Recently, Dustin Minton, Director of Restaurant Services, had the opportunity to participate in Restaurant Research’s first podcast, RRin5, featuring five-minute discussions on industry hot topics. To kick off the launch of their podcast series, Dustin had the opportunity to discuss the profitability and accounting treatment of delivery fees, exploring the profitability under differing scenarios, as well as the GAAP accounting treatment. Although delivery does add incremental sales, the profitability under most scenarios, except the traditional pizza scenario, results in a loss on the sale. We all understand the need to keep a competitive edge and relevance to our customers; is there another delivery option to consider that pizza has long understood or is there more pressure to be added on DSP fees to make it more profitable? There are many factors to consider and we will undoubtedly continue to see evolution in the delivery arena as it continues to grow.
In addition, it is important to understand the different types of GAAP accounting treatments for delivery related to being the principal versus agent. It all depends on whether the restaurant or the DSP has “control” over the transaction which is based on your contract with the DSP. Having two different accounting presentations will make it harder for companies to benchmark themselves against each other as the delivery mix continues to grow.
To learn more, check out RRin5: Accounting For Delivery featuring Dustin Minton.