Delivery commission in the UAE, costed honestly

A café owner opens the platform statement at the end of the month and sees the headline: hundreds of orders, a healthy total and a commission line that looks about right for the rate in the contract. The kitchen was busy every evening, the riders came and went, and the delivery tablet barely stopped. Then the accountant works out what the venue actually kept from those orders, after the VAT, the packaging, the promotions it agreed to and the refunds for missing items, and the figure is far smaller than anyone expected.

The delivery commission in the UAE is the largest single cost of most delivery orders, but it is not the only one, and a sum that stops at the commission flatters the channel. Costing a delivery order honestly means taking the VAT out first, counting the commission on the right base, adding the costs the platform causes as well as the ones it charges, and comparing the result with what the same order would leave through your own site, with its own costs counted just as honestly.

This guide costs one illustrative AED 120 order line by line, first through a delivery platform and then through the venue's own ordering site with its own delivery, and tests what changes with volume, price, promotions and refunds. The rates are examples, not any platform's terms: commission rates differ by platform, by contract and by venue, so take yours from your own agreement. Every venue and figure in it is an example.

The quick sum most venues do is the order value, minus the commission, minus the food. It is a useful start, but it leaves out several costs that every delivery order carries: the VAT that was never the venue's money, the packaging, the payment and service fees, the promotions the venue funds, the refunds for errors and the share of the kitchen's time.

Each is small on its own. Together they can take as much again as the commission, and they decide whether a busy delivery channel is earning or simply keeping the kitchen occupied. The honest sum is longer, but it only has to be built once, and then it can be checked every month against the statements.

Commission is the share of each order a delivery platform keeps in return for what it provides: the listing in its app, the guest who finds the venue there, the payment the guest makes in the app and, on many contracts, the rider who carries the order. Contracts where the platform supplies the rider usually carry a higher rate than those where the venue delivers itself or the guest collects.

The rate is only part of the agreement. Contracts can also set fees for payment processing, for marketing placement, for promotions and for tablets or other equipment, and the terms for refunds when an order goes wrong. Our guide to delivery in Dubai: the channels and the margins sets out the market; this guide does the sum.

The order is a family dinner from an invented casual venue: two mains, a side, a dessert and two soft drinks. The guest pays AED 120.00 for it in the app, the same price as on the venue's dining-room menu, with VAT included in the price, as prices shown to guests in the UAE normally are.

The food and drink cost is 30 per cent of the price before VAT, and the packaging for the order, the bags, boxes, cups and labels, costs AED 4.00. The rates and fees that follow are illustrative: a platform commission of 25 per cent, a card fee of 2.5 per cent and a rider at AED 12.00 an order. None of them is a quote from any platform or courier.

The first line of an honest sum is the tax. VAT in the UAE is 5 per cent, and when a price includes it, the tax is one part in twenty-one of the total: AED 5.71 of the AED 120.00. That money belongs to the Federal Tax Authority, and the venue only holds it until the return is due.

So the venue's sales from this order are AED 114.29, not AED 120.00. Every percentage in the sum, from the food cost to the margin, should be worked out on that figure. A quick sum that starts from the price the guest paid overstates what the venue earned before a single cost has been taken off. Our guide to VAT on restaurant sales in the UAE covers the basics of value added tax for a venue.

In this example, the aggregator commission is 25 per cent of the full amount the guest paid: AED 30.00 on the AED 120.00 order. That is the line most venues watch, and it is the largest cost in the sum, larger even than the food.

Whether the rate applies to the price including VAT or excluding it depends on the contract, and the difference is worth knowing. On the price before VAT, the same 25 per cent would be AED 28.57. Our guide to aggregator commission: the real cost of an order costs a smaller order the same way, line by line.

When commission is charged on the price including VAT, part of it is charged on the tax itself. In this example, 25 per cent of the AED 5.71 of VAT is AED 1.43: commission paid on money that was never the venue's to keep.

It is not a large sum on one order, but across a month of orders it adds up, and it is easy to miss because it never appears as a line of its own. Read the contract's definition of the order value, and if the rate is charged on the total including VAT, count the effect in the sum.

The platform's commission is a service it sells to the venue, and in the UAE that service normally carries VAT of its own: 5 per cent of AED 30.00 is AED 1.50. A venue registered for VAT can normally recover it as input tax, as long as it holds a valid tax invoice from the platform, so for that venue it is a matter of cash flow rather than cost.

A venue that is not registered for VAT cannot recover it, and for that venue the AED 1.50 is a real cost on every order. Check with your accountant how the platform invoices its commission and whether the VAT on it is being reclaimed. A statement that shows commission without the tax invoice behind it makes the return harder.

The food and drink cost is 30 per cent of AED 114.29: AED 34.29. It is the same food the dining room would serve, but delivery adds a cost the dining room does not have: the packaging, at AED 4.00 for this order.

Packaging is often underestimated because it is bought in bulk and nobody costs it per order. Count every item that leaves with a delivery: the bag, the boxes, the lids, the cups, the sauce pots, the cutlery, the napkins and the seal or sticker. A dish that needs two containers to arrive well costs more to send than one that travels in one. Our guide to a delivery menu that is not your dining room menu covers the dishes that travel well.

Here is the platform order, line by line:

The venue is left with AED 46.00 from the order, about 40 per cent of its sales, to pay the kitchen team, the rent, the utilities and everything else, and to make a profit. The same dishes served in the dining room would leave AED 80.00, before the costs of serving them at a table.

Now take the same order through the venue's own ordering site, with the venue arranging the delivery. The guest pays the same AED 120.00, and the VAT, the food and the packaging are the same as before. What changes is everything the platform did: someone has to carry the order, take the payment, run the ordering system and bring the guest to the site in the first place.

Own delivery replaces the commission with costs of its own. They are usually smaller per order, but some of them are fixed each month, and that changes the picture as the number of orders changes. Our guide to own delivery vs aggregator: the real comparison weighs the two in full.

The largest cost of own delivery is the rider. In this example the venue pays a courier AED 12.00 an order, which makes the sum simple. A venue that employs its own riders has a harder sum to do: the salary, the visa and the other costs of employment, the motorcycle or car, fuel, maintenance, insurance, the phone, the uniform and the delivery box, divided by the orders each rider actually carries.

An employed rider who carries many orders an hour can cost less per order than a courier; one who waits through a quiet afternoon costs the same and carries nothing. Work out the cost per order from a real month, including the quiet hours, rather than from the busiest evening.

The venue's own site needs an ordering system: the menu, the checkout and a way for the order to reach the kitchen. In this example it costs AED 1,000 a month, and at 500 orders a month that is AED 2.00 an order. The guest pays by card, and the card fee, at an illustrative 2.5 per cent of AED 120.00, is AED 3.00.

The system's cost is fixed, so its share of each order falls as orders rise and rises as they fall. The card fee follows the order value. Both are smaller than the commission, but neither is zero, and a sum that compares the platform with "free" direct orders is not an honest one.

Here is the own-site order, line by line:

The venue is left with AED 59.00, AED 13.00 more than through the platform. On 500 orders a month, that is AED 6,500 more, which is why own delivery is attractive. It is also before the cost that decides whether those 500 orders arrive at all.

A platform brings guests who were already looking for food in its app. The venue's own site brings only the guests the venue sends to it: regulars who are told about it, guests who find it in a search, and anyone who sees a card in the bag of a platform order and orders direct next time. Each of those takes effort, and most take money.

In this example, the venue spends AED 2,000 a month on marketing for its own site. At 500 orders a month, that is AED 4.00 an order, and the own-site order leaves AED 55.00, still AED 9.00 more than the platform. At 250 orders, the system and marketing come to AED 12.00 an order, and the order leaves AED 49.00, only AED 3.00 more. At 100 orders, they come to AED 30.00 an order, and the order leaves AED 31.00, AED 15.00 less than through the platform.

The sum can be turned round to find the number of direct orders the venue needs for its own site to beat the platform. Before its fixed costs, each own-site order leaves AED 61.00: the sales, less the card fee, the rider, the food and the packaging. The platform order leaves AED 46.00. Each direct order therefore earns AED 15.00 more, before the monthly costs.

The fixed costs here are AED 3,000 a month: the system and the marketing. Divided by AED 15.00, that is 200 orders a month. Below 200 direct orders, the own site earns less than the platform would have; above it, it earns more. Every venue's figures will differ, but the method holds: find your own number before investing in a site of your own.

Many venues charge more on a platform than in the dining room, to recover part of the commission. Delivery pricing of this kind is common, and guests are used to small differences between the app and the menu. In this example, raising the platform price by 10 per cent, to AED 132.00, changes the sum: sales become AED 125.71, the commission AED 33.00, and the food and packaging stay the same.

The platform order then leaves AED 54.43 instead of AED 46.00, close to the AED 55.00 the own site leaves at 500 orders. A higher price may sell fewer orders, so test it on part of the menu first. Our guide to delivery pricing: why the menu price must differ covers how to set it.

Some platforms offer a collection option, where the guest orders in the app and collects the order from the venue. With no rider to pay, the commission on collection is usually lower than on delivery. At an illustrative 15 per cent, the AED 120.00 order pays AED 18.00 in commission and leaves AED 58.00, close to the own-site figure.

Collection suits venues with a passing trade, parking nearby or a counter that can hand orders over quickly without disturbing the dining room. It needs a clear place for guests to wait and a team that knows which orders are ready.

Platforms offer promotions: a discount on the menu, free delivery for the guest, a bundle or a place higher in the app. A promotion funded by the venue is a cost, and it is easy to underestimate because the commission is still charged on what the guest pays.

Take a 20 per cent discount funded by the venue on the AED 120.00 order. The guest pays AED 96.00, of which AED 4.57 is VAT, so sales are AED 91.43. The commission is AED 24.00, and the food and packaging still cost AED 38.29. The order leaves AED 29.14 instead of AED 46.00: the promotion has cost AED 16.86 on this order, more than a third of what it would have earned. Our guide to offer margin: the sum to do before you publish covers the sum in detail.

When an order arrives wrong, late or with an item missing, the guest is refunded, and on many contracts the venue pays for the refund when the error was its own. The food has been cooked and packed, so the venue loses the cost as well as the sale. In some agreements the commission is not returned either.

Suppose one order in twenty-five has a refund at the venue's expense, at an average of AED 30.00. Spread across every order, that is AED 1.20 an order. It is small on one order and significant across a month, and it is the cost most directly in the venue's own hands: a checking step at the pass, before the bag is sealed, prevents most of it.

The sums so far leave labour aside, because the kitchen team is paid whether an order comes from the app or the dining room. But delivery adds work of its own: packing, checking, labelling and handing over, at the same time as the dining room is busy. A venue with a heavy delivery trade often needs someone at the pass for delivery alone.

Count that person's hours in the delivery costs if they would not be needed without it. Our guide to delivery and the kitchen: two services at once covers how to run both without either suffering.

The effective commission rate is everything a platform keeps or causes the venue to give back, divided by the value of the orders. In this example, the AED 30.00 commission plus AED 1.20 of refunds is AED 31.20 on an AED 120.00 order: an effective rate of 26 per cent, against a headline rate of 25.

Add promotion costs, marketing fees or tablet charges, and the effective rate climbs further. Work it out from the monthly statement, not from the contract: the contract shows the rate, but the statement shows what the channel actually cost.

A platform statement usually lists the orders, their value, the commission, the fees, the promotions and the refunds, and the amount paid out to the venue. Reconcile it every month: check that the orders match the kitchen's records, that the rate matches the contract and that every refund has a reason the venue accepts.

Errors happen in both directions, and a venue that never checks its statements will never find them. Keep the statements with the tax invoices for the commission, because the accountant needs both. Our guide to delivery aggregators: the deal, read properly covers the contract terms behind each line.

Delivery in Dubai follows the year as the dining room does, but not always in the same direction. In the hottest months, when the terrace is empty, delivery often holds up better than the dining room; in the cooler months, when guests want to sit outside, the dining room gains and delivery may slow. Ramadan changes the pattern again, with orders gathering around iftar and later in the evening.

Cost the channel across the year, not in one month. A margin that looks thin in January may be the venue's mainstay in August, and a decision to leave a platform should be tested against the summer as well as the season. Our guide to Ramadan restaurant hours and the service that fits covers the month itself.

Platforms collect payment from the guest and usually pay the venue on a cycle, after their deductions. The venue pays for the food, the packaging and the team before the money arrives. On the venue's own site, card payments reach the venue through its payment provider, on that provider's own timetable.

Neither changes the margin, but both affect cash flow, and a growing delivery trade can strain it. Know when each channel pays, and plan the supplier payments and the rent around it.

Before signing, or renewing, read the terms that change the sum: the commission for each type of order, whether it is charged on the price before or after VAT, the fees, the share of promotion costs, the refund rules, the payment cycle, the contract length and notice period, and any exclusivity that stops the venue listing elsewhere.

Exclusivity sometimes comes with a lower rate. Cost it both ways: the lower rate on all orders through one platform, against the orders the venue might win from others. A rate that looks better can cost more if it closes the other channels.

The sum can also be done dish by dish. Take a burger priced at AED 52.50 including VAT, or AED 50.00 before it, with a food cost of AED 15.00. In the dining room, it leaves AED 35.00 before the cost of serving it. Through the platform at 25 per cent of AED 52.50, the commission takes AED 13.13, and packaging adds AED 1.50, leaving AED 20.37: about 58 per cent of what it leaves in the dining room.

Doing the sum for each dish shows which ones travel profitably and which barely earn. A dish with a high food cost and bulky packaging may be better left off the delivery menu altogether, or priced for the channel.

Here is the honest sum, in order, for any delivery order:

Run it once a month for each channel, from the statements rather than the contract. It takes less than an hour once the sheet is built, and it is the only way to know which orders earn.

servearound takes no delivery or takeaway orders and does not connect to any delivery platform, so the delivery side of this sum comes from each platform's statements and your own ordering system. Orders in servearound are for seated tables, on the point of sale and the table's QR menu.

What servearound holds is the dining-room side of the comparison. Payment analytics show what was collected by day and by hour, the dashboard shows revenue, covers and spend per cover against the previous period, and the menu report shows units sold, revenue and share of sales for every dish, the dining-room figures to set beside each dish's delivery sum. servearound itself is priced per venue, per month, rather than per order. See Analytics and pricing.

The share of each order a delivery platform keeps. Rates differ by platform, contract and service, so take yours from your own agreement.

That depends on the contract. Check it, because commission on the price including VAT is partly charged on the tax.

A venue registered for VAT can normally recover it as input tax with a valid tax invoice. Check with your accountant.

No. It saves the commission but adds riders, card fees, a system and marketing, and below a certain number of orders it earns less.

Divide the own site's monthly fixed costs by what each direct order earns over a platform order. In the example, 200 a month.

Many venues charge more on platforms to recover part of the commission. Test it on part of the menu first.

Sometimes. Cost them first: the discount and the commission both come out of the order.

Monthly, from the statements, for each channel.

The delivery commission in the UAE is the biggest cost of most delivery orders, but an honest sum counts more: take the VAT out first, check whether the commission is charged on the tax, reclaim the VAT on the commission invoice where you can, and count the food, packaging, fees, promotions and refunds. In the example, an AED 120.00 order leaves AED 46.00 through a platform.

Through the venue's own site, with own delivery, the same order leaves AED 59.00 before marketing, and the site beats the platform only above about 200 orders a month. Delivery pricing, collection and careful promotions all change the sum, so run it for each channel every month, from the statements, and decide where delivery in Dubai earns rather than where it is merely busiest.