Quick answer
On a delivery order you almost never keep what you think. From the gross price the customer pays, you have to strip out, in order: the platform commission, VAT on the commission, the food cost, and the packaging. On a typical £30 order at a 30% commission, the real contribution margin drops to about £8-9 (27-30%), not the £21 a "flat" 30% would suggest. Only by building the P&L line by line do you see which dishes hold up and which lose money.
Why delivery margin isn't what it looks like
The most common mistake is treating the selling price as if it were net revenue. In delivery it never is. Between you and the customer sits a platform that takes a cut, taxes that stack on top, and material costs that don't exist (or barely register) in your dining room.
The result is that the same dish has one margin dine-in and a completely different one in delivery. Operators who don't separate the two P&Ls reach month-end with rising revenue and flat profit — or worse, falling profit. Delivery generates volume, but volume without margin is just unpaid work.
To think about it correctly you need one concept: contribution margin per order. It's what's left after variable costs (commission, VAT, food cost, packaging), and it must cover fixed costs (staff, rent, utilities) and leave a profit.
The lines to subtract, in order
Let's build the full sequence. Each line applies in the right order, because some are calculated on the gross and others on the value of the previous line.
- Customer gross price: what the customer sees and pays in the app, food VAT included.
- Platform commission: a percentage of the gross, not the net. Typically 28-32% when the platform delivers.
- VAT on the commission: the platform invoices its commission with VAT. A VAT-registered business recovers it, but it hits cash flow and your immediate maths.
- Food cost: the cost of the dish's ingredients. Calculated on the dish value, not on the gross inflated by an app markup.
- Packaging: trays, lids, cutlery, bags, seals. A line that barely exists dine-in.
What's left after these four subtractions is contribution margin. From there, separately, you spread fixed costs.
The full worked example
Take a single £30 gross order, with platform delivery at 30%, food cost at 30%, and packaging at 4%.
| Line | Calculation | Amount | |---|---|---| | Customer gross price | — | £30.00 | | − Commission 30% | 30 × 0.30 | −£9.00 | | − VAT 22% on commission | 9 × 0.22 | −£1.98 | | − Food cost 30% | 30 × 0.30 | −£9.00 | | − Packaging 4% | 30 × 0.04 | −£1.20 | | Contribution margin | — | £8.82 |
On £30 taken in, you keep £8.82, or 29.4%. You still have to cover staff, rent and utilities from that. The same dish dine-in, with no commission and no VAT on it, would leave about £18 of gross margin — more than double.
The compact formula is:
Margin = Gross − (Gross × %comm) − (Gross × %comm × 0.22) − Food cost − Packaging
To test your real percentages dish by dish, use the dish margin calculator: change food cost and price and instantly see where you're losing money.
How margin shifts as the levers move
Margin isn't a fixed number: it depends on four levers you can move. Here's the same £30 order under different configurations.
| Scenario | Commission | Food cost | Packaging | Margin | % | |---|---|---|---|---|---| | Baseline | 30% | 30% | 4% | £8.82 | 29% | | High food cost | 30% | 38% | 4% | £6.42 | 21% | | Self-delivery | 18% | 30% | 4% | £13.03 | 43% | | With +12% app markup | 30% | 27%* | 4% | £11.30 | 34% |
*With a markup, food cost as a percentage falls because the selling price rises while ingredient cost stays the same.
The table says three things. First: high food cost destroys margin more than commission does. Second: switching to your own riders (self-delivery) radically changes the maths — but only if you have the volume to absorb the fixed costs. Third: a controlled markup on the app menu recovers much of what the commission takes away.
The role of app-price markup
Raising app prices above dine-in is common and legitimate practice, within limits. A +10-15% is the usual band: it absorbs the commission without scaring off the customer.
But watch two things. First, price-parity clauses: some contracts forbid showing higher prices on the app than in your venue. Read the contract before applying a markup. Second, customer perception: too aggressive a markup lowers conversion and drags down the average order value.
Markup should be tuned per dish, not applied across the board. Low food-cost dishes (pizza, dried pasta, fried items) handle delivery well even without a heavy markup; high food-cost dishes (fish, premium meats) need either a bigger markup or removal from the app menu.
Which dishes to keep (and drop) from the delivery menu
Not the whole menu belongs on the app. Selection is one of the most underrated margin levers.
- Keep: low food-cost dishes that travel well and arrive as they would dine-in. Pizza, pasta, bowls, sturdy sandwiches.
- Assess with a markup: medium food-cost dishes customers ask for anyway. Keep them, but at a higher app price.
- Drop: dishes that arrive ruined (delicate fried food, complex plating) or whose margin is too thin once commission is removed. They generate refunds, bad reviews and losses.
A delivery menu built for margin — not simply copied from dine-in — can lift the average margin per order by several percentage points without touching a single price.
Common mistakes
- Using the net price instead of the gross for commission: the platform always applies its percentage to the gross, VAT-inclusive figure. Getting this wrong understates the cost.
- Forgetting VAT on the commission: a "flat" 30% effectively becomes a burden near 37% once you add 22% VAT.
- Ignoring packaging: 3-6% of the order seems small, but across hundreds of orders a month it's a heavy line.
- Treating all dishes alike: some survive delivery, others lose money. Selling everything on the app without distinction is the most expensive mistake.
- Confusing revenue with margin: delivery inflates revenue but can leave profit flat. Always count contribution margin per order.
- Not separating the dine-in and delivery P&L: they're two different businesses with different margins. Lumping them together hides the channel's losses.
Related resources
- Dish margin calculator — how much each dish leaves you after food cost
- Delivery commission calculator — what you actually keep on each order, VAT included