What order value should qualify for free delivery? Working it out by contribution

A free-delivery threshold costs the restaurant money before guests have reacted to it at all. Everyone who was already ordering that much stops paying the delivery fee. In this article’s model, a $35 threshold takes $630.50 a month from those orders. It has to earn that back through items guests add to their orders and through orders that would not have happened without it.

That is why candidate settings are compared by the delivery area’s contribution for the month: revenue from items and delivery fees minus variable costs. Average order value is the wrong yardstick here: it can rise even when the threshold lowers contribution. All figures are hypothetical: they describe one delivery area of a model restaurant in the United States, with amounts in US dollars.

The model

In the Eatery Club admin panel, a delivery area is one row of the «Радіуси доставки» (delivery areas) block, with its own terms. In the model area, an outside delivery service makes the deliveries, and the period is one month.

• Before the change, the guest pays a $5 delivery fee on every order; there is no free delivery, and the minimum order is $15. If your area already has a threshold, the baseline is last month with the current threshold. With no guest reaction, contribution changes only where the fee changes; reactions are counted for everyone, including guests who used to top up to the old threshold.
• The restaurant pays the delivery service $8 per trip within the area, whatever the order value, with no distance surcharges or volume discounts. Extra trips do not change the service’s rate and need no new fixed costs.
• Food cost is 30% of the item subtotal. Prices and the food-cost share are the same in both months, and items added to an order carry the same share.
• Packaging costs $1 per order, the same for delivery and pickup. Added items do not increase it, and a top-up does not reduce the guest’s next orders.
• All orders, pickup included, are paid online at the same prices. The card fee is 3% of the whole amount paid: items and delivery fee.
• The model assumes no sales tax; there are no promo codes, loyalty points, tips, cancellations or gross receipts taxes either. If you collect sales tax, count revenue without it, costs at what you actually pay for them, and the card fee on the amount the guest actually paid, that is, including the tax. Count any gross receipts tax on the base it is actually charged on.
• Thresholds and levels in the model apply from the amount itself: an order of exactly the threshold amount already gets the discount.
• Each guest places one order a month, except in scenario f, where two of a guest’s orders become one. Guests react to the new rule in the first month.
• Everything the area’s rule does not affect is the same in both months: the season, advertising, guest churn and new guests who would have come anyway.

Order contribution = items + delivery fee − food cost − packaging − card fee − courier

Show the delivery fee and courier cost on separate lines according to the contract with the delivery service. If the service collects the guest’s payment, check who is entitled to the fee, whether it offsets the trip charge, and which commissions the service withholds and on what amount. If the fee belongs to the restaurant and the service withholds it against the trip charge, show the full fee and the full trip charge. If the fee belongs to the service and covers part of the trip charge, enter 0 in the fee line and only the restaurant’s top-up in the courier line. If the service keeps the fee on top of a separate trip invoice, enter 0 in the fee line and the full invoice in the courier line. Count each commission once; do not add a withheld fee to costs a second time. In this article’s model, the $5 fee belongs to the restaurant, and a trip costs it $8. If the couriers are your own staff on a fixed wage, count for each new trip only what it adds to your costs.

An order of $40 before and after a $35 threshold:

Order of $40	Before	After
Items	$40.00	$40.00
Delivery fee	$5.00	$0.00
Food cost, 30%	−$12.00	−$12.00
Packaging	−$1.00	−$1.00
Card fee, 3%	−$1.35	−$1.20
Courier	−$8.00	−$8.00
Contribution	$22.65	$17.80

The courier was already delivering this order before the change, so the cost is the same in both columns. The $5 fee is gone, but so is the $0.15 card fee charged on it, so contribution fell by $4.85.

Order scenarios

The comparison is between the month before the change and the month after, in the same area. The model assigns every order to one of the scenarios below. That is an assumption of the model: the restaurant’s data does not show this split directly.

Scenario	What changed	Change in one order’s contribution	Where to look for candidates in your data
a. Already at or above the threshold	Same order, no fee anymore, the courier was making the trip anyway	minus the delivery fee net of the card fee on it	Last month’s orders at or above the threshold. If these guests keep ordering as before, this is the only scenario you can calculate before the change
b. Topped up to the threshold	The guest added items and got free delivery	contribution of the added items minus the delivery fee net of the card fee on it	Guests whose orders used to be below the threshold and are now at or above it
c. Truly additional	An order that would not exist without the threshold: a new guest or more frequent orders	the order’s whole contribution, with the courier already subtracted; at or above the threshold it carries no fee	A single order does not show this
d. Switched from pickup	Same order, now delivered with no fee	minus the courier	Guests who used to pick up their orders and now order delivery
e. Below the threshold, unchanged	Nothing	0	Orders below the threshold in both months
f. Combined orders	Several orders with a fee became one order at or above the threshold	contribution of the combined order minus the contributions of the orders it replaced: no fee, and one trip and one packaging instead of several	Guests who now have fewer orders but a larger amount per order
g. Lost because of the new terms	The guest no longer orders delivery in this area	minus the order’s whole contribution	Last month’s orders below the new minimum, if the minimum is raised, and guests who stopped ordering

For b, d and f, a guest’s history gives you only candidates: it shows that the order changed, but does not prove that the threshold changed it. For f, it does not even show which old orders the new one replaced, so matching two old orders to one new order is also an assumption of the model. The share of the change caused by the new rule itself in scenarios b, c, d, f and g is estimated by comparing them with the changes in a comparable area left unchanged over the same weeks, or set as an explicit assumption, as here.

Orders that moved over from another channel do not belong in scenario c. For them, count the difference:

Change in contribution = the order’s contribution with delivery − the same order’s contribution in its previous channel

For pickup, this is scenario d. If the order used to come through an aggregator, subtract the aggregator’s commission under your contract from the previous contribution; if it was a dine-in order, subtract the dining room’s variable costs.

The $35 threshold in detail

The month before the change, delivery in the area:

Item subtotal	Orders	Delivery fee	Contribution per order
$18.00	150	$5.00	$7.91
$26.00	200	$5.00	$13.27
$32.00	120	$5.00	$17.29
$40.00	90	$5.00	$22.65
$58.00	40	$5.00	$34.71
Total	600

Another 20 orders of $38.00 were picked up by guests whom the model assigns to this area, with a contribution of $24.46 each. Together these 620 orders brought in $9,831.40 of contribution, and this is the common base for all candidates.

For the $35 threshold, the model assumes these guest reactions: 50 guests with a $32 order top up by $5, 20 guests with a $26 order top up by $11, all 20 pickup guests switch to delivery, 15 guests place one order instead of two $18 orders, and 20 truly additional $37 orders appear. The model assumes no lost orders here; an unchanged minimum and an unchanged fee below the threshold do not guarantee that, so this is an assumption too.

Scenario	Orders	Item subtotal, $	Change per order	Change for the month
a	90	40	−$4.85	−$436.50
a	40	58	−$4.85	−$194.00
b, topped up by $5	50	32 → 37	−$1.50	−$75.00
b, topped up by $11	20	26 → 37	+$2.52	+$50.40
c	20	37	+$15.79	+$315.80
d	20	38, pickup → delivery	−$8.00	−$160.00
e	370	18 (120), 26 (180), 32 (70), unchanged	$0.00	$0.00
f	30 → 15	2 × 18 → 36	−$0.70 per guest	−$10.50
g	0			$0.00
Total				−$509.80

The area’s contribution for the month fell from $9,831.40 to $9,321.60, even though average delivery order value by item subtotal rose from $29.43 to $31.41 (+6.71%). The same difference, line by line:

Line	Change for the month
Items minus food cost and the card fee on them	+$810.70
Delivery fee minus the card fee on it: 370 orders pay it instead of 600	−$1,115.50
Courier: 625 trips instead of 600	−$200.00
Packaging: 625 orders instead of 620	−$5.00
Total	−$509.80

The lost delivery fee reduces contribution the most. The courier made 25 more trips: 20 for additional orders and 20 for guests who switched from pickup, minus 15 saved by combined orders.

What you know before the change. Last month, 130 orders were already at $35 or more. If these guests keep ordering as before, the threshold will take 130 × $4.85 = $630.50 a month from them.

How many additional orders are needed. All scenarios except c together give −$825.60. Each truly additional $37 order brings in $15.79, so with the other scenarios distributed this way you need 825.60 / 15.79 = 52.29, that is, at least 53 orders a month, or 8.83% of the area’s 600 deliveries. The model has 20 of them, and the $35 threshold reduces the area’s contribution by $509.80.

When a top-up pays off. Each dollar of added items leaves $0.67 after food cost and the card fee, so the lost $4.85 comes back once a guest adds at least $7.24. That is why scenario b splits in two in the model: a $5 top-up reduces contribution, and an $11 top-up increases it.

Three thresholds and two discount levels on one base

The same 620 orders can be calculated under other rules for the area. Guest reactions are set separately for each candidate, because they depend on how much guests are short of the threshold. The model assumes no lost orders in any of the four candidates, and each additional order is set slightly above the threshold or level.

• $30. The threshold already covers 250 orders. Of the 200 guests with a $26 order, 80 top up, each by $7. All 20 pickup guests switch to delivery, and 15 guests combine two $18 orders into one.
• $35. As in the calculation above.
• $45. The threshold already covers 40 orders. Of the 90 guests with a $40 order, 30 top up, each by $7; of the 120 guests with a $32 order, 10 top up, each by $15. Pickup guests do not top up to $45, and 5 guests combine two $26 orders into one.
• Two levels. Two discount levels in one area row: from $30 delivery costs $3 (a 40% discount), and from $45 it is free. The same guests top up as under the $30 and $45 thresholds. At the $3 fee, 10 pickup guests switch to delivery, and 15 guests combine two $18 orders into one.

	$30	$35	$45	Two levels
Guests behave as before	−$1,212.50	−$630.50	−$194.00	−$601.40
Topped up	−$12.80	−$24.60	+$47.20	+$344.80
Switched from pickup	−$160.00	−$160.00	$0.00	−$50.90
Combined orders	−$10.50	−$10.50	−$3.50	+$33.15
Total without additional orders	−$1,395.80	−$825.60	−$150.30	−$274.35
One additional order	$32: +$12.44	$37: +$15.79	$47: +$22.49	$35: +$17.36
Additional orders needed per month	113	53	7	16

The first row shows what the rule would take if every guest ordered as they did last month; the reaction rows show what guest behavior adds to that. You can calculate the first row on your own data before deciding, and the lower the threshold relative to your orders, the bigger the loss: with a $30 threshold the fee is lost on 250 orders, with $45 on only 40.

The other rows depend on assumptions. A $7 top-up to the $30 threshold gives −$0.16 per order, because it takes at least $7.24 to pay off. The same top-up to the $3 level in the two-level candidate gives +$2.75: the restaurant loses only $2 of the fee. Combining two $18 orders under the $35 threshold reduces contribution by $0.70, while at the $3 level it increases contribution by $2.21: there is one trip, and part of the fee remains. The assumption about top-ups to $45 in the two-level candidate is optimistic, because at the $30 level the guest already pays only $3. If nobody tops up to $45, the two-level candidate will need 23 additional orders instead of 16.

In this area, the $45 threshold needs the fewest additional orders and the $30 threshold the most. Whether those 7 or 113 orders are realistic, the model does not show: you test that by launching in one area and comparing the change in its contribution with the change in contribution of a comparable area left unchanged over the same weeks. Where more orders are at $45 or above, the candidates may rank differently.

A higher minimum order

A minimum order does not change the fee: it prevents orders below that amount from being placed. The candidate: a $20 minimum instead of $15, with the $5 fee on every delivery. It affects 150 orders of $18. The model assumes that guests top up 90 of these orders to the minimum, place 15 as pickup, and 45 disappear. In the model, the area’s minimum applies only to delivery.

Reaction	Orders	Change per order	Change for the month
Topped up to $20	90	+$1.34	+$120.60
Switched to pickup	15	+$3.15	+$47.25
Lost, scenario g	45	−$7.91	−$355.95
Total	150		−$188.10

A top-up to the minimum takes no fee away, so everything the added items leave after food cost and the card fee goes into contribution. Switching to pickup even adds $3.15 here: the $5 fee is less than the trip costs. Each lost order takes away $7.91. If everyone who stays, except the 15 on pickup, tops up to $20, the minimum pays off only if no more than 24 of the 150 orders are lost.

In this model, a delivery order breaks even at an item subtotal of about $6.19 and has a positive contribution from $6.20:

Break-even subtotal = (trip + packaging − fee net of the card fee) / the share left from each dollar of items

The current $15 minimum is well above this break-even point. A minimum raises contribution whatever the guests do only when the orders below it are loss-making (for example, in a distant area where the trip costs more), and neither those guests’ other orders nor the costs depend on the minimum. Here those orders bring in contribution, so the reactions decide the result: how many guests top up and how many are lost. The model does not count other reasons, such as kitchen load at peak hours.

What to set up in Eatery Club

The terms are set in the delivery zone card, in the «Радіуси доставки» row of the area you need: «Стандартна ціна доставки» (default delivery fee), «Сума замовлення для безкоштовної доставки» (order amount for free delivery), «Мін. сума замовлення» (minimum order amount) and discount levels, where an amount threshold gives its own delivery discount percentage. One zone card can hold several areas, so calculate the candidates for each area separately (delivery zones).

Before launching, use a test checkout to see which amount triggers the threshold and the minimum (the item subtotal or the amount due, before or after a promo code and payment with loyalty points), whether the threshold amount itself already gives free delivery, and how the levels combine with the threshold. Add items to the cart, enter an address in the area and look at the delivery fee without placing the order. Check the minimum and the threshold on the restaurant card the same way: it has its own «Мінімальна вартість замовлення» (minimum order amount) and «Мінімальна вартість безкоштовної доставки» (minimum amount for free delivery) (restaurant settings).

If the restaurant works with a POS, the «Послуги доставки» (delivery services) field in the area row has to match the service in the POS; otherwise the delivery fee in the panel and at the POS will differ. «Правила доставки» (delivery rules) are only text for the guest and calculate nothing (delivery rules): if the text names a threshold or a price, update it together with the area.

Where to get the data

The calculation needs the area’s orders for the month: item subtotal, delivery fee, whether the order was delivered or picked up and, for scenarios b, d and f, a link to the guest. The «Замовлення» (orders) list has the columns «Клієнт», «Ресторан», «Вартість доставки», «Тип доставки», «Вартість замовлення» and «Сума до сплати»: guest, restaurant, delivery amount, delivery type, products total and amount due (orders). An order belongs to an area by its delivery address, and a pickup guest by the address of their deliveries before or after the change, if they have any; for guests with no deliveries the area is unknown, so count them separately. The export is started from the «Замовлення» section, and the finished file is in «Налаштування → Експорт» (Settings → Export): check whether it contains the address and the other fields you need, and take any that are missing from the POS (data export).

«Статистика доставки» (delivery statistics) shows average order value for delivery and for pickup separately, but a per-area calculation needs data for every order, and POS and shift reports come from the POS system (delivery statistics). Take the trip cost from the delivery service’s invoices or your own records: the guide to «Кур’єри» (couriers) describes fields for the restaurant’s own couriers and how to assign one to an order, but gives no trip rate or actual trip cost (couriers).

How to decide

1. Take the area’s orders for last month and calculate the contribution of each one, recording the fee and the trip separately.
2. For each candidate, calculate what the rule would take from last month’s orders if guests ordered the same way.
3. Write down your assumptions: who will top up and by how much, who will switch from pickup, who will combine orders and who will stop ordering.
4. Calculate how many truly additional orders each candidate needs.
5. Check the threshold, the minimum and the levels with a test checkout.
6. Launch the candidate in one area, leave a comparable area unchanged for the same weeks, and compare how much each area’s contribution changed relative to the month before the launch.

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The Help Center’s Delivery section explains how to set up delivery zones and discount levels and where to find delivery statistics in Eatery Club.