Mileage Reimbursement for Sandwich and Sub Shop Delivery
Ask a sub shop operator about mileage and the answer usually starts the same way: "we pay a dollar fifty a run, same as everyone round here."
That is a reasonable thing to have landed on. A flat fee is easy to explain, easy to run through payroll, and it is what the shop down the road does. Nobody picked it because they modelled it.
The problem is that sandwich delivery is the hardest place in the whole category for a flat fee to survive, and it is hard for reasons that have nothing to do with how well the shop is run. Three things stack up, and they all point the same way.
Three things make sandwich delivery the worst ratio in the business
- The ticket is half the size. A pizza order is commonly around thirty dollars and a sandwich order around fourteen. Driving four miles costs exactly the same in both cases, so the run eats roughly twice the share of the smaller order. None of the cost of a mile gets cheaper because the food was cheaper.
- The speed promise forces a tight radius. Delivering fast means delivering close, which sounds like it should be cheaper and is not. Insurance, registration and depreciation do not shrink when the radius does; they are simply spread across fewer miles, so the cost of each one goes up. Our piece on why a tight radius costs more per mile walks that arithmetic.
- The runs are shorter, so there are more of them. A driver doing twelve short runs a shift accumulates miles and minutes in a way that a driver doing six long ones does not, and a per-run fee multiplies by the count rather than by the distance.
Put those together and a flat per-run fee that looks generous on a long, expensive pizza order can fall well short on a short, cheap sandwich one. The figure below is modeled, and you can put your own numbers into it.
What a run costs against your ticket
Set your own numbers; the same run is then priced against a pizza-sized ticket for comparison.
A flat fee per run is the wrong shape for the problem
The objection to per-mile reimbursement is usually practical rather than principled: a run fee is one number, and miles are a thing you have to record. That is true, and it is also the reason the run fee fails. A fee that does not move with distance cannot be right at more than one distance.
There is a second problem underneath it, and it is the one that gets litigated. A payment that is not tied to recorded miles is not substantiated, so it does not satisfy an accountable plan under 26 CFR 1.62-2. That makes the whole amount taxable wages on the W-2 regardless of how generous it was. Our guide to accountable plan rules sets out the three tests.
Percentage of ticket is the same failure wearing a different hat, and on a fourteen dollar order it is worse: the percentage tracks the food, which has nothing to do with the drive. We covered that specifically in the franchisee reimbursement piece.
Where the wage floor bites first
If a driver is paid a tipped cash wage and funds part of their own vehicle cost, the shortfall behaves like a deduction from wages. Where it pushes their effective hourly pay below the minimum wage, the gap is treated as a kickback to the employer under the FLSA. The kickback theory explains the mechanism.
Sandwich shops reach that point sooner than pizza shops do, for the same three reasons as before. More runs per shift means more unreimbursed miles per hour, and a shorter run means the fee is spread across less distance while the fixed cost of owning the car carries on regardless.
Parker v. Battle Creek Pizza (6th Cir. 2024) is the case most often cited here. It rejected the assumption that paying the IRS standard rate of $0.76 is automatically defensible, and it binds employers in Michigan, Ohio, Kentucky and Tennessee while being persuasive elsewhere. West v. BAM! Pizza Management (D.N.M., January 2026) went the other way on flat rates, rejecting one defended as a reasonable approximation. Both involved pizza, and neither turned on the food.
What a defensible rate looks like for a sub shop
| Method | What it gets wrong | What it takes to fix |
|---|---|---|
| Flat fee per run | Does not move with distance, and is not tied to recorded miles, so it fails substantiation | Record the miles you already dispatch against, and pay on them |
| Percent of ticket | Tracks the food rather than the drive. On a small ticket it underpays the long run and overpays the short one | Same: price the run, not the order |
| The standard rate | A national average built for tax administration. At $0.76 it is usually well above what a delivery mile costs in one market | Use it as the tax ceiling it is, and set the rate from local cost |
| Local per-mile rate | Nothing, if it is documented and paid on recorded miles | A rate built from your own market, kept current, with the workings attached |
Nothing in that table is specific to sandwiches. What is specific is how quickly the first two rows go wrong when the ticket is small and the runs are short, which is why a method that survives at a pizza shop can fail at a sub shop on the same street.
What to do on Monday
Start by recording miles, because every other option depends on it and you are almost certainly dispatching against an address already. Then set a rate from what a vehicle costs to run in your market rather than from a national average or the shop down the road, and keep the rate and the miles together in one record so the file answers the question before anybody asks it. If you want to see where you currently stand, the reimbursement compliance audit is ten questions and takes about two minutes, and the look-back calculator checks the years behind you.
The complete operator guide covers the same ground in more depth, and applies just as well to a sub shop: the wage floor, the tax ceiling, and the fifty state rules are the same whatever is in the bag.
RatesReady builds the rate. Documented per-mile figures for each store's own market, built from filed insurance data, real fuel prices and local fees, refreshed monthly, with the audit trail attached and the recorded miles behind every payment. From $49 per location per month. Request a demo and we will price your stores against what you pay now.
This article is general information for restaurant operators and is not legal, tax, or accounting advice. Every dollar figure here is illustrative and modeled. Reimbursement obligations vary by state and by how drivers are classified and paid; review your own position with a qualified professional.