DoorDash aims to “turn the art of food delivery into a perfect science” with their advanced logistics software. Their mission is to bring customers their food faster and fresher. The estimated delivery time is based on an algorithm, with their goal being to deliver the customer’s meal within an hour or less. DoorDash can expand the customer base of a restaurant and bring an inflow of orders, but is it worth the costs?
So, does a partnership with DoorDash mean Big Cash?
The integration into food delivery comes with a price for restaurant owners as they no longer get to keep the all of the earnings, but it may still be a successful marketing tool! In order to understand if a partnership with DoorDash means big cash for the merchant, let’s take a look it’s effects on cash flows. Firstly, there are four expenses that a partner incurs.
- Commission: Although the rate is negotiable and fluctuates among restaurants, DoorDash typically charges a commision of 20% for its services.
- Sales Tax : Varies by state.
- Tablet Fee (Optional): Restaurants can elect to sign up for a tablet subscription, costing $15 per week. The tablet helps streamline operations by providing data driven insights about the restaurant and can be used to quickly receive the orders that are made through DoorDash.
- Error Charges: These charges occur anytime there are issues with orders, for example if a customer complains about a missing or wrong item. The restaurants are responsible for absorbing these expenses.
Note: The restaurants receive all the orders from DoorDash over fax, computer, or tablet and are not responsible for paying any credit card processing fees.
In addition, merchants experience a lapse between when the sales are made and when cash is received. This is because DoorDash initially collects the sales revenue from customers and then pays its partners via weekly direct deposits, after deducting the expenses. This could complicate bookkeeping, so how should restaurant owners enter this revenue into the Point of Sale (POS) system? We will illustrate this process using an example where “Restaurant ABC” receives three orders throughout the week through DoorDash.
The three orders and expenses associated with them are as follows.
“Restaurant ABC” will then receive a direct deposit for these orders. The invoice is equal to to the Gross Delivery Totals for the week + the Sales Tax – the Commission Fees – any Error Charges – the Tablet Fee (if applicable). The Sales Tax is added to the invoice because although DoorDash collects it from customers, it is the responsibility of the restaurant to remit it to the government. For this example, we will assume the restaurant doesn’t incur any error charges for the week, but does have a tablet subscription.
Now that “Restaurant ABC” has received the invoice, is simple to post this revenue into the general journal ledger. Sales revenue made through delivery services should be entered as method of payment in the POS system and QuickBooks. This is much easier with an automatic daily sales entry program, such as POS Link, as it saves time and ensures accuracy.
How does this partnership affect Cash Flows?
Although a partnership with DoorDash causes the merchants to incur some expenses, it offers them the opportunity to expand their customer base and increase their total revenue. One positive aspect about DoorDash is that it pays its partners once a week, which limits the time between the cash outflow associated with the orders (buying the ingredients, wage expenses, ect.) to the cash inflow. In addition, the fact that the restaurants retain the sales tax until they must remit it to the government allows the restaurant to have more cash on hand for the investment into the business and to cover daily operational costs.