Include Delivery Costs in Your Menu Prices — Not at Checkout

If you take anything away from this article, let it be this: 1) increase direct delivery menu prices so that you can eliminate or drastically reduce your delivery fees and 2) remember the following statistic:

90% of consumers are likely to abandon shopping carts that feature high shipping costs. [1]

Ok, now on to the article …

Back in 2016, when I was launching new markets for DoorDash, we had a large company initiative to eliminate menu inflation in favor of displaying delivery fees at checkout. Up until that point, we made money by increasing most restaurant’s menu prices by 10-30% instead of monetizing via a higher per-order delivery fee. As an example, we’d mark up a $20 item to $25 and have a $1.99 delivery fee instead of leaving the item at its $20 in-store price and tacking on a $6.99 delivery fee at checkout. Wanting to give customers more transparency on what they were paying for delivery, we planned to make all DoorDash menu prices match in-store prices and instead include the full delivery cost at checkout.

At the time, we thought splitting out the cost of delivery from the menu item price was a great, customer-centric idea. However, it was a massive flop soon to be forgotten. To emphasize how short-lived it was, I was only able to find two articles about it online (one from TechCrunch and one from Eater). Below is a snippet from the TechCrunch article:

The reason why it was so short lived is because customers didn’t like it and it badly hurt conversion metrics. People would spend time building their cart only to get to checkout to see delivery fees they weren’t willing to pay. If they understood most of the costs up front, they would’ve either started the order with a clearer understanding of the final price they’d pay, or not have built the cart in the first place.

I vaguely remember us reverting the change after only a matter of days. We quickly realized the Amazon effect and how consumers have a repulsive response to delivery fees.

The Amazon effect and our conditioning to hate delivery fees

Think about the last time you saw a delivery fee on Amazon or while buying something online. How did you feel when you saw it? Did you decide to enthusiastically checkout? If you knew of an alternative with free delivery, would you have used that alternative? The truth is we hate delivery fees, and have been conditioned to.

The conditioning started in 2002 when Amazon introduced Free Super Saver Shipping – a product that gave free shipping on orders over $99, then $49, and eventually $25. This started our love for free and fast shipping. A few years later, in 2005, Amazon launched Prime where customers could pay $79/year for unlimited two-day shipping on over a million items with no per-order delivery fee. Over 40% of US households were subscribed just 10 years later and shipping cost was now the #1 cause of cart abandonment online.

Most of retail followed suit, eventually paving the way for last mile delivery services like DoorDash and UberEats, capitalizing on our love for free delivery.

Food delivery gets primed

As food delivery services looked to find ways to make consumers more loyal to their platform and increase conversion rates, they each launched their own version of Amazon Prime –Postmates Unlimited was released in 2018 with free deliveries over $15 for $9.99/mo [2], DoorDash quickly followed up with DashPass that same year [3], and Uber tested Eats Pass in 2019 [4] which eventually evolved to Uber One in 2021 [5].

DashPass and Uber One have both seen incredible growth. DashPass now has more than 22 million active members [6] and Uber One recently hit more than 30 million subscribers [7]. All of this means that free delivery is becoming the default experience for more customers ordering food. Unsurprisingly, Uber states that Uber One members spend three times more than nonmembers. If you’re a restaurant looking to get customers to order direct, these are the customers you should be seeking to acquire.

Many restaurants are hesitant of including delivery costs up front, not wanting to increase menu prices for direct customers. However, I think there’s a way to reframe how we think about this, and some proof that this might ironically be what customers want.

Reframing “menu inflation” and giving customers what they want

I recently discussed increasing menu prices and having no checkout delivery fee with Lucas, one of my colleagues at Open. I mentioned to him that we might be fighting an uphill battle because restaurants have a negative perception of menu inflation for their owned channels. He responded saying, “Well, menu inflation isn’t the right way to think about this. The right way to think of it is that we include the total price, including delivery fees, up front to the customer. This is actually the best experience because there are no big surprises at checkout. Airbnb recently did this, and it’s clearly what customers prefer.” I decided to look into the Airbnb example more, and ran the thoughts by a few restaurant customers.

In late 2022 [8], Airbnb started testing a feature to ease customer complaints from users who were frustrated by seeing a low base nightly fee only to get to checkout and notice they were paying 30%+ more when factoring in fees like cleaning. Airbnb decided to give customers the ability to toggle a setting to instead see the nightly cost inclusive of all fees. There were so many customers that opted for seeing the full cost up front (more than 17 million) that Airbnb made a permanent and standard change to do this for all customers in 2025 [9].

About a month ago, I was thinking of productizing the menu price includes delivery idea. I chatted with one of our most popular restaurants who initially wasn’t a fan. Ironically, his opinion changed without my convincing. His friend texted him a couple weeks later saying he was going to place an order directly with a restaurant but ended up using DoorDash to avoid the $5 delivery fee. The restaurateur told his friend that the DoorDash prices were 25% more and that it would’ve actually been less expensive to order directly from the restaurant. The customer said “Well, the restaurant’s website felt more expensive when I saw the $5 delivery fee compared to free with DashPass.”

Adding delivery fees in the menu prices is the only way to engineer “lowest cost, order direct”

Most of the restaurants I speak with promote cost savings by ordering direct, but that’s not always the case. The challenge lies in the fact that most restaurant’s direct ordering channel has a fixed delivery cost (i.e. $6) and most restaurant’s third-party delivery channels have a relative delivery cost (i.e. 20% mark up). Here’s the simple math: if the customer’s order size is less than your fixed delivery cost divided by the markup %, it will be more expensive to order direct. Conversely, if the customer’s order size is more than your fixed delivery cost divided by the markup %, it will be less expensive to order direct. Here’s an illustration highlighting the difference:

Unfortunately, in both cases, the perceived lowest cost option is likely the third-party marketplace. If you made your direct experience delivery cost relative (through a <20% markup for delivery), you could guarantee that your direct channel is always both the actual and perceived best option. For example, if you mark up 20% on third-party marketplaces but mark up 18% direct and both have $0 delivery fees, you know that your direct channel is always a better delivery option (barring any promotions). Couple this with loyalty (ideally a cash based loyalty system) and it’s a no brainer to order direct.

The hidden costs of not doing this are massive. You’ll train and incentivize your customers to continue ordering from third-party marketplaces up until the point where 50-75%+ of your sales are third-party, if that hasn’t already happened.

Concluding thoughts

The other day I saw a $170 shipping fee at checkout (granted the items were 100+ lbs). $170 for shipping seemed ridiculous so I ordered an alternative on Amazon Prime. Because I had been thinking about delivery fees and item prices recently, I decided to look back and compare the total price of the two orders. Ironically, they weren’t that different. But the ones with the $170 delivery fee seemed significantly more expensive. I opened up a support ticket asking if they ever offered free delivery. They told me that they didn’t and sent me this response:

Maybe they stay true to that promise, but at the expense of keeping their delivery fees as high as possible and they lost me as a customer.

We’re addicted to free delivery. Instead of trying to fight consumer behavior, let’s learn from it and implement the customer-preferred solution of including most (or all) delivery fees up front.

Appendix: How to determine the markup and answers to common questions

Question: How much should I increase my menu prices on my direct channels?

Answer: Here are a couple of good options:

1. You can simply mark up direct slightly less than your third-party marketplace markup. If you mark up 15% on third-parties, you can mark up 14% direct.

2. You can look at your current customer delivery cost (i.e. $5) and figure out what you’d need to increase delivery prices by to make $5 on average based on your average order size (yes, sometimes you’ll make less than $5 and sometimes you’ll make more than $5). For example, if your average order size is $25, you’d need to increase that by 20% to make $5 on average, assuming the average basket size doesn’t go down.

Question: Will my average basket size go down for delivery orders?

Answer: Most likely. Customers will be more willing to order delivery for smaller order sizes. This trade off is worth it, but you might end up adjusting the mark up % after you see the adjusted average order size.

Question: If I pay a system like DoorDash Drive and Uber Direct $8 per delivery, won’t I lose a bunch of money on small orders?

Answer: Yes, but you can institute a small order minimum (matching DashPass and Uber One) and also should be willing to make less margin on some smaller orders because you will offset them with greater margin on larger orders. I’d encourage you to think not solely of your per-order profitability but rather the total lifetime value of that customer as an owned customer vs a rented customer.

Question: What should the order minimum be for free delivery?

Answer: This can vary by customer and market, but I’d recommend looking at what threshold DashPass and/or Uber One (based on which marketplaces you partner with) members need to meet and setting it at that price (typically $12 or $15).

Question: Should I be worried about customers thinking I’m expensive?

Answer: This is a valid concern. I still believe that you should be more worried about your customers leaving for third-party marketplaces and not truly being your customers anymore.

Sources

[1] McKinsey: What do US consumers want from e-commerce deliveries?

[2] Postmates Unlimited Grows 300% — Drops Minimum Order Amount

[3] DoorDash Launches DashPass Subscription and Free Customer Pickup

[4] Leak reveals Uber’s $9.99 unlimited delivery Eats Pass

[5] Uber Introduces Uber One: A New Membership Program Bringing Together the Best of Uber

[6] DoorDash Revenue and Usage Statistics (2025)

[7] Uber One Hits 30 Million Subscribers, Drives Delivery Revenues 22% Higher

[8] Airbnb is introducing total price display and updating guest checkout

[9] Total price display is now standard for guests worldwide