Free delivery promotions can slash your monthly profit by 15-25% even when order volume doubles. Most restaurant owners focus on increased sales but overlook the hidden costs eating their margins. Here's how to calculate the real financial impact before launching your next promotion.
What a free delivery promotion actually costs you
Your customers normally pay €2.50 for delivery. During a free promotion, those costs come straight from your pocket. But the damage goes deeper:
- You absorb delivery fees for every single order
- Platform commissions still apply (15-30% on total order value)
- Higher order volume but thinner margins per transaction
- Some customers order smaller amounts without delivery minimums
⚠️ Heads up:
"Free" delivery isn't free for you. Every delivery fee transfers directly from customer payment to your expense sheet.
Calculate your per-order cost increase
Each promotional order carries additional expenses you need to quantify:
💡 Example:
Standard order vs. free delivery scenario:
- Order total: €25.00
- Delivery fee normally: €2.50 (customer covers this)
- Platform commission: €6.25 (25% of €25)
- Your standard revenue: €21.25
During free delivery:
- Order total: €25.00
- Delivery fee: €2.50 (now your expense)
- Platform commission: €6.25
- Your reduced revenue: €16.25
Revenue drop: €5.00 per order
Use this formula: Additional cost per order = Delivery fee + (Delivery fee × Platform commission rate)
Monthly margin impact calculation
You'll need these metrics to assess the promotion's true cost:
- Additional orders generated by the promotion
- Average order size during promotional period
- Your standard profit margin per order
- Promotion length in days
💡 Example calculation:
7-day free delivery campaign:
- Typical daily orders: 20
- Promotional daily orders: 35
- Additional orders: 15 daily × 7 days = 105 total
- Cost increase per order: €5.00
- Total promotional expense: 105 × €5.00 = €525
However, you gain extra revenue:
- 15 bonus orders × €25 average = €375 additional sales
- Profit on bonus orders (assuming 35% margin): €131.25
- Net financial impact: €131.25 - €525 = -€393.75
This promotion costs you €394 for the week
Determining if free delivery pays off
Free delivery promotions justify their cost only if:
- You acquire substantial new customers who reorder regularly
- Average order values rise significantly during the campaign
- You can amortize costs across future purchases from new customers
⚠️ Heads up:
More orders don't automatically mean more profit. Losing money per order means higher volume equals bigger losses - a pattern we see repeatedly in restaurant financials.
Better promotional alternatives for margins
Consider these margin-friendly alternatives:
- Reduced minimum orders: Drop from €20 to €15 threshold
- Percentage discounts: 10% off entire order
- Value-add bonuses: Free dessert with €25+ orders
- Loyalty rewards: Fourth order free after three purchases
💡 Example alternative:
10% discount vs. free delivery:
- Order total: €25.00
- Customer discount: €2.50
- Customer pays: €22.50 + €2.50 delivery = €25.00
- Your revenue: €16.25 (identical to free delivery)
Advantage: customers don't resent delivery charges
Monitor your promotional performance
Track these metrics throughout and after your campaign:
- New customer ratio vs. repeat customer orders
- 30-day retention rate for newly acquired customers
- Order value changes during and post-promotion
- Long-term cost recovery vs. additional margin generated
Food cost tracking tools like KitchenNmbrs help you monitor order patterns and profit margins across different platforms, revealing which promotions actually boost your bottom line.
How do you calculate the impact of free delivery on your margin?
Calculate your extra costs per order
Add up the delivery costs you normally don't pay. These are usually €2.50-€3.50 per order. Keep in mind: you also pay platform commission on these costs.
Estimate the number of extra orders
Compare your normal order numbers with what you expect during the promotion. Calculate conservatively: better a positive surprise than a letdown.
Calculate the total cost of the promotion
Multiply extra costs per order by the number of extra orders and the duration of the promotion. Subtract the extra margin you earn on the extra orders from that.
✨ Pro tip
Run a 48-hour test promotion before committing to longer campaigns. You'll spot potential margin issues early and can adjust your strategy without major financial exposure.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
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Frequently asked questions
Do I owe VAT on delivery costs I absorb during promotions?
No additional VAT applies to absorbed delivery fees. These costs simply become marketing expenses for your restaurant operation.
How can I verify if new customers actually return after promotions?
Monitor your platform analytics to track repeat purchase rates. Look for new customers who reorder within 30 days. Anything below 20% typically indicates poor long-term value.
Can I terminate a promotion early if costs spiral out of control?
Most platforms allow mid-campaign adjustments or cancellations. Always review the specific terms before launching any promotional campaign.
What should I do if average order values drop during free delivery?
The promotion becomes more expensive than projected when order sizes shrink. Consider implementing minimum order requirements like €20 or €25 for free delivery eligibility.
Is it more profitable to run promotions independently versus through delivery platforms?
Platform promotions reach wider audiences but incur commission fees on discounted amounts. Direct social media promotions often cost less but have limited reach.
How do I calculate customer acquisition cost during delivery promotions?
Divide total promotion expenses by the number of genuinely new customers acquired. Factor in their projected lifetime value to determine if acquisition costs are sustainable.
Should I adjust my menu prices before running free delivery campaigns?
Some restaurants temporarily raise prices by €1-2 during free delivery periods to offset costs. Test this carefully as it can backfire if customers notice the increase.
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
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