Dive Brief:

• DoorDash will charge U.S. McDonald's restaurants higher commission fees if they make DoorDash drivers wait more than four minutes to collect delivery orders, The Wall Street Journal reports. The pricing change takes effect in 2023, and is part of a November deal between the two companies to lower DoorDash's base commission fees at the Golden Arches. 
• McDonald's will pay 14.1% commissions on DashPass subscriber orders and 11.6% commissions on non-subscriber orders — down from previous 15.5% for both order types. But if a restaurant takes more than seven minutes to hand off a DashPass or standard delivery order, DoorDash will charge 20.1% and 17.6% fees, respectively. 
• The tiered commission fee system will reward high-performing McDonald's stores and incentivize efficiency, Mark Salebra, chair of the National Franchisee Leadership Alliance, said in an emailed statement.

Dive Insight:

The terms of McDonald's recent deal with DoorDash reflect the pressure delivery aggregators are under to sustain their profitability and restaurants' desire to protect thin margins from delivery commission fees. 

While DoorDash noted in an email to Restaurant Dive it does not comment on confidential client contract terms, it said: "The fee structures for our merchant partnerships can vary by store or franchisee location and, in practice, can be determined by a variety of factors, including volume, average delivery distance, and value-added services, as well as operational performance and quality. Any summary figure is highly misleading. Our platform’s quality-based incentives help reduce Dasher wait times in order to maximize their earnings and boost customer retention and revenue for our merchant partners."

DoorDash may be insulating itself from potential fulfillment issues by putting individual McDonald's stores on the hook for refunds sparked by restaurant mistakes, The Journal reports. This new policy, combined with charging higher fees on slow orders, could help DoorDash recoup some of the revenue lost by its lowered base rate for McDonald's. DoorDash has managed to reach EBITDA profitability, though it has not achieved GAAP measures of profitability.

"Commission rates are just one component we consider when establishing these strategic agreements, which often take into account unique and reciprocal business objectives and allow our partners to capitalize on the unmatched advantages that a global partnership with the largest restaurant company in the world provides," McDonald's said in an emailed statement. 

McDonald's also established a white-label partnership with DoorDash in November, wherein the aggregator will fulfill delivery orders placed through the McDonald's app via DoorDash Drive. The chain struck a similar deal with Uber Eats, which uses its Uber Direct white-label product to fulfill delivery orders.

The risk of penalty commission charges may be worth the benefit of lowered commission fees for McDonald's as its digital channels continue to grow. CEO Chris Kempczinski said during McDonald's Q3 earnings call that the company makes more than 20% of its sales through digital channels in its top six markets.

Aggregator commission fees have long been a subject of contention in the restaurant industry, with major companies pushing to negotiate lower rates. DoorDash introduced a tiered pricing system last spring for restaurants and brands that don't have the negotiating power of McDonald's, charging 15%, 25% or 30% for a range of delivery fulfillment services. Rival delivery platforms have made similar offerings in a bid to stay relevant to their restaurant partners.