Quick answer: A delivery order is contributing only after its net revenue covers the dish's adjusted food cost, packaging, discounts and the delivery and payment fees that apply to that order. This is contribution margin, not net profit: rent, salaries, utilities, taxes and other operating costs are outside this per-order view.
Delivery can add useful sales, but a busy delivery channel can still hide weak economics. The practical question is not whether an order was received. It is what remains after the direct, variable costs of fulfilling that particular order.
The per-order delivery contribution formula
Use the same definition for every channel so the comparison is meaningful:
Adjusted food cost can include a yield or wastage uplift that you enter from your own recipe and wastage records. This is a contribution view, not a full profit-and-loss statement. It does not include fixed overheads, staff costs, marketing spend, aggregator-funded promotions, refunds, chargebacks or income-tax treatment.
A clearly labelled AED worked example
The following is an illustrative scenario, not a market-rate assumption or a price recommendation. It assumes a menu price of AED 50 that includes 5% VAT, an AED 5 customer discount, AED 14 ingredient cost, a 5% yield uplift, AED 2 packaging and a hypothetical 20% commission calculated on revenue excluding VAT. Actual commissions and fees vary by contract, channel, order type and commercial terms.
| Scenario input | AED or rate | Calculation |
|---|---|---|
| Menu price | AED 50.00 | Price shown to the customer |
| Customer discount | AED 5.00 | AED 50.00 - AED 5.00 = AED 45.00 |
| Revenue excluding 5% VAT | AED 42.86 | AED 45.00 / 1.05 |
| Adjusted food cost | AED 14.70 | AED 14.00 x 1.05 yield uplift |
| Packaging | AED 2.00 | Scenario input |
| Delivery commission | AED 8.57 | 20% x AED 42.86 |
| Payment fee | AED 1.00 | Scenario input |
| Contribution margin | AED 16.59 | AED 42.86 - AED 14.70 - AED 2.00 - AED 8.57 - AED 1.00 |
In this scenario, the contribution margin is 38.7% of net revenue. It is not net profit, and it should not be compared with another business's target without matching the assumptions.
Treat VAT and discounts consistently
First decide whether your menu price includes VAT, excludes VAT with VAT added at checkout, or should be assessed without a VAT adjustment for this scenario. Then apply the discount consistently before calculating the revenue that your commission is based on. Your contract and tax adviser can clarify how a particular platform settlement is presented; a spreadsheet cannot replace that review.
Discounts deserve their own line. A discount that is funded by the restaurant reduces the revenue in this calculation. If another party funds it, record that treatment separately rather than assuming every promotion has the same effect.
Review the inputs that move most often
- Recipe and yield: Compare actual purchase and wastage records with the recipe cost, especially for proteins and produce.
- Packaging: Include all order-specific packaging, not only the main container.
- Delivery terms: Enter the percentage commission or AED fee in the written agreement for the relevant channel. Do not use a generic aggregator rate.
- Payment fees and adjustments: Include only the order-level fees you can identify from settlements.
- Channel and brand: Compare like with like. A cloud-kitchen brand, dine-in order and delivery order often carry different variable costs.
The UAE Dish & Delivery Margin Calculator makes this scenario explicit without storing an order or asking for a login. For delivery operations with multiple brands or channels, see the cloud kitchen POS guide.
Questions to ask before changing a menu price
A per-order calculation can show the assumptions behind a price, but it cannot decide your menu strategy. Before changing a price, check demand, competitor positioning, customer perception, taxes, platform terms, kitchen capacity and the full operating profit-and-loss. Use the calculation as an owner review tool, not an automatic recommendation.
Frequently asked questions
Is delivery contribution margin the same as net profit?
No. Contribution margin subtracts the direct variable costs selected for one order. Net profit also accounts for wider operating costs and the business's accounting treatment.
Should delivery commission be calculated before or after VAT?
Use the basis stated in your delivery contract and settlement. The worked example uses revenue excluding VAT only as a labelled scenario; it is not a universal rule.
Why include a wastage or yield uplift?
Recipe cost may not capture trim, spoilage or yield differences. A transparent uplift lets an owner test how those observed losses affect a dish, then investigate the underlying recipe or wastage record.
Can this calculation tell me what to charge?
No. It can show the price required to reach a user-entered contribution scenario, but it is not a menu-price recommendation and does not forecast demand or full business profit.