Cost of delivery

[system]

Hello all and Merry Christmas.
I am opening a delco pizza operation in February and trying to figure out how to structure my delivery charges and compensation for drivers.

My first inclination is to create zones and charge amounts based on the zones proximity to my store. I’m thinking between $1.50 to $2.75 per delivery.

But when I spoke to some employment people about how to compensate my drivers for their driving, they told me that the IRS rate for mileage should be applied as they are driving for the business. The rate goes up from 44.5 cents to 48.5 cents per mile starting January 1, 2007. Compounded by the minimum wage increase from $6.75 to $7.50 (CA), delivery becomes a costly proposition.

My question is this. Am I required to compensate my drivers 48.5 cents per mile? I have heard other operators pay their drivers a flat rate (like $1 per delivery or something like that). But most deliveries are going to be more that 2 miles (to and from). So according to the IRS, these operators are not paying enough to the drivers.

Not only that, I can picture it now. A teenage driver with mom’s car decides to take the long scenic routes to get to their destinations. In doing so, they rack up an extra 20 miles that night and are happy to pocket the extra 10 bucks. Do you think Mom ever sees that? Plus, they’re eating up my labor costs because they’re less productive.

There’s got to be a better and legal way to compensate drivers for their delivery mileage.

 

[j_r0kk]

Chip,

The answer is, “no”, you don’t have to pay your drivers per mile. You can if you’d like, but it’s not required. That number is for write-offs and your drivers can deduct the difference between the amount of money they were paid and the going mileage rate when he/she files his tax returns (as long as that driver keeps a mileage log).

As an example…

DriverX drives 20,000 miles for you during calendar year 2006.
You paid DriverX 25 cents/mile for deliveries.
He can claim the difference between 48.5 cents and 25 cents, or 23.5 cents per mile
This will translate to a tax savings of $5,100 that he can apply to his tax form as long as he’s filing itemized.

I pay by the delivery, and even that number is all over the place, as I’m sure you’re about to find out when everyone let’s you know how they’re doing it with their posts.

I charge my customers $1.35 per delivery and pass all that money down to the drivers, keeping none. Hope this helps. -J_r0kk

 

[MM1]

Agreed. Too complex to pay based on mileage (though there are POS systems that will compute the distance for each run, so you don’t have to trust the drivers report of mileage).

I charge $1.50, pass $1 to the driver, and figure the difference is a chip off the insurance cost I bear.

MM

 

[Giuseppes_Pizza]

We charge a flat rate and the driver gets the rate and the tip. It’s makes it alot easier.

 

[system]

We charge $2 bucks. All of that goes to the driver. If people fuss over $2 delivery, I tell them, we will pay them $2 dollars to come and pick up. When they think about that for a second, they say, “Oh okay, just deliver it.”