Doordash has revolutionized the food delivery industry. With its innovative approach to delivering meals to hungry customers, it’s no wonder that Doordash is one of the leading players in the field. But how does Doordash make money?
DoorDash, or DASH as it has become colloquially known, is a food delivery app that makes money in various ways. DoorDash’s income comes from commissions, delivery service fees, advertising, subscription plans, and catering. One of their core business components, though, is still food delivery.
Ordering food online via apps has become a revolutionary food industry component that has picked up immense steam over the years.
The most prominent players are taking home some serious money, and in this post, we shall discuss how DoorDash does things.
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The Ways That DoorDash Makes Money
DoorDash began with the intention and idea to aid in delivery logistics between restaurants and customers.
They are an incredibly renowned brand and hold most of the market share in the U.S. as an on-demand delivery service, among other things.
However, they have expanded their reach and taken a firm foothold in the industry (making money via various avenues).
There are many ways delivery apps such as DoorDash make money, and many rely on similar business models.
However, some, such as DoorDash, have merely got the nitty-gritty components more finely tuned than others in the market. Below we have listed several ways that DoorDash is capable of raking in revenue.
1. Delivery Fees
Customers order food via DoorDash and pay for the meal, delivery, and service fees that the company adds to the order.
Depending on certain factors, this often sits between $5 and $8 per order. This amount covers the delivery cost, so let us say that if the customer orders $50 ribs and chips from a restaurant, they will pay $55-$58.
The additional fee for the delivery goes directly to DoorDash. At the same time, the rest (minus a fee) is paid to the restaurant.
DoorDash uses this fee to cover the costs of their contracted drivers. Some enterprising DoorDash drivers can earn upwards of $500 per week. As for the split, as far as we know, they have yet to disclose how much finally makes its way into the drivers’ pockets (or Dashers).
2. Customer Subscriptions
DoorDash offers a tempting offer to their customers and is most certainly something that people who use them frequently will undoubtedly sign up for, a subscription known as DoorPass.
This DoorPass allows the customer to pay roughly $10 as a monthly fee and then get to enjoy delivery fees of $0 for any deliveries that are over a prescribed amount.
This allows the customer to save in the long run. And what it does for the company is that they receive customer loyalty, as the individuals in question are now invested in the services they receive from DoorDash.
And since DoorDash places a high value on customer satisfaction, the customers will likely continue to use the subscription service.
3. Commissions From Restaurants
DoorDash charges customers a fee on the orders they place and makes the restaurants pay a commission on all the food delivered via the DoorDash app and through their Dashers.
The commission fee was initially set at 20% per delivery, but it has been amended since then.
Initially, if a customer ordered a meal valued at $50 from the restaurant in question, the restaurant would need to pay DoorDash $10 for the delivery.
However, as of April 2021, DoorDash opted to introduce a tiered commission model for their partnering restaurants.
This structure allows companies to select between three options: Basic (15%), Plus (25%), and Premier (30%).
The idea from the start was to enable restaurants to expand reach in terms of market share and distance between them and the customers, as well as giving them the ability not to have to deal with the costs and hassle of hiring and managing their own delivery service and team.
The new tiered commission structure gives the restaurants more flexibility and choice than before.
4. DoorDash Drive
DoorDash also concluded that there was another segment of the market they could target. Rather than just working with restaurants that do not have or desire their own delivery service, they would offer white-label delivery services.
This is integrated with the restaurant’s existing system instead of customers ordering through the DoorDash app.
Restaurants and, nowadays, other companies that offer delivery services can partner up with DoorDash when they need assistance handling deliveries ordered via the company or restaurant’s website or app.
The company or restaurant in question pays a flat fee for deliveries completed to DoorDash for their service.
The fact that restaurants and businesses already offer delivery but occasionally find themselves unable to handle the high demand level is why they choose to use this service.
This often occurs during peak seasons or periods, when people prefer to order in that go and order takeout themselves from the places.
5. Offering A Platform For Advertisement
Restaurants are offered the opportunity to advertise themselves on DoorDash. Hopefully, this allows them to reach a more significant customer base and build clientele.
All restaurants in partnership with DoorDash are listed in the app; those with better reviews rank higher on the list.
So if a restaurant is not getting noticed or has lower ratings, they may pay a monthly fee to DoorDash for advertising space. This should allow them to increase their orders and grow their business.
Additionally, suppose a restaurant is receiving negative reviews. In that case, a clever advertisement can help to change people’s perceptions of them and regain the trust of past customers.
6. Corporate Catering
DoorDash also offers a unique concept for delivery service ventures where they offer corporate catering for companies who desire alternative catering.
The companies can place group orders, determine a spending limit for their function, and even receive food that is packaged individually.
This is then delivered to a central office or home businesses.
DashMart connects convenience stores to customers, allowing them to offer their customers retail products or even household items delivered to their door through the DoorDash app.
This idea also deviates slightly from DoorDash’s original business model. Still, it certainly works and is a niche in the market they have filled, and they receive 20% commission from stores.
8. Ownership Of Other Companies
DoorDash is not a single-entity company. They own several other companies that have helped diversify their services and contribute to and aid in increasing revenue accumulated by the enterprise.
The companies include Caviar, a high-end delivery service that aims at connecting upmarket restaurants and operates similarly to DoorDash.
Scotty is another company they acquired, specializing in working on and creating self-driving vehicles.
They also took over Chowbotics, which sells robots that produce custom bowls of yogurt, salad, and cereal.
The largest acquisition made, however was of Wolt, a Finnish technology company that was acquired for $8.1 billion near the end of 2021.
The Type Of Business Model That DoorDash Exercises
As we know, DoorDash is an on-demand logistics app connecting local restaurants with customers who wish to order.
More than a million drivers connected more than 450,000 restaurants to a larger market share in 2021 alone, and more than 20 million people used the app that year.
There are more moving parts to the whole model. They have helped restaurants expand their reach and give customers more options regarding food that can be ordered easily.
However, the company is still a delivery service at its core, with restaurants paying a commission fee for completed deliveries. Customers are also charged for the delivery of their meals and other products.
One area of the company that is still under debate is that their drivers are treated as independent contractors as opposed to being seen as company employees.
This has been a controversy at times, especially back in 2019, when DoorDash was reported to have been pocketing part of the drivers’ tips for their work.
A Brief History Of The Company
DoorDash was founded in January of 2013 but took a few years to rise to flesh it into being the company that now operates.
The founders were Andy Fang, Evan Moore, Stanley Tang, and Tony Xu, who met while at Stanford University. The company headquarters is based in San Francisco, California.
DoorDash only went public in December 2020 and currently runs in various countries, including the United States, Canada, Japan, and Australia.
In their 2021 financial year, they reportedly saw revenues of $4.8 billion, which is an incredible feat for a company that only officially opened shop the year before.
Final Thoughts On How DoorDash Makes Money
DoorDash is quite possibly one of the most successful start-up companies that entered the market not very long ago.
They have leveraged on-demand delivery with the “gig economy” and use multiple avenues to obtain income streams.
Their revenue comes from the likes of delivery service fees, subscriptions, paid commissions, and advertisements.