Since 2014, the online food delivery business has expanded at a rate that’s three times that of dine-in traffic. The recent pandemic no doubt played a crucial role in increasing food delivery usage with perks including convenience, time savings, and limited contact. With the online food delivery market projected to become a $32 billion industry by 2024, many restaurants have turned to third-party delivery (TPD) services like Grubhub, DoorDash and Uber Eats to stake their claim of the pie. However, there is more to third-party delivery than one may expect. Here are some recommended TPD financial considerations to be made when taking the plunge.
Fees & Reconciliation Due Diligence
Price, fees and overcharge adjustments are a huge factor to consider when signing up with any TPD vendor. The per transaction fee can be as much as 10-30% depending on the location of your restaurant – the busier the area, the higher the fee. These fees can be compounded when orders are late, incorrect or never retrieved and the TPD vendor is required to issue a refund. Depending on the responsible party, fee adjustments must be made.
Visibility and control over delivery costs by type of service is critical to profitability. One way to streamline the process is through the use of software which allows you to access your TPD vendor reporting in real-time. POS integration is a great way to reduce the time spent tying up your TPD expenditures. Both allow for immediate matching of fees with orders. As always, don’t forget to make sure your restaurant’s financial information is entered and is correct to receive your portion of revenue.
Sales Tax Collection & Remittance
Sales tax collection has become a sticky subject for TPD vendors due to the introduction of marketplace facilitator laws thanks to Wayfair. Under marketplace facilitator laws, sales tax collection must be completed by a single entity rather than the individual sellers under said entity. This means in those states where marketplace facilitator laws are in place, TPD vendors may be considered a marketplace facilitator which would require them to collect and remit sales tax on behalf of their restaurant clients.
As an owner-operator, it is important to clearly understand the sales/use tax compliance terms outlined by your third-party delivery provider. Find out how they are handling marketplace facilitator laws, reporting such data, and in which states they are collection and remitting.
Some POS systems, like Toast, have direct integrations with TPD vendors to capture sales and distinguish between which taxes are being collected and remitted on a restaurant’s behalf and those which need to be included on the restaurant’s return.
These are just some of the financial & accounting considerations to be made when leveraging third-party delivery services. If you are struggling with tying out your TPD fees and commissions and would like to have an accounting team assist you, connect with our team. We can help – click the Connect With Us to learn more.
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Nicole Menden, Director