Dive Brief:
- Last week, DoorDash announced it will reduce commissions for its local restaurant partners with five or fewer locations by 50% on both the DoorDash and Caviar platforms starting April 13 and continuing to the end of May, according to a company blog post.
- This commission relief program will benefit more than 150,000 local restaurants in the U.S., Canada and Australia.
- This announcement comes on the heels of DoorDash’s other COVID-19 response programs, including financial assistance for drivers, no-contact options, no commission fees on pickup orders and $20 million in merchant marketing programs.
Dive Insight:
DoorDash notes this relief program costs up to $100 million, a number that comes from the commission reductions versus direct payments, and adds to the more than $15 million in combined commission reductions and marketing initiatives that have already been put into place by the company.
Such goodwill seems to be almost a necessity for delivery companies, which have been under public scrutiny through the coronavirus crisis. Grubhub’s initial COVID-19 response generated criticism when restaurateurs learned that the company was not suspending commission payments, but rather deferring them. Grubhub has also received complaints for its Supper for Support program, which keeps restaurants on the hook for deep-discount promotions. In response, the company said in early April it would it would provide $30 million in support for over 100,000 independent restaurant partners and regional chain franchisees through its Supper for Support promotion and offer $250 for each restaurant to enable them to provide $10 off orders of $30 or more, according to an email sent to Restaurant Dive. Funding would be available through April.
DoorDash has not been immune to criticism, either. Vice reported earlier this month that the company’s drivers were occasionally directed to restaurants that are closed during the crisis, and sometimes not getting full pay for those orders. DoorDash said it is actively trying to ensure it has the most up-to-date information.
Notably, delivery platforms faced plenty of criticism before the pandemic, mostly for their high commission and service fees averaging between 20% and 30% — a number that erodes already-thin margins at restaurants.
That’s why this move by DoorDash is a big deal and should be effective in saving the most vulnerable mom-and-pop restaurants a material amount of money for the critical delivery channel at this time.
However, criticism will likely return when those commission fees also return. As DoorDash's blog notes, “Restaurant fees are necessary to keep Dasher and Courier earnings high and support all of the services restaurants and consumers need. But that doesn’t mean we’re not prepared to do our part in this acute moment of need to truly come together.”
Perhaps at this point the only post-pandemic compromise is some type of regulation, including a cap on delivery fees. The New York City Council proposed capping fees at 10% last month. San Francisco made this move for all restaurants late last week, capping delivery app fees at 15% an order. The cap in that city will be in place until restaurants are once again able to offer dine-in. DoorDash objected to the move, according to the San Francisco Examiner, stating that the policy doesn’t ensure that delivery drivers are paid fairly.
