How to Set Restaurant Delivery Zones, Fees and Minimum Orders

It’s 8pm on a Friday evening and the order is ready to go! However, your rider is still delivering an order across the town and will take longer than your team can reliably guarantee to get the order to your customer ready for dinner in 15 minutes.

Create delivery zones for your restaurants based on how long it takes to deliver to addresses during peak hours. Consider the costs of delivery to each zone, what you want to charge your customer and what minimum order value is required to cover costs. Test your rules before going live.

Start with your desired delivery time. Subtract the time it takes to prepare your order, assign and pick up from your rider and handover. This means you’ll know how much time you have to deliver.

For example, if you want to deliver in 40 minutes but it takes 20 minutes to prepare, 5 minutes to assign/pickup and 3 minutes to handover, then you will have 12 minutes to deliver. Look at what addresses your riders can deliver to in 12 minutes during your busiest shift.

Start with creating a delivery radius. Refine it based on roads, junctions and areas that will consistently impact your delivery time. Even if two addresses are 3km away from your kitchen, if one will consistently take longer to deliver to it should be put into a different delivery zone. Some delivery systems will use delivery based on distance, whilst others use custom areas on maps.

• Core zone - Addresses you can reliably deliver to during your lunch/dinner rush.

• Standard zone - Addresses that will take longer to deliver. Either increase the estimated delivery time or increase the delivery fee.

• Extended zone - Addresses you can deliver to but with a longer delivery window, increased minimum or limited delivery times.

If you have multiple outlets, create separate maps for each kitchen. Decide which outlet to send the order to if two zones overlap.

Calculate how much it will cost to deliver to each zone. This will include rider pay or courier costs. If you pay your riders per shift calculate an average based on how many orders you complete. Compare how long your riders will spend delivering to each zone, including return journeys or next pickup.

Delivery Fee = Estimated Delivery Fee Per Order – Amount You’re Willing To Absorb

For example, if the delivery fee for your standard zone is ₹65 but you’re willing to absorb ₹20 then your customer will pay ₹45. If your delivery cost is consistent across your delivery area then you can set a flat fee. If your outer areas regularly take longer to deliver then you can set a delivery fee per zone.

Clearly state the delivery fee and estimated delivery time once the customer has added their address. If they’re eligible for free delivery then state how much they need to add to their basket.

Your minimum order value should cover costs such as packaging, delivery fee you’re absorbing and aim to contribute towards your overhead and profit. Start with your contribution margin after variable food, labour and payment costs (if applicable). Before packaging and delivery.

Minimum Food Value = (Packaging Cost + Delivery Subsidy + Target Contribution) / Contribution Margin Rate

For example, if your contribution margin pre-packaging and delivery is 30%, packaging costs ₹15 and you’re absorbing ₹20 of delivery costs but want to contribute ₹40 towards your overhead and profit. Your initial minimum order value will be (₹15 + ₹20 + ₹40) / 0.30 = ₹250.

Make sure it’s realistic based on customer purchasing. If most of your customers are ordering lunch for ₹180 then it may put them off placing their order. You may want to keep the lower minimum for your core zone, offer a meal bundle or limit longer deliveries during lunch.

Calculate your free delivery. If you’re offering free delivery (so you’re absorbing all ₹65) then your break even point will be higher. Using the same assumptions you’ll need your basket to be worth ₹400 to contribute ₹40 towards your overhead and profit.

Below are example values. We’ve used a contribution margin of 30% before packaging and delivery, packaging costs of ₹15 per order and a target contribution of ₹40. Minimum order values have been rounded up where necessary.

Your standard zone matches your initial 40 minute delivery time. Your extended zone can take up to 8 minutes longer to deliver to. Based on our assumptions, it would take a minimum of 48 minutes to deliver. You could increase the estimated delivery time or only deliver to this zone when your kitchen and riders have capacity.

Test your delivery rules by placing some test orders using your mobile ordering system. Try ordering from just outside your delivery zone, at the exact minimum value, with a discount to bring it below the minimum value and from an area that covers two outlets. Make sure your customers know what rules apply and what they can do.

Once you start taking orders, look at how well you’re delivering on time, average order value, rider costs per order and cancellation rates. Use real time tracking to see how long your riders are taking to pick up. If your rider is spending most of their time waiting in the kitchen then look at adjusting your preparation times or rider assignment. If they’re getting delayed on the road then look at adjusting your delivery zone.

ReadyDelivery is a delivery management app that includes a branded app for your customers and admin panel. You can manage your orders, dispatch, drivers and payments. Bring your outlet address, draft map and delivery fees to your demo. Ask the team to demonstrate how you could manage your delivery zones, minimum order value and delivery times. Find out more about ReadyDelivery and book a free demo here .