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Don’t we just love to stay in our bed and order food? The comforts that are offered by services like Doordash makes them such a great idea. Being able to get food delivered straight to your doorstep is really a great asset.
The idea behind the establishment of the service led to its growth. People quickly became used to food delivery, which led to the popularity of the service. The growth over the last 5-6 years has been immense for the service as a result of their popularity.
Source: Yu Hosoi on Unsplash
What is Doordash?
If you haven’t figured it out by now, Doordash is an on-demand food delivery service that provides intermediary services by delivering food from merchants to customers. It was founded in 2013 and works logistically only for food delivery.
It has an aggregator application that serves as a directory for restaurants. Partnered restaurants feature on this platform, and customers are free to order from these restaurants. It is a simple and effective strategy that a lot of businesses, such as escape rooms, hotels, travel agencies, and much constantly use.
The company was founded by four Stanford alumni Andy Fang, Evan Moore, Tony Xu, and Stanley Tang. The company started as a platform to facilitate food delivery. They did not actually deliver the food. However, with the increased popularity of the idea, a logistical structure was put in place, and Doordash was formed.
How does the Service Work?
Doordash is an online food delivery service, which allows you to choose from assorted restaurants and order food. Many countries have their own version of this service. Doordash allows users to order food and then delivers it to them through its ‘Dashers.’
‘Dashers’ are the employees charged with the duty of collecting food packages and delivering them to the customer. Most dashers are contractually employed and get paid for their service rather than being paid monthly.
Most customers pay their bills online, and then restaurants can collect their share of payments except the delivery and service charges.
And now let us go ahead and analyze ‘How do they make money exactly’?
How does DoorDash Earn?
There are two major forms of revenue generation for Doordash that we are going to discuss. The first one is the commission DoorDash gets for delivering your order to you from the restaurants. The other type of revenue comes from premium subscriptions, which a lot of people subscribe to.
So how do these two Revenue streams work?
- The commission is a standard percentage of the fee that DoorDash Charges its partnered Restaurants. These charges are only levied if an order has been made through DoorDash Application/platform.
Source: Griffin Wooldridge on Unsplash
These Commissions are offered in three basic Plans, which they have aptly named as basic, plus, and premier plans. Don’t worry; you’ll know what they are like soon.
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- The Basic plan has 15% commissions levied on partner restaurants. It has a high delivery fee, and the area of delivery is limited quite a bit.
- The plus plan levies 25% commission while reducing the delivery costs, expanding the ideal area of delivery. Partnered restaurants are given the added benefit of being listed in the loyalty program of DoorDash.
- The Premier plan levies the highest percentage of fees at 30%. The plan offers an even lower delivery fee, an expanded area of delivery, loyalty benefits, and a guaranteed 20 deliveries in a month. If not delivered, restaurants can get a refund.
- The Other way Doordash earns is through delivery fee and service charge. While these charges are used to pay their Dashers and delivery personnel, how this happens is not publicly disclosed. Of course, the bigger your order, the bigger the service fee levied.
- Subscription Offered by DoorDash is known as DashPass, which allows customers to subscribe for a set monthly fee and get discounts on delivery fees and service charges. There are other services that DoorDash offers to its restaurant partners, such as ‘Drive.’ The revenue structure of these services is not readily available as it can heavily depend on the kind of restaurant.
Conclusion
DoorDash started as a genius business opportunity in a market where such options were not many. They have firmly established themselves as a go-to platform for many of their customers. So if you were wondering how they make money, now you know. It is a simple and effective business model that has been tried and tested for quite some time.
