Third-party delivery accounting for restaurants

Third party delivery accounting for restaurants

During the pandemic, restaurants flocked to third-party delivery platforms, tapping into additional sales and recouping lost revenue. While demand for delivery remains strong, many restaurant operators have encountered challenges with costs and questions relating to tax remittance. Before restaurants commit to working with third-party delivery apps, consider these challenges.

What are third-party delivery platforms?

Third-party delivery platforms like Grubhub, DoorDash, Uber Eats and Postmates provide an app-based delivery service customers use to order food delivery from local restaurants. There's no upfront cost for restaurants to contract with third-party delivery companies. Ordering and payment are processed directly through the app, and the delivery companies make their money by tacking on service fees.

In addition to delivery services, third-party delivery companies collect data on customer purchasing habits. The data is then used to assist restaurants with marketing services, helping them reach more customers or fine-tune their menus. Even if restaurants pass on the additional marketing services, listing on the sites can increase their exposure.

Third-party delivery fees

Third-party delivery service runs on fees paid by both the customer and the restaurant, with delivery costs to the restaurant ranging from 15% to 25% of the order total. There are also additional delivery costs and credit card fees charged to the restaurant on each app order. Accounting for all the fees owed to the platform, a $50 order could net the restaurant as little as $34.

With the average restaurant profit margin falling between 3% and 5%, fees can quickly eat away at the bottom line. To recoup the loss, restaurants must get creative. One way to offset the services fees is with delivery app menu pricing that differs from their dining room menu. For example, on a third-party delivery order, a $15 hamburger in the restaurant would cost a DoorDash customer $17.

Third-party accounting best practices

A third-party delivery provider may simply deposit money into the restaurant’s account with little detail on the breakdown of fees and taxes withheld. For accounting best practices, it’s important restaurants request detailed reports from their third-party delivery partners and reconcile payments received from the third-party delivery payout with sales, service fees and taxes withheld.