OrderUp makes it easy for customers to order from the best delivery and takeout restaurants in their hometown! This online food ordering and credit card processing platform is unique compared to its competitors in that it has local franchise locations throughout the United States which allows them to develop personal relationships with their local merchants. They promote their partners through guerilla marketing tactics, email marketing campaigns, and a strong social media presence. It’s easy to see why a restaurant could be incentivized to partner with them, but what do these benefits cost?
What is means to partner up with OrderUp:
OrderUp can help restaurants reach new customers and build their brand name, but it’s not for free. So what does OrderUp charge for these services? And how are the cash flows of these partnered restaurants affected? Let’s take a look! Firstly, there are three main expenses that merchants incur with each order.
- Commission: In total, OrderUp takes about 15-19% commission per order. This is split up between the OrderUp company, which takes 5%, and the local OrderUp franchise, which takes 10-14%.
- Credit Card Processing Fees: The restaurants must absorb the 2.8% processing fees associated with each order.
- Sales Tax: This varies by state.
In addition, the restaurants are not paid immediately for these orders. OrderUp has organized its payment method to first collect the revenue from the customers and then pay its partners every Tuesday, after deducting the expenses. One tricky aspect of utilizing food services is the documentation of these revenues and expenses. So, how should these sales be entered into the Point of Sale (POS) system? To illustrate this, I will use an example where “Restaurant ABC” receives three orders within the week through OrderUp.
The three orders and the expenses associated with them are as follows.
Then on Tuesday, “Restaurant ABC” will receive an invoice equal to the Gross Delivery Totals + the Sales Tax – the Commission – the Credit Card Processing Fees. Note that OrderUp includes the Sales Tax in the deposit, this is because although OrderUp collects it from customers, the restaurants are the ones responsible for remitting it to the government at a later date.
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.
What are the effects on cash flows?
The utilization of OrderUp’s food delivery service coupled with their marketing techniques can lead to huge growth for any size restaurant. Even though restaurants are not able to retain 100% of the revenue, there are many positive effects on cash flows. Most importantly, it provides an opportunity to increase total sales revenue. In addition, weekly direct deposits limit the period of time between when orders are placed and when cash is collected. Lastly, the fact that sales tax is included in the direct deposits allows the restaurants to increase their cash on hand by “borrowing” this money before they remit it to the government.