A free delivery threshold is the order value above which you waive the delivery charge. Below it the customer pays for delivery; at or above it you absorb the cost. It is a pricing lever to lift the average order, since customers will often add one more item to cross the line, and it is different from a minimum order value, which is the lowest order you accept at all.
Why it matters
Set the threshold right and the extra margin from the bigger basket pays for the delivery you are now giving away. Set it too low and you pay delivery on orders that would have come anyway; set it too high and nobody reaches it, so it does nothing. The threshold should also differ by zone, because a rider trip to 8 km costs you far more than a trip to 2 km. What minimum order should you set for free delivery works through the maths.
Example
Your average order is ₹320, your delivery charge is ₹40, a rider trip costs you ₹35 and your gross margin is 60 percent. You set the threshold at ₹450. A customer with ₹380 in the cart adds a ₹90 dessert to reach ₹470. The dessert brings ₹54 of gross margin, you absorb the ₹35 rider cost, and you are ₹19 ahead while the customer feels they got delivery free. Had the threshold been ₹350, the same customer would have crossed it with no extra item and you would simply have lost ₹35.
Tezzu supports a free-delivery threshold per delivery zone, so a far zone can carry a higher threshold than a near one; the setup is covered in delivery zones, charges and free-delivery thresholds in Tezzu.