Delivery platforms such as Deliveroo, Uber Eats, and Just Eat have experienced significant growth in recent years. For restaurants offering delivery-friendly products, these platforms represent a major opportunity to increase revenue.
However, with the sheer number of restaurants listed, visibility is a constant challenge. To stand out from the competition, it's now essential to leverage the marketing tools offered by these platforms, such as promotional offers and sponsored ads.
But these marketing tools come at an additional cost on top of the commissions already charged on each sale.
Since these platforms act as intermediaries, restaurants must pay a percentage of their total revenue in exchange for the services provided (order management, delivery, etc.). This fee is typically a commission based on gross sales (including VAT).
So, how can you ensure profitability on Deliveroo, Uber Eats, and Just Eat?
Here are four key steps to measure and optimize your profitability on these platforms:
Step 1: Calculate your gross margin on delivery 💰
The first essential step is to measure delivery performance in terms of gross margin, not just revenue.
It's possible to see a significant increase in sales but paradoxically make less profit. How? Due to rising variable costs associated with each order.
It's crucial to calculate your gross margin on delivery platforms:
Gross Margin = Total Sales (incl. VAT) - VAT - Platform Commission - Cost of Goods (incl. packaging) - Cost of Promotions - Cost of Sponsored Ads
Tracking this metric ensures you're not selling at a loss or overloading your kitchen staff without a profitable return.
Once you have this figure, the next step is to assess the profitability of your marketing efforts, such as promotions and sponsored ads.
Step 2: Measure the profitability of your marketing actions 🔍
Promotionaloffers🏷️
Three key indicators help assess the success of your promotional strategy:
1️⃣ Percentage of discounted orders
The goal of promotions isn't just to offer discounts to everyone but to boost visibility on the platform.
Deliveroo, Uber Eats, and Just Eat algorithms prioritize good deals for consumers. Promotions improve ranking, potentially landing your restaurant in high-visibility carousels.
The challenge is finding a promotional offer that enhances visibility, attracts customers, and doesn't significantly erode your margins. Ideally, 30-50% of orders in the promotional time slot should include the discount.
2️⃣ Average discount percentage per order
What's the actual discount rate across all orders during a promotional period?
Example:
- If you offer 30% off and 50% of customers choose it, your average discount per order is 15% (30% x 50%).
- If you offer 20% off and only 30% of customers opt for it, your average discount per order is 6% (20% x 30%).
Tracking this indicator allows precise measurement of each promotion's cost.
3️⃣ ROI (Return on Investment)
For every £1 spent on promotions, how much additional gross margin is generated?
Example:
- A Buy One Get One Free (BOGO) deal costs the cost of the free product.
- A 30% discount on a product means the promotional cost is 30% of the cost of goods sold for that item.
This metric helps compare different promotions to identify the best cost-to-impact ratio.
Sponsored Ads📢
Two key indicators determine the profitability of sponsored ads:
1️⃣ ROAS (Return on Ad Spend)
ROAS measures the revenue generated per pound spent on advertising.
Example:
- If spending £1 on ads generates £9 in revenue, the ROAS is 9.
There are two ways to calculate ROAS:
- ROAS J+7: Measures revenue from customers who ordered within 7 days of clicking the ad (used by Deliveroo, Uber Eats, and Just Eat).
- Direct ROAS: Measures only the sales made directly after clicking the ad. This provides an immediate impact assessment. Flynt tracks both Direct ROAS and ROAS J+7.
With ROAS, you can also determine advertising cost per order:
Advertising Cost per Order = Average Basket Size (incl. VAT) / ROAS
Example: If ROAS is 9 and the average basket is £27, then advertising cost per order is £3 (27/9).
2️⃣ Minimum ROAS for profitability
While ROAS indicates impact, it doesn't account for variable costs such as:
- Platform commission
- Cost of goods and packaging
- Promotional discounts
To ensure ads are profitable, calculate the minimum ROAS needed to generate enough revenue while maintaining a profit per order:
Gross Margin per Order = Basket Size (incl. VAT) - VAT - Platform Commission - Cost of Goods & Packaging - Promotional Cost - Advertising Cost per Order
If the gross margin per order is positive, the advertising strategy is profitable.
Step 3: Adjust your marketing strategy for maximum profitability 🎯
Now that you can measure your delivery profitability and marketing impact, the next step is refining your approach.
Ask yourself:
- Should I focus on promotional offers, sponsored ads, or both?
- What budget should I allocate for the best return on investment?
- Which time slots generate the highest returns?
- Should I target all platform users, new customers, or lapsed customers?
There's no one-size-fits-all answer. The right strategy depends on your brand, locations, and business model.
Testing different strategies allows you to identify what works best and maximise ROI.
💡 For a full guide on setting up a local marketing strategy on Deliveroo, Uber Eats, and Just Eat, check out our dedicated article.
Step 4: Automate your strategy for maximum efficiency 🚀
One final factor to consider is real-time activity levels across your locations.
It's inefficient to apply the same marketing budget or audience targeting during peak and off-peak hours. Overspending when demand is low wastes budget, while underspending during peak hours misses opportunities.
To optimise spending, try predicting peaks and dips in demand and scheduling marketing actions accordingly.
Alternatively, a tool like Flynt can detect real-time activity across your restaurants and automatically adjust marketing strategies, ensuring maximum profitability on Deliveroo, Uber Eats and Just Eat.
