Why Marking Up Your Third-Party Delivery Menu Is Quietly Losing You Customers

When restaurants mark up their menu on third-party delivery platforms, we get it. Platforms take a 15-30% from each sale (we ask for a 20% revenue share), and the markup is an easy way to earn some of that back.

But what is that markup actually costing you?

The Four Customers You're Dealing With

The convenience-first customer. They know third-party prices often run higher than the in-house menu, and they don't mind. They're satisfied if they get their food. The markup doesn't cost you sales or brand reputation among this cohort, so you don't need to worry about them.

The price-checker. This customer cross-references your normal menu before ordering. When they spot a markup, one of two things happens: they order anyway, but their trust takes a hit. Was this the restaurant's call or the platform's? Why so much higher? Most people don't know the pricing model of third-party delivery well enough to realize it's usually the restaurant's decision to mark up in order to absorb platform costs, so this customer may assume someone's price-gouging them. Or, they skip your restaurant entirely and order from a competitor on the same app who they've confirmed doesn't mark up.

The customer who never clocks it's a markup. They just think, Restaurant X is too expensive. Not, Restaurant X is expensive on Delivery Platform Y. Just expensive, period. The next time they're deciding where to order from or eat in person, you're not in the running.

The customer who finds out later. They ordered, paid the markup without noticing, and eventually realize they've been paying more than they needed to. This one stings the most. It doesn't matter whose decision the markup was. If they feel cheated, you've lost them for good.

The Upside Nobody Talks About

Here's the flip side worth sitting with: that price-checker and the customer who assumed you were just expensive? They're not lost causes. If your third-party prices matched your in-house menu, the price-checker stops hesitating and just orders. The customer who wrote you off as "too expensive" may never have that thought in the first place, because the number they see is the number you actually charge.

In other words, the markup isn't just costing you trust. It's actively suppressing orders from exactly the customers who are paying closest attention to your prices. Fix the markup, and you're not just avoiding reputational damage. You're picking up sales you didn't know you were losing.

You Can't Un-Ring the Bell

Say you read this and decide to drop your third-party prices to match in-house. Good instinct, but timing matters. The moment you do it, you draw attention to the fact that there was a markup in the first place. Customers who'd been ordering at the higher price now realize they'd been paying more all along, and you potentially cause the same reputational damage.

The Fix

This may be a controversial statement, but hear us out:

Raise all of your prices so everything matches.

Yes, that includes in-house, your own online ordering, and third-party platforms.

If your third-party sales are a significant amount of your business, then build in enough margin in your updated pricing across the board to absorb your third-party platforms' commissions.

If your gut tells you that'll price you out, then look at your own third-party sales data as evidence that that likely won’t be the case. If you’ve been marking up on third-party platforms, then you already have a test market of customers paying a higher price today, albeit the customers you haven't lost from the pricing games above, but it's proof there are people willing and able to pay what you could be charging.

Raise prices across the board and your margins go up everywhere, not just on delivery orders.

And once your pricing is consistent, treat third-party platforms as a lead-generation channel instead of a pricing minefield. For example, drop a coupon card in every delivery order, offering a one-time discount to order through you directly, and if they do order, you can capture their email and phone number to retarget and convert them into your own loyal customer.

If your gut tells you the opposite, that nobody will pay higher prices, that's worth sitting with too. Because if a customer won't pay a higher price at your restaurant, why would you expect them to pay it anywhere else?

The Next Generation of Food Pedaler

Under New Ownership, STL’s Only Local Restaurant Delivery Service Rolls On

How it all started.

In January of 2013, I found myself without a job, and with a lot of passion for St. Louis. It amazed me how underestimated our food and cycling communities are, and it still does—I felt compelled to help mix things up a bit. Equipped with only a smartphone, Chromebook, and bike, Food Pedaler was born.

What began as a way to get by in lieu of a regular job — a way for my labor to line up more directly with my convictions — grew into so much more. I craved more autonomy and work that aligned with my values, having had my fill of working without much meaning under hierarchies of managers. My test for the new business was that it could support me learning how to code. Launching before the wave of venture capital-backed startups — and blessed with incredible riders, doting restaurant partners, and loyal fans — within a couple years this little bike-based restaurant delivery service became a formidable food delivery force in St. Louis’s central corridor.

Food Pedaler provided so much more than I imagined. Great friendships, lasting business relationships, and best of all my amazing wife — I met the most wonderful people in my life while biking food around St. Louis. Neighbors ordering up food supported Beth and me as she finished grad school. Little did we know that years later it would furnish the means to start our dream urban farm and residential compostables pickup service, Perennial City. It has provided dozens of cyclists with a way to make fun, fast cash, and local restaurants with a new hospitality-focused avenue to reach the St. Louis community.

Cranking along.

My goal for Food Pedaler was to last five years, a big feat for a small business. We saw waves of billion-dollar, market-disruptive startups coinciding with several other services closing (four bike-based companies and over half a dozen utilizing cars). We celebrated the opening of many outstanding restaurants, and mourned the loss of favorites (R.I.P. Porano, Good Pie…)

From day one, Food Pedaler committed to being fast, friendly, and reliable and stuck to it ever since — as a result through the changing tides we’ve been blessed by regulars keeping us rolling day in and out. The on demand delivery industry became increasingly ubiquitous. One big benefit to us was it made more obvious the contrast between a homegrown small company built on relationships, and apps built on debt operated by a call center across the country, or across the world. As tablets began sprouting like weeds on service bars and host stands, restaurant staff appreciated our service even more.

The terrain changed dramatically through the years, and we adjusted with it. Firms purchasing 20 Craigslist ads in succession every day to fill up a jobs page resulted in our single monthly post receiving 2–3 responses instead of the usual 40–50. But, the applicants who managed to find us are on average more passionate about cycling and hospitality, and we have a lot less to sort through. When deliveries are made for free — at a loss to these startups — it’s hard to convince some restaurants of our worth. But now everyone else is jacking up prices and hiding fees passed to the customer, scrambling to make a profit.

We learned that as fun as it is bombing hills in Clayton on a fixie, bikes have more of an advantage in urban areas on a grid, with stop signs and traffic. And as trolley tracks went down in The Loop, we managed to keep most of our teeth before making the tough decision to focus our efforts in the city for now. (Seemingly an outsider, I’m actually hopeful the trolley works out and the entire stretch of Delmar becomes a pedestrian-only corridor — problem solved!)

Shifting gears.

While Food Pedaler as an organization navigated the ups, downs, and turns in the industry and city, my own life enjoyed big transitions. In 2017 I married the previously mentioned love of my life, who I met on one of the first deliveries, bringing cupcakes to a dorm at SLU. Our chat that evening focused on food and urban farming, and in 2018 that conversation materialized as we launched Perennial City together.

One of Food Pedaler’s newest riders at the time, Alex Ward, offered to help get the word out about Perennial City. Building his freelance PR portfolio, he helped us grab the attention of many local publications, while we concentrated on the compost. He did an outstanding job and impressed us with his character and professionalism.

Expressing interest in the health of Food Pedaler, and continually offering ideas and feedback, I pitched him on the idea of taking over Food Pedaler Downtown. He didn’t hesitate, and within weeks he was free from his cubicle day job and pounding pavement to grow his business downtown.

The plan was for me to continue to operate Central West End and develop the business’s systems to support independently-owned, neighborhood-focused Food Pedaler operations.

But farm demands increased, and as urban food production is Beth and I’s mission, I found myself giving less and less to biking meals. Many days last summer I quickly changed out of muck boots and into cycling shoes, riding from the farm to pick up lunch orders in the CWE! It was clear I was not able to give our riders and partners the attention they deserved. And with the news of a little Kiefer on the way, it was official that something needed to give.

Meeting with Alex on the roof of TechArtista, I disclosed that it was obvious to me Food Pedaler was no longer to be a card in my deck — it needed to be turned over. He supported my decision, not realizing that I was offering for him to purchase the company. As I clarified my intentions, he was as enthusiastic about running the entire company as he was about heading up downtown the winter before. We immediately began the process of transferring everything over.

Rolling on.

It’s been over half a year since Alex fully took the bars at Food Pedaler, and the company, our riders, partners and neighbors are better off for it. One thing that had me holding out for longer than expected was the realization that St. Louis would miss seeing our Fleur-de-Flatware around town — every day our dispatcher is lit up with enthusiastic fans who’ve supported us for years! I personally could not be happier to see another St. Louisan, who cares about all the many people who keep Food Pedaler going, making sure they continue to be served well.

In just this short time Alex breathed new life into our social media, waking up our Instagram from a period of slumber and actively connecting with our community on Twitter. He launched a subscriptions service to reach a wider audience in St. Louis with the best local goods like Blueprint Coffee and Clementine’s Creamery Ice Cream. Those regulars I love getting to still see while taking rides now have a premium option to bypass delivery fees. With another restaurant partner added just this week, you can be sure there is much more excitement to come!

Alex brings new life and color to your favorite restaurant delivery service. In one hand he carries on our commitment of enlightened hospitality on wheels, and the other his own personal style — for instance, I’ve never been one for the camera, but he isn’t shy. I’m so grateful to him for carrying the torch, and wish for this crazy enterprise to be the awesome blessing to him as it was for me. With the support of adoring fans and restaurants, there will be many more rides to come.

Good luck, Alex!