Third-party delivery (3PD) companies, like Uber Eats and DoorDash, have transformed the restaurant industry by offering customers convenience and a broader range of dining options. Most restaurants rely exclusively on 3PD services, finding them more cost-effective than maintaining a delivery program. However, restaurant operators often voice concerns about high delivery fees eroding their profits, with franchisees particularly burdened by both 3PD fees and brand royalty fees. To determine the true impact of these costs (and manage them), it is essential for Finance and IT to ensure data integrity. This process involves navigating the complexities of internal systems and 3PD data and building robust reporting and analytics to accurately evaluate how 3PD affects the bottom line.
Leverage Technology for Internal Data Systems
Finance, operations, and IT must be in sync with a data structure that can effectively manage 3PD orders and operations. Below is an example of the types of systems that an order may pass through that will impact the record to report the financial process.
Key Considerations for Internal Data:
- Price Discrepancies: Companies typically raise prices on 3PD platforms to mitigate fees charged by 3PDs. Point of Sale (POS) systems should be able to store multiple pricing sets or leverage downstream systems to adjust pricing prior to entering the general ledger. Discrepancies between the general ledger pricing and 3PD pricing may exist due to POS integration issues or delayed pricing updates on 3PD websites, which may cause sales and sales tax variances.
- Tax Discrepancies: 3PD providers may use a different tax rate methodology than a given restaurant, leading to issues such as mismatches between tax rates, differences in tax rates between restaurant and delivery locations, and complexities with marketplace facilitator tax (MFT).
- Marketplace Facilitator Tax (MFT): 3PD providers can remit state and local taxes on behalf of restaurants, known as MFT. Restaurants may opt to set tax rates to 0% in the POS for MFT states to avoid accounting adjustments for tax liabilities. Consider that each 3PD vendor may define MFT states differently, and intra-state rules may vary by location, causing additional challenges for accounting.
- Refunded Orders: POS systems may not be able to accept order refunds directly from 3PDs, since customers often have up to three days to request a refund from the 3PD. Monitor refund details provided by the 3PD to ensure accurate accounting entries and determine the party responsible for refunds.
- Canceled Orders: Customers can cancel orders after they have been inputted into the restaurant POS. Like refunds, POS systems may not be able to capture canceled orders directly. Canceled orders should be monitored to prevent overstating sales. Some 3PD providers may compensate restaurants for prepared canceled orders, necessitating attention to contractual terms.
What The Finance Organization Can Do
- Perform transaction-level match for pricing, tax, and orders to ensure accurate accounting.
- Audit pricing on POS system and 3PD websites to ensure price controls are in place.
- Provide operations with a list of refunded and canceled orders to review with the 3PDs.
Ensure Data Integrity for External Data
Restaurants obtain data from the 3PDs through various means, including application programming interface (API) connections, file sharing, or direct downloads from the 3PD websites. Finance should be proactive in auditing the data for accuracy, as the 3PDs pay restaurants based on their own data. Below is the order to cash process from the 3PD perspective.
Key Considerations for External Data:
- Reporting Format: No industry standard reporting format currently exists, which poses a significant challenge for restaurants. Each 3PD vendor provides different data in a different format, making it critical for restaurants to understand the nuances of each data source. It is important to stay adaptable, as 3PD vendors may change their reporting structures, causing potential headaches for treasury, accounting, and IT.
- Promotions: Promotions are typically categorized into sales or delivery discounts, each with distinct accounting implications. Sales discounts affect revenue and have tax consequences, whereas delivery discounts only affect expenses. 3PDs may partially subsidize promotions to boost their own business. This subsidy, which is paid to the restaurant by the 3PD, impacts sales and sales tax and must be accounted for properly.
- Timing: Differences in date structures between 3PDs and restaurant POS systems can complicate order reconciliation. While 3PDs may define a day as midnight to 11:59 PM, restaurants might align dates with operating hours, such as 6:00 AM to 5:59 AM. This difference may be further muddied for national restaurant groups across time zones. Resolving these discrepancies is important for accurate month-end accounting.
- Payout Accuracy and Monitoring: Timing affects restaurant payouts. Refunds spanning payout periods can lead to reporting variances. Additionally, 3PDs apply additional fees like commissions, which are not captured in the POS. For multi-store groups, including store locations in bank descriptions helps track payouts by store.
What The Finance Organization Can Do
- Work with IT to develop a data structure that consolidates and standardizes 3PD reports for transactional matching and reporting & analytics.
- Set up automated journal entries to capture additional fees, promotions, and refunds not found in the POS.
- Perform store-level cash reconciliations. Consider maintaining separate bank accounts for 3PD-only activity.
Transform Data Into Insights
To effectively answer the question as to whether third-party delivery is profitable, accounting and finance must first ensure there is a single source of truth in financial data. Understanding and addressing the key considerations above will enable the finance organization to create a source of truth that can be leveraged for reporting and analytics across the business.
The Financial Planning and Analysis (FP&A) team possesses a significant opportunity to leverage data and transform it into actionable insights for both Finance and Operations. Developing dashboards and analytics to evaluate the performance of the 3PD empowers operators to make informed decisions and drive operational improvements.
Additional benefits include:
- Addressing root causes of inaccurate orders: By analyzing the data, the FP&A team can identify patterns or issues leading to inaccurate orders. For instance, if a significant number of milkshakes arrive melted, the team can consider investing in more insulated cups or even reconsidering the inclusion of milkshakes on the delivery menu. Similarly, if drivers are grabbing the wrong orders, operations could implement strategies like turning the bags at the counter and requiring drivers to confirm the order to minimize errors.
- Identifying key markets for targeted campaigns: Through data analysis, the FP&A team can compare the performance of different markets when promotions are implemented. By examining factors such as order count and size, FP&A can determine whether promotions are achieving the organization’s goals and whether they are driving profits or improving user engagement. This insight enables the team to optimize promotional activities and focus on markets that yield the best results.
- Challenging refunds: Refunds are typically handled by 3PDs, and customers often turn to them when encountering order-related issues. However, by running refund analytics, the FP&A team can ensure that the 3PDs can substantiate the restaurant's appropriate liability for refunded orders. Restaurants could be leaving a large pool of money on the table because of incorrectly flagged refunds. This analysis helps maintain fairness and accountability in the refund process.
By capitalizing on these data-driven insights, FP&A can work with the operations team to drive improvements, enhance customer satisfaction, and optimize business performance. Through reporting and analytics, restaurants can accurately evaluate the true profitability of third-party delivery.
Unlocking Potential with the Ankura Advantage
Ankura’s Office of the CFO® can support the design and implementation of Third-Party Delivery reporting and analytics, as well as ensure data integrity is maintained in every step of the process. With deep experience supporting private equity (PE) portfolio companies and large corporates, expertise in restaurants and retail, and a hands-on approach, Ankura OCFO® can bring a unique and deeply informed perspective that harnesses data to drive efficiencies and achieve a future state vision. We stand ready to optimize your third-party delivery ecosystem to drive actionable insights.
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
