ROAS and your restaurant: How to increase sales with online advertising

ROAS, or Return on Ad Spend is a marketing metric more and more restaurants are getting interested in. Put simply, it measures the effectiveness of online or digital advertising.

With the continued dominance of social media platforms as a marketing channel, as well as the rise in importance of third party delivery app advertising, ROAS has become “one of the most important metrics” to track for restaurant and food delivery operators.

But is ROAS really the only marketing metrics that matters anymore? In this article I’ll explain what ROAS really is, how to increase ROAS, the limitations of ROAS, as well as some other metrics you might want to consider using alongside ROAS.

We’ll cover

• ROAS for Restaurants definition
• ROAS on social media ads vs ROAS on delivery apps
• How to track ROAS effectively  
• How to increase ROAS
• Limitations of ROAS in food delivery businesses

ROAS for Restaurants definition

ROAS is a metric specifically related to digital advertising spend. It measures how effective that ad spend is at generating new revenue for your business.

Since in 99% of cases, any restaurant running ads wants to make more money in revenue than they spent on ads, ROAS is a great metric because it tells you exactly how much money you generated in revenue compared to how much you spent on ads.

For this reason a higher ROAS is usually always better because every dollar spent on ads brings in more revenue. 

Knowing this, restaurant marketers can focus on delivering higher a ROAS over time, and continue to positively contribute to the growth of the business, as well as forecast budgets and report on performance.

This is why ROAS is often looked at as a powerful metric. It’s easy to calculate, it shows you the direct impact on revenue from campaigns, and it’s an easy way to get marketing teams or agencies to focus on improving performance.

However, it’s crucial to understand what ROAS really is in order to use it effectively in your food delivery business. Whilst it seems simple, once you dig a bit deeper it’s clear that only tracking performance based on top level ROAS can lead to some bad marketing outcomes.

How to calculate ROAS for restaurants

As mentioned before ROAS helps you understand how much money you're making relative to how much you're spending. 

This translates into the simple formula: 

ROAS = Revenue from Ads / Ad spend

In the ROAS formula "revenue from ads" means the amount of money generated that is directly attributable to your ads. 

Digital ad platforms are unique in that they can track the buyer journey from clicking an ad to viewing the menu and then ordering. This means you are able to see the amount of revenue you made as a direct result of the ad.

Ad spend is simply the amount you spent on the ads over the same period as the campaign ran.

ROAS is usually expressed as multiple or a ratio based on the above formula.

For example If you spent $10,000 on a campaign and the revenue generated was $30,000, the ROAS is 30,000/10,000 = $3

So you made $3 in revenue for every dollar you spent on advertising.

Expressed as a multiple this is a ROAS of 300%. 

To ge the multiple, you simply multiply your results by 100. Or expressed as a ratio it's 3:1.  

A 100% ROAS means you generated exactly the same in revenue as you spent on advertising. Anything less than 100%, then you spent more money on the campaign than it generated in revenue.

How is ROAS used in restaurant marketing?

ROAS is most used in restaurant marketing for two types of general marketing strategy.

1. Running ads on social media platforms like Instagram and Tiktok to drive either reservations or direct delivery orders.
2. Running in app ads on food delivery aggregators like Doordash, Deliveroo and Talabat etc.

With social media advertising you will need to set up conversion rate tracking using pixels or other tracking techniques in order to calculate ROAS for your ads.

On food delivery apps ROAS is much easier to track and is in most cases easily accessible through the campaign performance dashboards in your account.

ROAS is most useful for comparing the performance of campaigns.

This means it’s most useful when you’ve already run multiple campaigns on different channels and 3rd party apps and have existing data to compare against. 

The goal is to find the best performing strategies, combos, discounts etc so you are able to make optimization decisions towards increasing ROAS.

To get the most out of ROAS as a restaurant marketer you want to track ROAS on a granular level, as well as just a simple total.

It’s crucial to remember:

ROAS should not just be a single number you track. You should be calculating ROAS per campaign, channel and delivery app so you can find what types of ad are driving the highest revenue at the best cost, and where the best places to invest further are.

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Revly provides restaurants with granular data and insights from all campaigns run on delivery apps accessible in a single dashboard that gives marketers and advertisers a clear overview of performance on all levels, including ROAS.

ROAS can also be combined with other important metrics and KPIs typical to restaurant marketing. Metrics like Impressions, Menu views, Click-through-rate (CTR), Conversion Rate, Customer Acquisition Costs (CAC) and Marketing Contribution Margin.  

Top Tips to Improve ROAS for Restaurants

How can you ensure every dollar you spend on advertising goes as far as possible? These five considerations are a great starting point:

1. Double down on winning strategies

Customers can come from multiple channels. Platforms like Facebook, Instagram, Google and different food delivery apps are all potential sources for customers. Experiment with these platforms and track ROAS to find which channels perform the best and move your marketing budget to the highest performance channels.

2. Refresh and optimize creative

With social media ads, testing creative can often increase ctr and ultimately ROAS. Adjust headlines, copy, images, and layouts to determine which variations perform best. Incorporate timely trends and topics to create ads that are relevant, engaging, and memorable.

3. Track key performance metrics

Monitor key performance metrics and KPIs alongside ROAS to maximize revenue. Use tools like Google Analytics or Meta Ads Manager for regular digital ads or Revly for delivery app ads to gain a clear understanding of how your ads are performing and where to optimize.

4. Improve your website and menu

If your online ads drive traffic to your website or menu, ensure they deliver a strong first impression. Invest in high-quality photography, compelling captions, and clear calls to action to entice and engage prospective guests.

On delivery apps, how you show your menu is a key to high performance ads. Invest in a menu optimized specifically for delivery apps to improve conversion rates and ultimately boost ROAS.

5. Automate your delivery app marketing

Revly helps restaurants increase their ROAS by streamlining CPC and discounting strategies on third party delivery apps. The platform leverages data-driven insights to create targeted campaigns, optimize ads, and continuously refine performance.

What is a good food delivery marketing ROAS?

The average ROAS across 3rd party delivery apps is generally around 3x using the default campaign settings.

However, I usually consider 2x or 3x ROAS quite low. With proper campaign optimization, a good ROAS between 4-5x is good to great, with outstanding performance reaching 6x to 7x.

Optimization for ROAS on delivery apps is helped with advanced techniques like meal period targeting and delivery location optimization. Learn more here.

With social media ads there are few good benchmarks to follow. According to Grub Hub a 4x ROAS is considered “good” in general, but the reality is that performance and ROAS can vary wildly on social media based on creative, market and food type.

Profitability and the limitations of ROAS.

ROAS is often seen at the gold standard metric on food delivery platforms and social media advertising. 

But for restaurants hyper-focused on ROAS it’s important to note that ROAS as a metric only tells you about the amount of revenue you made, not the actual profit after costs.

If your marketing goals involve profitability then you must also look at ROI or marketing contribution margin to track marketing performance. Not just ROAS.

ROI and marketing contribution margin are harder to calculate, especially with social ads as you have to combine food costs, aggregator commissions or delivery costs. With food delivery app marketing, the job is much easier with tools like Revly that help automatically calculate contribution margin based on your average food cost.

ROI = (Net profit / net investment) x 100

Marketing contribution margin = total revenue - (ad or discount spend + commission + food cost)

When you calculate these two metrics for your delivery brands you’ll see it's possible to have a positive ROAS but a negative ROI or contribution margin. This is because the variable costs of running campaigns can impact your profit, even though the total revenue generated is solid.

Say for example you run food delivery app ads in a particular delivery area and the majority of orders you receive are for your lowest margin menu items. In this case you might see a high ROAS as people are ordering the most expensive items on the menu, but when you come to calculate the marketing contribution margin for this campaign, you might find that you are actually losing money because of low margins.

Overall ROAS is a powerful and important metric to assess the relative performance of each campaign, and should ideally be tracked on a granular level to enable optimization and improved performance. Be mindful of the limitations of ROAS when it comes to profitability and consider closely what you are trying to achieve with your marketing when tracking ROAS.

For more info on optimization ROAS on food delivery apps consider a free demo of Revly today and learn how we help brands increase ROAS by up to 300%.