whether the drivers have the right insurance, or have the stress of scheduling enough drivers. You also don’t have the added cost of wages, gas reimbursements, and insurance that you’d need to provide for an in-house team. This creates a more stress-free delivery experience for many food business operators.
Lastly, third-party platforms help you meet consumer expectations for convenience. Customer demand for online ordering has only grown, with the global market for online delivery services expected to reach nearly $2 trillion by 2029 (a compound annual growth rate of 9.04%). In other words, customers love—and now expect—the convenience of online ordering and local delivery. Working with a third-party platform is a convenient way to meet your customers where they are.
Cons
Although the benefits are significant, the third-party delivery picture is not all rosy. These platforms can create serious challenges for your business, like increased costs, lack of control, and limited access to customer data.
Cost, of course, is the first and generally most immediate concern. Third-party platforms can charge as much as 30% on every order they send to your restaurant. This cost can eat into the already thin margins of your menu dishes. You can raise prices to offset this, but you can only raise prices so high before customers balk at paying them.
It will take longer to access your money when using third-party delivery services. When you handle operations in-house, your credit card processor generally deposits funds in your account every one to two business days. Third-party platforms process payments on their site and take out their commissions before depositing in your account—which means you might be getting these deposits as infrequently as once per week. If cash flow is an issue for your business, this lengthy turnaround time can be stressful.
The second major drawback to using delivery platforms is lack of control. The third party will handle customer disputes and refunds, not your restaurant. So, for example, if a customer calls Uber Eats to complain about a missing side order and Uber Eats decides to refund the entire check, you have no say in the matter. You are simply out all the costs of the food and the labor it took to prepare the order.
You’ll also lack the ability to control the quality of delivery drivers and how they treat your food once it leaves your restaurant. An eye-opening (and perhaps stomach-turning) stat from a Circuit Route Planner poll found that 80% of drivers have admitted to eating some of their customers’ food. Customers who have bad experiences with such drivers may choose not to order food delivery again—losing you a potential long-term customer.
Lastly, when you use third-party platforms, you won’t have access to customer data that would enable you to address customer satisfaction issues or request feedback personally. The platforms do not share the ability to contact customers directly. So, you won’t have the information to feed your own marketing and loyalty campaigns, which can be a huge business driver.
Typically, small business users discuss their experiences with third-party platforms in private industry groups. The consensus seems to be that they are pricey and only worth it to expand your restaurant’s visibility. Some comments we found—both positive and negative—include the following:
- The mobile app (Grubhub) is easy to navigate for staff. Service increases traffic to our website and has increased our revenue.
- We’ve seen a near 30% bump in sales with Uber Eats. We onboarded two restaurants simultaneously.
- Customers will prefer a cheaper restaurant that competes with you since their prices might be parity with their normal menu.
- DoorDash took the credit card money and sent it to us weekly minus their 30% and any adjustments they decided on. If errors or changes needed to be corrected, we had to call DoorDash, and it was always too late.
How Third-party Delivery Platforms Work
Third-party delivery services like Grubhub, Uber Eats, and DoorDash operate similarly. They provide an app and a website that allow customers to place delivery orders from your restaurant. The app sends these orders to you via a mobile device or a direct integration with your point-of-sale (POS), and then it connects you with local delivery drivers to deliver the orders.
The platforms make money by charging businesses a commission on each order. The commission can vary from 6% to 30% or higher, depending on the order type and your marketing preferences. Typically, they also charge delivery fees to customers. So, both businesses and customers pay for the service.
Third-party Delivery Services & Pricing
Below are our breakdowns for use cases and pricing for three popular third-party delivery platforms: DoorDash, Grubhub, and Uber Eats.
Doordash
| basic | plus | premier | Storefront | On-demand Delivery | |
|---|---|---|---|---|---|
| What it is | Let customers order from you on DoorDash and add marketing programs when you need them. | Increase sales and reach loyal and frequent customers with DashPass. | Maximize sales with the biggest delivery area, DashPass, and more. Backed by our Growth Guarantee. | Easily set up a restaurant online ordering system and turn your website visitors into customers with Storefront. | Offer delivery from your own app or website by tapping into DoorDash’s network of Dashers. |
| Pricing | • Delivery order commission: 15% • Takeout order commission: 6% • Payment processing included • First 7 days free | • Delivery order commission: 25% • Takeout order commission: 6% • Payment processing included • First 30 days free | • Delivery order commission: 30% • Takeout order commission: 6% • Payment processing included • First 30 days free | • Delivery order fee: $3.99 • Delivery subtotal fee: 10% • Payment processing: 2.9% plus 30 cents per order | • $6.99-$10.99 flat delivery fee • 0% commission |
What do users say? Reviewers give this platform 3 out of 5 stars on G2. Around 90 reviews are from consumers or drivers, with most positive reviews mentioning convenience and most negative reviews citing difficulty getting refunds for missed deliveries.
Grubhub
| basic | plus | premium | grubhub direct | |
|---|---|---|---|---|
| What it is | Online ordering service provides access to a limited selection of users. | Online ordering service provides access to premium, high-use users. | Online ordering system provides access to high-use users and access to promotion, loyalty, and review response tools. | Commission-free online ordering site allows access to customer data. |
| Pricing | • Marketing rate: 5%+ • Takeout order commission: $0 • Grubhub delivery rate: 10% | • Marketing rate: 10%+ • Takeout order commission: $0 • Grubhub delivery rate: 10% | • Marketing rate: 15%+ • Takeout order commission: $0 • Grubhub delivery rate: 10% • +5% for a sponsored listing | • No delivery, hosting, or commission fees |
What do users say? Reviewers on G2 award this platform 4.1 stars out of 5 based on 60-plus reviews. Like DoorDash, all current reviews are from customers and drivers. Reviewers like the variety of restaurants available on the platform but dislike the number of fees on orders. There were also some issues getting employees integrated into using the platform.
Uber Eats
| Lite | Plus | Premium | self-delivery | |
|---|---|---|---|---|
| What it is | Uber’s lowest-cost plan is for businesses looking to reach customers who already know you. | Uber’s mid-cost plan helps businesses get discovered by new customers. | This is the best fit for businesses that want to stand out and reach more new customers. | Stay in control of your delivery method, drop-off experience, and customer delivery fees. |
| Pricing | • Delivery order commission: 15% • Takeout order commission:6% • Processing fee: 2.5% + 29 cents • Visibility in Uber Eats app when they search for your restaurant | • Delivery order commission: 25% • Takeout order commission:6% • Processing fee: 2.5% + 29 cents • Restaurant shown in app and Uber One Benefits accessible to your customers | • Delivery order commission: 30% • Takeout order commission: 6% • Processing fee: 2.5% + 29 cents • Matching of ad spend of up to $100 per month • 0% fees in first six months if you do not do above 20 orders | • Delivery order commission: 15% • Takeout order commission: 6% • Processing fee: 2.5% + 29 cents • 25% fee on orders using Uber drivers |
What do users say? Uber Eats is rated 4 out of 5 on G2, based on about 180 reviews. One two-star review from a restaurant user notes negative experiences with rude drivers and a tedious menu update process, but also notes that the platform helps their restaurant stay busy. Other restaurant users echo menu update criticism, with cost of using the service also being a recurring claim.
Third-party Delivery Platform Alternatives
Online ordering and delivery can be a big opportunity for small restaurants. However, using third-party online ordering and delivery services is not the only way to meet customer demand.
Most modern restaurant POS systems and retail POS systems include online ordering modules that send online orders directly to your POS order stream. Some even offer built-in options for managing a team of in-house drivers with maps-based dispatch and driver smartphone apps. Dedicated food delivery software for restaurants also exists.
If you don’t use a point-of-sale system and don’t have a business website, you can still add online ordering via free sites like Square Online or GloriaFood. You can even avoid the risk of accepting online payments by setting up your online ordering site only to accept pickup orders with in-person payments.
Many independent restaurants use third-party platforms alongside in-house online ordering systems. They then add coupons or flyers to their third-party orders, offering customers discounts or freebies for placing future orders directly with the restaurant. Third-party platforms frown on this behavior, but the third-party drivers will never know if you place the coupons in sealed delivery bags (and 85% of consumers prefer sealed delivery bags that show if their order has been tampered with).
Alternatively, some restaurants use third-party platforms during slow days and turn off third-party orders during days—like weekend services—that are already busy.
| Use a Third-party Platform When: | Use an Alternative When: |
|---|---|
| You need to expand your marketing reach. | You already have a substantial list of loyal customers. |
| You are short-staffed or need to save on labor costs. | You have sufficient staff levels and an adequate budget to maintain this. |
| You can afford commission fees of 6%–30% per order. | You would rather not (or can’t) pay high commission fees for delivery. |
| You trust non-staff drivers to provide good service. | Your products require sensitive handling. |
| Customer data tracking is not crucial for you. | You use customer data to drive marketing and loyalty campaigns. |
Recent studies have shown that delivery isn’t a necessary part of the customer convenience package—55% of digital orders are actually for takeout. So, you reap the benefits of online ordering without adding the delivery cost. Studies also show that nearly 60% of consumers prefer to order directly from local restaurants rather than through third parties.
Factors to Consider Before Deciding to Use a Third-party Delivery Service
Choosing between in-house delivery or a third-party solution is not a small decision; either approach’s operational benefits and drawbacks can be significant. Then, there are the costs to consider. Here are some questions to ask yourself before deciding on one approach.
Which option will give my business the largest net profit?
Long-term net profit is the key idea to keep in mind here, and it can be affected by various factors. For example, you’ll have to pay commission fees of up to 30% if you go with third-party delivery—but this might end up being the more profitable long-term option for you if you have the profit margins and delivery volume to make it worth it. You’ll need to set menu prices, determine your customer base and order volume, and crunch the numbers to find out if the extra costs associated with third-party delivery will be a good investment for your business.
Am I willing to trust workers who are not my employees?
While third-party delivery drivers are technically not your employees, customers who order from your restaurant may still see those drivers as representatives of your business. If those customers receive poor service or a negative experience, they may choose (rationally or not) to avoid ordering from your company again in the future. If you decide to use third-party delivery services, you’ll need to accept that you will have little control over how drivers treat your food and your customers.
How important is convenience for me and for my customers?
It’s easy to say that convenience is important, and it is—but it isn’t free. The convenience of outsourcing delivery to a third-party service is undeniable, but you’ll end up paying for this convenience in both money and worry about how they’ll perform. This isn’t to say that such services aren’t worth the expense—in many cases, they are—but only that you should decide whether the advantages are worth the drawbacks, no matter which option you choose.
Last Bite
Third-party online ordering and delivery platforms are a surefire way to introduce your restaurant to millions of users who place online orders every month. They also offer different competitive advantages tested by countless food businesses and ordering algorithms.
However, the lack of driver control and accountability can be a major pain point for operators. The costs of using these services are also very high and can impact a business with thin margins. With credit card payments coming in weekly versus daily, there are also cash flow issues to consider. Be sure to consider these factors before deciding on a platform for your food operation.
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