DoorDash tries tiered commission structure to deal with restaurants’ complaints
DoorDash launched a new tiered commission plan for restaurants following outrage over its high fees as delivery took off during the pandemic. The service’s lower commission rates, however, will provide less marketing support and pass on higher costs to consumers.
The three plans are:
- Basic (15 percent commission): The most cost-effective option allows restaurants to stay listed in the app, but reduces the delivery radius and charges the highest delivery fees ($4.99 on average) to customers;
- Plus (25 percent commission): Reduces delivery costs, expands the delivery area and provides access to DashPass, DoorDash’s loyalty program;
- Premier (30 percent commission): Offers the lowest fees to customers ($1.99 on average), the largest delivery area and DashPass access. The plan offers a “Growth Guarantee,” or a fee refund if monthly orders are less than 20.
Restaurants have the option to switch plans as needs change.
Previously, standardized pricing wasn’t offered. Some bigger restaurants were able to negotiate fees as low as 15 percent while some smaller ones were charged as much as 30 percent per order. Lawmakers in dozens of cities and states temporarily capped delivery commission fees as restaurants increasingly relied on delivery during the pandemic, and some are considering making the caps permanent.
Doordash, which is estimated to control nearly half of the U.S. food delivery market, said the new setup gives restaurants more options to choose a plan that works with their needs and cost structure. For instance, an established restaurant or one in a heavily trafficked area may have less need for Doordash’s marketing outreach.
The varied plans also increase transparency around the underlying costs of delivery to restaurants, customers and contract drivers.
Restaurants appeared pleased with the more flexible options but concerned about the potential limitations on placement and promotion within the app as well as the smaller delivery radius under the 15-percent plan.
DoorDash’s COO Christopher Payne also said at a virtual event that raising delivery fees to customers under the lowest commission plan will impact order volume. The Wall Street Journal reports that he said, “Delivery is a very cost-intensive service so we need to blend the economics on the consumer side and merchant side in order to make the overall system economics work.”
- DoorDash Announces Pricing Updates to Provide More Choice, Flexibility, and Transparency for Local Restaurants – DoorDash/PRNewswire
- Announcing Updates to Provide More Choice, Flexibility, and Transparency for Local Restaurants – DoorDash
- DoorDash Allows Restaurants to Choose Commissions in Post-Pandemic Future – The Wall Street Journal
- DoorDash Announces New Pricing Tiers for Restaurant Delivery – San Francisco Eater
- DoorDash retools restaurant fees with tiered pricing – CNET
- DoorDash announces new pricing for restaurants, with commissions as low as 15 percent – TechCrunch
- Understanding Merchant Fees – DoorDash
DISCUSSION QUESTIONS: Do you think DoorDash’s three-tiered commission plan offers a viable solution for restaurants, its contract workforce and itself? What challenges do you see potentially arising that may necessitate changes or cause potential problems in execution?