Food delivery platform DoorDash bows to pressure and cuts commission rates by 50%


Source: DoorDash blog.

Food delivery platform DoorDash has bowed to pressure and cut its commissions in half, easing the pressure on restaurants already struggling with the COVID-19 crisis.

In a blog post, DoorDash co-founder and chief Tony Xu announced that the reduced commission would apply to eligible restaurants in the US, Canada and Australia, from April 13 until the end of May.

It’s available for restaurants with five locations or fewer, the post says, although administration and eligibility for the program will be at the startup’s discretion.

The move comes “in response to the acute financial threats that local restaurants are facing right now”, Xu said in the post.

It is expected to benefit about 150,000 restaurants, and to cost the business about US$100 million ($1.59 million).

DoorDash launched in Australia in September last year, taking on the likes of Deliveroo, UberEats and Menulog in the market.

It didn’t have the strongest start, however, suffering a data breach just weeks later.

Now, the US-born startup seems to be trying to do right by its restaurant partners.

“We believe that doing our part is critical during this unprecedented time and that government-imposed, one-size-fits-all solutions do not reflect the needs of the businesses they are intended to help,” Xu said in the post.

“Arbitrary caps can cut off a lifeline for many consumers and deprive Dashers and Couriers of the earnings they need, now more than ever.”

However, he said some commission fees are necessary to protect the earnings of delivery workers, and to continue providing services for the restaurants themselves.

“But that doesn’t mean we’re not prepared to do our part in this acute moment of need to truly come together.”

The cut to commission follows calls for other delivery platforms to better support local restaurants as the COVID-19 pandemic eats into their revenues.

Even before the coronavirus crisis, there was concern that commissions for meal-delivery platforms were unsustainably high, ranging from 14% to 35%.

Melbourne food writer Dani Valent has launched a petition calling for UberEats and Deliveroo to reduce their commission charges, calling them “insupportable by restaurants and cafes who are already suffering greatly due to a huge drop in diners”.

“At the same time, the delivery operators are seeing a huge spike in business,” Valent wrote.

At the time of writing, the petition has been signed by just shy of 11,300 people.

“UberEats and Deliveroo also rely on the creativity, drive, persistence and — let’s face it — existence of hospitality operators to stay in business. I am confident they will do what they can to assist,” Valent added.

COVID-19 means many restaurant businesses are relying on their delivery service as their only source of income. So, that commission charge takes on even more significance.

Speaking to SmartCompany last week, Evan Hanisimikali, co-founder of Manny’s Pizza diner in Chippendale, New South Wales, called the ongoing situation “ridiculous”.

“If they said they’d reduce their commission from 35% to 25%, that would be a huge difference,” he said.

“If you’re doing $5,000 a week in Uber another 10% in your pocket is $500. That’s a staff member.”

At the same time, some Aussie restaurants have pivoted to also sell products such as pasta, eggs and toilet paper online.

However, Paul Kasteel, who owns two restaurants in Melbourne’s Chapel Street, told SmartCompany he’s seen unexpected competition from Deliveroo, which is also offering a grocery service.

Kasteel, who pays the company a 30% commission to deliver his own goods, called the move a slap in the face to small business owners.

“What I take offence at is a company all of a sudden coming along with the advantage of all that market data, cherry-picking and creating kitchens to compete directly back against us,” Kasteel said.

“Are they running a delivery service or restaurants and grocery stores?”

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