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The food delivery company DoorDash is reportedly launching lower-priced delivery options for U.S. restaurants as a direct response to the criticism around the commissions it charges being too high for an industry that’s still in a difficult position.
The company announced it will offer a new basic plan that will charge restaurants 15% per order for delivery, or around half the cost of previous plans. That plan will limit the delivery area and shift more delivery costs to customers — they might pay $4.99 instead of $2.99, for example. Restaurants can reportedly pay more — commissions of 25% or 30% — for other plans if they want a larger delivery area, more visibility in DoorDash’s app or lower customer delivery fees.
Even before the pandemic — though it was exacerbated by it — DoorDash other food delivery companies had rocky relationships with the restaurants they did deliveries for, who generally criticized their high fees, lack of transparency, and sometimes spotty service. And while the pandemic, which closed dining rooms, greatly expanded customer demand for delivery, it forced many restaurants to shift to carryout and delivery to survive.
According to Market Watch, DoorDash, Uber Eats, Grubhub, and Postmates raked in roughly $5.5 billion in combined revenue from Apr. through Sep. 2020, more than twice as much as their combined $2.5 billion in revenue during the same period last year. Doordash’s revenue in the fourth quarter of 2020 more than tripled from the year prior. This cemented the platform’s market share gains ahead of rivals GrubHub and Uber Eats. But when it comes to Los Angeles, as of Jan. 2021, Grubhub and Postmates — which is now owned by Uber— are tied as the most popular services in the area.
Lawmakers temporarily capped food delivery companies’ commission fees — generally at 15% — in dozens of cities and states during the pandemic as an effort to help restaurants. In those cities, the new rates will go into place once those caps expire, according to Doordash.
However, DoorDash reportedly insisted the caps weren’t the reason it changed its fees. Instead, the company said it was acting in response to restaurant owners who wanted more options. DoorDash Chief Operating Officer Christopher Payne said the company spent the last six months developing a plan that would help restaurants but still ensure drivers — and DoorDash itself — can make money.
Moreover, Payne reportedly said restaurants can change their plans depending on their needs at any given time. A new restaurant that wants to boost traffic and visibility might elect a plan with a higher commission fee, while an established restaurant that doesn’t rely much on delivery might choose a lower-cost plan. DoorDash said it’s also dropping its commission fee for pickup orders — which customers place through the DoorDash app but pick up themselves — to 6% from 15%.
Last fall, a St. Louis Asian fusion restaurant owner filed a lawsuit against DoorDash alleging the company was steering customers away from non-participating restaurants. The suit reportedly alleged that DoorDash set up fake landing pages for restaurants in an effort to steer customers to preferred restaurants on their app. In California, Assemblymember Lorena Gonzalez, D-San Diego, authored AB 2149, called the Fair Food Delivery Act, which currently requires the food delivery services to only list a restaurant on their platform with permission from the restaurant owner and to share certain information about who is ordering.
Also last year, DoorDash and Uber raised its prices for customers in California in order to fund the new driver perks the companies promised if Prop. 22 passed, which it did in the Nov. election.