DoorDash, the food delivery app headquartered in San Francisco, announced today, April 27, that it’s changing its pricing for restaurants. Restaurants can now choose from three different plans, tiered at 15 percent, 25 percent, and 30 percent commission fees. DoorDash says it is making these changes in response to feedback from restaurants. But that 15 percent price level currently matches the delivery cap in place in San Francisco, similar to other delivery caps in other cities, including LA, NYC, and Chicago. It’s also not clear how bare-bones that tier really is, and whether it’s something restaurants can even profitably use.
The San Francisco emergency order that went into effect at the beginning of the pandemic capped delivery fees at 15 percent. That temporary order will only remain in place for 60 days after restaurants resume indoor dining at 100 percent capacity, so its days may be numbered — if California fully reopens on June 15, and if the city doesn’t decide to be stricter than the state, the soonest it might be lifted is August. At least one city supervisor has floated the idea of making the delivery cap permanent, and it was up for discussion at the state level, as well, but nothing has been confirmed.
It’s notable that DoorDash is keeping an option at 15 percent, a more reasonable cut that restaurants were already demanding before the pandemic, and which became a contentious issue during the pandemic. And it will be interesting to see if that basic plan at 15 percent is actually a viable option for restaurants, or if they will feel pressured to upgrade to the plans at 25 percent or 30 percent, closer to those fat pre-pandemic cuts, in order to get better promotion and sales through the apps. DoorDash also owns Caviar, and this change will apply to both brands.
Per the DoorDash release, the “basic” plan at 15 percent has the highest delivery fees for the customer and limits the delivery area. The “plus” plan at 25 percent reduces delivery costs, expands the delivery area, and puts restaurants into the loyalty program. And the “premier” plan at 30 percent has the lowest fees, the largest delivery area, the loyalty program, and also “guarantees growth” — DoorDash is promising 20 or more orders a month, otherwise they’ll refund those fees. DoorDash does not say exactly how they plan to drive growth, but it sounds like the restaurants that pay higher commissions are paying for marketing, which might mean better placement and promotion within the app.
In addition to these new delivery plans, DoorDash is also making a couple of updates to pickup orders. For pickup orders placed on the app, they are lowering the fee to 6 percent. And they’re launching a “storefront” product, to help restaurants take orders through their own sites, for a processing fee on every order.
“Maybe this is a move in the right direction, acknowledging different pricing tiers, with distinct benefits for restaurants paying more than 15 percent,” says Laurie Thomas, president of the Golden Gate Restaurant Association (GGRA), the local restaurant lobbying group. “It’s encouraging to see DoorDash clearly differentiating their offerings, and setting a price point where the delivery cap is currently at.” But Thomas says her primary concern is how limited that delivery radius might be, and whether that will force restaurants to opt into a higher tier. And she says it also depends how much a restaurant needs that marketing push. She says one restaurant might not want or need promotion whatsoever, while another might need prime placement in the app in order to get sales.
So while today’s announcement sounds promising, San Francisco restaurants won’t actually experience the difference for at least a couple of months. And of course, they’ll have good reason to scrutinize that fine print, when they’re considering these new plans. During the pandemic, delivery apps have added restaurants to their platforms without their consent, poured millions of dollars into opposing driver benefits, paid drivers pennies in hazard pay, threatened to raise delivery fees for customers, and in fact raised delivery fees for customers. DoorDash went public in December, making the CEO and founders billionaires. Stay tuned for more updates.