Third-party delivery service DoorDash is catering to restaurants allowing them to choose from different pricing plans for the first time after receiving criticism for charging high commission fees.
DoorDash, which has faced backlash from small business owners who have said its commission fees eat up too much of its bottom line, said Tuesday it would let restaurant owners set commission rates at 15%, 25% or 30% per order. Commission fees typically cover the cost of drivers and marketing for a restaurant. DoorDash also announced its reducing its Pickup commission to 6% from 15%, including payment processing.
Restaurants were unable to set the rate of commission charges prior to DoorDash’s pricing update. Instead, the third-party delivery services, like other competitors, took a percentage of each bill with some restaurants paying up to 30% per order.
Under the new pricing plan, customers can expect to pay more for delivery so the company’s drivers (called "Dashers) won’t have to take pay cuts as a result. The three tiers of commission fees come with things like in-app marketing and an increased level of visibility on its app.
"There is a massive, increasingly digital opportunity for small restaurants, and we believe that when we work together, we can help them capture more of that market in a post-pandemic world––in-store, online, through a third-party partner, or any combination of these three," said Christopher Payne, Chief Operating Officer of DoorDash, in a statement.
"Over the past year, we've introduced offerings to help restaurants define their own futures. Today, we are changing how we do business to provide more choices, and better choices, for restaurants. We are hopeful that as they reopen for indoor dining, we can be a partner that helps restaurants accelerate into the future and continue growing. That's the most important service DoorDash can offer."
DOORDASH REDUCES RESTAURANT FEES BY 50%
A number of cities have put caps on how much third-party delivery services can charge restaurants, particularly during the early days of the pandemic in April when restaurants were starving for business with take-out and delivery being their main source of revenue due to indoor dining shutdowns in many parts of the country. Seattle, San Francisco, New York City, Boston, and Los Angeles capped delivery fees at 15% last year.
DoorDash in April 2020 temporarily waived its commission fees by 50% as restaurants pivoted to delivery and pickup only or closed entirely during the coronavirus. Competitor UberEats also announced a similar effort around the same time for more than 100,000 independently owned restaurants, while Grubhub, which also owns Seamless, said it would stop collecting up to $100 million in commissions from mom and pop restaurants during the health crisis.
DoorDash announced the news of its new pricing plans with statements from small business owners responding to the need for a better business model.
"Jai Meals operates out of a local mall, so delivery has been an important part of how I have made up for lost income over the past year of dine-in closures. Despite this, my previous commission didn't work for my business; it was hard to absorb that high of a cost, especially when delivery became a large percentage of my orders," Sherry Copeland, owner of Jai Meals in Plano, Texas said in a statement, adding:
"With the Basic plan, I can offer delivery to customers, who increasingly enjoy the convenience delivery provides, but at a cost that is more aligned with my products, my goals and my customers’ needs."