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Negotiating exclusivity offer from third-party delivery apps

Updated: Mar 26


Negotiating exclusivity offer from third-party delivery apps

As a restaurant owner, you’re likely familiar with the benefits and challenges that come with partnering with delivery apps. Typically an exclusivity offer on the table from a delivery app ( such as UberEats, DoorDash) presents both opportunities and potential pitfalls. A sample offer may look like this (taken from reddit*).


3-year exclusive contract . 6 months with no commission. After that, a 15%/20% commission split (15% for non-Pass orders, 20% for Pass holders). $20,000 sign-on bonus (paid after the 6-month no commission period). Run a BOGO (buy one, get one free) promotion during those first 6 months.


Let’s break down the key points of this offer and consider the advantages, disadvantages, and areas where you might negotiate better terms.


1. 3-Year Exclusive Contract

  • Advantage: Committing to a single platform can streamline your delivery operations, as you’ll only need to manage one system.

  • Disadvantage: Exclusivity means you won’t be able to work with other delivery apps, potentially limiting your customer base and negotiating power. If the market shifts or a better offer comes along, you’re locked in for three years.

Negotiation Tip: Shorten the exclusivity period or ask for an option to opt out after a year if the partnership isn’t meeting expectations.


2. 6 Months with No Commission

  • Advantage: This gives you a cost-free period to test out the partnership and build your delivery business without losing a cut of your sales.

  • Disadvantage: While this is a generous offer upfront, the commission rates after the initial six months could eat into your profits long-term.

Negotiation Tip: Request an extension of the no-commission period or a reduced commission rate after the first six months. Even an additional month or two without commission can provide a cushion.


3. 15%/20% Commission Split

  • Advantage: A 15% commission for non-Pass holder orders is competitive and can help keep your delivery margins reasonable.

  • Disadvantage: The 20% commission for Pass holders (customers who subscribe to the app's premium service ) is higher and could significantly impact your profitability on those orders.

Negotiation Tip: Push for a lower commission rate on Pass holder orders or ask for a cap on the total commission percentage over the term of the contract. Also, check what percentage of orders come from pass holders. For UberEats, typically 40% of orders come from pass holders. Keep the volume from pass holders in mind to understand your average commission and negotiate accordingly.


4. $20,000 Sign-On Bonus

  • Advantage: This is a significant upfront payment that can be used to cover expenses or invest in your business.

  • Disadvantage: The bonus is only paid after the initial 6-month period, meaning you’ll need to stay in the partnership for half a year before seeing this cash.

Negotiation Tip: See if the sign-on bonus can be paid earlier, perhaps in installments during the commission-free period. Alternatively, ask for a higher bonus if you're committing to exclusivity for three years.


5. BOGO Promotion

  • Advantage: The Buy One, Get One free promotion could attract new customers and increase your order volume, especially since the app is covering some of the food costs.

  • Disadvantage: Promotions like this can still strain your kitchen and staff, and there’s no guarantee that the increase in volume will translate to long-term loyalty.

Negotiation Tip: Ensure the app covers a significant portion of the food costs (80%) and clarify any terms regarding the duration of the promotion. You could also ask for more control over the timing and frequency of the BOGO deals. Also check the impact of this promotion on your food costs and margin. Consider whether the increase in volume offsets the reduced profitability per order and negotiate accordingly.


6. Feature at College Football Stadium

  • Advantage: Getting your restaurant featured on the big screen at a college football stadium is great for exposure, especially if you’re located near the stadium. This could bring in a wave of new customers.

  • Disadvantage: While this is a valuable marketing opportunity, its effectiveness depends on the demographics of the football fans and whether they’re likely to order from your restaurant.

Negotiation Tip: Ask for more details about the exposure—such as how often your restaurant will be featured and whether it includes any additional marketing support. If possible, negotiate for more localized marketing efforts alongside the stadium feature.


Balancing the Offer with Your Business Goals

This delivery app offer has its advantages, but it also comes with potential risks. By carefully evaluating the financial impact and negotiating for better terms, you can make sure this partnership benefits your restaurant in the long run. Remember, exclusivity, commission rates, and promotional efforts should all be tailored to your specific needs and goals. Run the numbers, ask the right questions, and ensure that the deal you’re signing sets you up for success, both now and in the future.

*reddit link .






DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Cactus does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Cactus does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.

 
 
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