June 20, 2025
The food delivery landscape has undergone a dramatic transformation over the past few years, with platforms like DoorDash becoming essential partners for restaurants across North America.
The numbers tell a concerning story: restaurants typically surrender 15-30% of each order value to delivery platforms, with some establishments reporting that their delivery operations barely break even despite significant sales volume.
Even more troubling, a recent survey revealed that 74% of delivery customers say they would prefer to order delivery directly from a restaurant rather than a third party.
Ordering through third-party apps results in losing your contact information and preferences, hindering relationship building. As delivery grows in restaurant sales, knowing your costs and exploring alternatives is vital for financial health.
Let's start by understanding the business model of Doordash.
DoorDash is an on-demand food delivery service that connects customers with local restaurants and businesses.
Founded in 2013, DoorDash is now one of North America's largest food delivery platforms, operating in thousands of cities in the U.S., Canada, and Mexico. The company primarily facilitates food deliveries from restaurants to consumers, charging service fees to both parties.
DoorDash provides delivery services and value-added options like DashPass, a subscription that reduces service fees. It went public in December 2020, achieving a market value exceeding $60 billion.
Now that we have a brief idea about DoorDash, let's have a look at their revenue streams.
DoorDash generates revenue through a diverse set of business models, which not only include traditional delivery fees but also extend into various specialized services. Below are the key ways DoorDash makes money:
DoorDash profits by delivering food from local restaurants to customers, charging restaurants a commission of 10% to 30% per order, based on size, location, and service type. Customers pay delivery fees dependent on distance and order size, which significantly add to DoorDash's revenue and business model.
Another major revenue source for DoorDash is its subscription service, DashPass, which offers unlimited free deliveries and reduced fees for a monthly fee. Subscribers enjoy benefits like no delivery charges on minimum orders and waived fees. Recent reports indicate that DashPass has millions of subscribers, generating predictable revenue and promoting customer loyalty.
DoorDash Drive is a white-label service enabling businesses to outsource delivery needs to DoorDash. It serves larger companies, including non-restaurant businesses, wanting delivery options without infrastructure investment. DoorDash charges a flat rate per delivery, allowing businesses to save costs while gaining revenue from various industries beyond food delivery.
Launched in 2020, DashMart is DoorDash's on-demand convenience store delivery service, enabling customers to order groceries and essentials directly. DoorDash stocks items in warehouses or partners with local stores for fulfillment. This service expands DoorDash's revenue streams by entering the rapidly growing retail and grocery delivery market, particularly post-COVID-19.
DoorDash capitalizes on corporate catering, enabling bulk orders for events, meetings, and employee meals. Through DoorDash for Work, companies manage catering needs, set budgets, and arrange delivery for large orders. This service attracts corporate clients seeking convenience and efficiency for feeding groups, proving profitable as businesses make larger, frequent orders, boosting DoorDash's revenue.
DoorDash expands revenue by acquiring businesses like Caviar and Wolt. Caviar allows access to upscale restaurants, while Wolt expands into European markets, enhancing global presence. These acquisitions broaden DoorDash's customer base and create synergies, driving revenue growth.
DoorDash also generates revenue through advertising services offered to restaurants on its platform. Through its advertising program, restaurants can pay to have their listings promoted, improving visibility among customers. Additionally, DoorDash offers targeted promotions, which help restaurants reach specific customer segments, thereby improving sales while generating ad revenue for DoorDash.
DoorDash has partnered with third-party services, including grocery chains, convenience stores, and alcohol retailers, to facilitate deliveries. These partnerships enhance DoorDash's service range and market share, and DoorDash earns additional fees from these businesses.
DoorDash’s diversified model generates revenue from various sources, making it resilient to market fluctuations. From commissions on restaurant orders to corporate catering and subscription services, DoorDash expands its revenue base as a leading player in on-demand delivery.
Let's examine the true cost of DoorDash partnerships and how restaurant owners are discovering more effective ways to serve customers and safeguard their profits.
Understanding exactly where your money goes when partnering with DoorDash is essential for making informed decisions about your restaurant's delivery strategy.
These fees can quickly accumulate, turning what seems like a profitable order into a break-even transaction.
DoorDash's delivery fees are more complex than many restaurant owners realize. Customers pay a delivery fee, and restaurants are charged for each completed delivery. Fees vary based on location, delivery distance, and demand.
Many restaurant owners are unaware that delivery fees are variable. During peak times or driver shortages, DoorDash may increase fees without notice.
This unpredictability makes financial planning challenging, especially for smaller establishments operating on thin margins. Delivery fees fluctuate by as much as 30% during busy weekend evenings compared to weekday afternoons.
Example:
Let's say a customer orders a meal from a restaurant during a typical weekday afternoon. The delivery fee might be around $5, and the restaurant is charged a similar fee for the delivery service.
However, on a busy Saturday evening when demand is high, DoorDash could increase the delivery fee for both the customer and the restaurant.
For example, the customer's delivery fee might rise to $6.50, and the restaurant could be charged a higher fee of $7. This represents a 30% increase in delivery costs for both parties, making it harder for the restaurant to predict and manage costs.
This unpredictability can lead to tight margins, especially for smaller restaurants that operate in high-demand areas where delivery costs tend to spike during peak hours.
Beyond the commission structure, DoorDash adds service fees that impact your bottom line. These fees cover operational aspects like payment processing, customer support, and technology maintenance.
Service fees typically range from 3% to 5% of the order subtotal, but can vary based on your contract terms. While each fee might seem small, they add up significantly when calculated across hundreds or thousands of orders each month.
For example, a restaurant processing $10,000 monthly through DoorDash might pay an additional $300 to $500 just in service fees—that's $3,600 to $6,000 annually, which many owners don't factor into their delivery profitability calculations.
The largest fee in DoorDash's structure is the commission from each order, usually between 15% and 30% of the subtotal, depending on negotiated terms, restaurant size, and market presence.
This commission structure creates a paradoxical situation: higher-value orders, which should be more profitable, actually result in larger commission payments.
Consider a $100 family order with a 25% commission—DoorDash takes $25 from that. With food costs at 30% and labor costs around 25%, there's little room for profit after overhead.
The impact becomes even more apparent when comparing pre-pandemic in-house dining profits to current delivery profits.
A $50 dine-in order might yield $10-15 in profit for in-house dining, while that same $50 order through DoorDash might only generate $2-5 in profit, a reduction of 50-80%.
In the crowded DoorDash marketplace, visibility is everything. To stand out, restaurants often feel pressured to participate in promotional programs that come with additional costs.
Featured placements, "DoorDash Recommended" status, and special promotions all incur additional fees that further reduce margins. These promotional opportunities typically come with fees ranging from 3% to 10% on top of the standard commission structure.
While they may increase order volume, restaurant owners must carefully calculate whether the additional sales actually translate to additional profits after accounting for these higher fee percentages.
Many restaurant owners overlook that declining promotional options can lead to reduced visibility. Some notice their restaurants drop in search results after opting out of premium placement, creating pressure to participate despite additional costs.
Example:
Let's break down the costs of an order to see how DoorDash's commission and advertising fees affect a restaurant's profitability.
In this fictional example, let's assume:
In this scenario, after participating in the promotional program and paying the delivery fee, the restaurant’s total cost to fulfill the order is $21. This leaves the restaurant with a net profit of only $29 from a $50 order, before accounting for any other operating costs (such as food cost, labor, and overhead).
With iOrders' Commission-Free Online Ordering, restaurants avoid complex fees and keep 100% of sales revenue while providing the online ordering convenience customers expect.
Now let's examine how these various fees directly impact your restaurant's bottom line and long-term profitability.
The real story of third-party delivery fees becomes apparent when you analyze their impact on your bottom line.
What may seem like a necessary business expense can have a profound impact on your restaurant's financial health.
The math of delivery platform partnerships often surprises restaurant owners when they do a detailed analysis.
Here's what happens to your profits when DoorDash takes its cut:
A $50 order with a 30% food cost ($15) and a 15% labor cost ($7.50) would normally yield $27.50 before overhead is applied. With a 25% DoorDash commission ($12.50), that same order drops to just $15 before overhead
After factoring in rent, utilities, and other fixed costs, many restaurants see delivery profits disappear entirely
This profit erosion is particularly concerning for independent restaurants operating on industry-standard net profit margins of 3-5%. When a third party claims 15-30% off the top, the math simply doesn't work out in the long term.
Beyond the obvious commission structure, DoorDash partnerships introduce operational considerations that further impact profitability:
These hidden costs add another 5-8% to the true expense of each delivery order, making the actual cost of third-party platforms even higher than the stated commission rates.
Perhaps the most valuable asset being surrendered is not the commission percentage, but your customer relationship itself. :
This data disconnection creates a scenario where restaurants are essentially paying platforms to build relationships with their customers.
When a regular diner who previously visited your restaurant starts ordering exclusively through DoorDash, you've lost both profit margin and the ability to communicate directly with them.
iOrders' White-label Mobile App and Website Ordering solutions address these challenges by keeping you in control of both your profits and customer relationships.
Your restaurant maintains ownership of all customer data, offering the convenience customers expect, while enabling you to build loyalty without the need for a middleman.
Let's explore strategies that smart restaurant owners are using to minimize these impacts while still meeting customers' delivery expectations.
While third-party delivery platforms have gained popularity, savvy restaurant owners are implementing creative strategies to maintain profitability without abandoning delivery options altogether.
Here is what you need to do to increase your profitability.
Many restaurant owners don't realize there's often room for negotiation with delivery platforms:
The best time to negotiate is when you have leverage—either before signing a contract or when it is expiring.
Remember that DoorDash wants your restaurant on their platform, especially if you're a popular local establishment or a unique concept that attracts customers.
Smart menu engineering can help offset delivery platform costs:
Many restaurants have found success with a dedicated "delivery menu" that emphasizes items with lower food costs and better delivery performance.
This strategic approach ensures that even after paying commissions, you still make an adequate profit on each order.
Reducing dependency on any single platform improves your negotiating position:
Restaurant owners report that maintaining relationships with 2-3 delivery platforms creates healthy competition for your business and prevents any single company from having too much control over your delivery revenue.
The most effective strategy is encouraging customers to order directly from you:
You can shift your regular customer from third-party to direct ordering by simply including a discount card in every delivery bag that offers 10% off on the next direct order.
Now, let's understand how you can minimize the impact of these fees on your restaurant's profits through effective strategies.
When it comes to managing delivery costs, iOrders provides restaurants with a practical solution that eliminates the headaches associated with third-party platforms.
By offering a range of tools and services to simplify online ordering, helping restaurant owners keep more of their profits.
Let's explore how we can make a significant difference in managing delivery expenses.
One of the biggest advantages of using iOrders is that restaurants can offer online ordering without paying any commission fees.
Unlike DoorDash and other third-party platforms that take a significant portion of each sale, with iOrders, you keep 100% of the profit from every order.
It means you won't have to worry about those high commissions eating into your revenue, giving you more room to reinvest in your business.
By eliminating commission fees, we help you increase your overall profitability, making every sale more valuable.
When using third-party delivery platforms, you often forfeit access to valuable customer data. With iOrders, you have full control over your customer information.
It allows you to build stronger relationships with your clientele, tailor marketing efforts to specific preferences, and even create personalized loyalty programs.
Owning your customer data means you can develop targeted campaigns, track customer behavior, and create an experience that keeps them coming back, without relying on external platforms.
Moreover, iOrders' features, such as Smart Campaigns, Loyalty Rewards, and an AI-powered Review System, can help you utilize this data for more personalized marketing.
Managing orders from multiple platforms can be time-consuming and confusing. iOrders simplifies this process with an intuitive, all-in-one system.
From accepting orders to managing deliveries, they help streamline restaurant operations, saving time and reducing the potential for errors.
The platform is designed to enhance the overall customer experience while simplifying back-end operations. A more efficient operation means you can focus more on what really matters—delivering great food and excellent service.
iOrders provides a powerful solution for managing delivery costs, enabling restaurants to regain control over their margins and customer relationships.
Now, let's summarize our discussion and explore how combining these strategies can help you enhance the profitability of your restaurant.
Third-party delivery platforms like DoorDash offer convenience but their fees can hurt restaurant profitability. High commissions, service charges, and loss of customer data narrow profit margins, prompting restaurant owners to seek alternatives.
By switching to iOrders, restaurants can retain a greater share of their revenue, foster stronger customer relationships, and increase overall profitability, all while reducing their reliance on third-party platforms.
iOrders provides a solution to these challenges by offering commission-free online ordering, complete control over customer data, and the ability to streamline operations.
Ready to reclaim your profits and strengthen your restaurant's financial future?
Contact iOrders today to book a free demo and see how they can help you reduce delivery costs and increase profitability.
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