DoorDash is a technology company that connects people with the best in their cities. It is primarily a door-to-door food delivery company. The company empowers local businesses and generates innovative ways to improve the earning base and living standard of people.
Thus, how does DoorDash make money, if the company is basically a food delivery company?!
According to Goldberg, E.(2017), the average restaurant in America has 100,000 pounds of excess food every year. This could mean several things, but most importantly; that restaurants have excess food because several persons cannot access these food points cause of last-mile logistics.
This is where DoorDash comes in. They take advantage of this lacuna to thrive in business. The 3rd-party company delivers food from more than 300,000 local and chain restaurants across the U.S. and Canada.
Table of contents
- How much do DoorDash shoppers make?
- Can you make money Working with DoorDash?
- How much money can I make from DoorDash?
- Doordash Business Model
- Interesting Features of DoorDash
- DoorDash’s 3 Customer Segments
- Value Propositions offered by DoorDash
- The 4 Step Model – How DoorDash Works
- Revenue Generation Model – How Doordash Makes Money
- Final Thoughts
This post distills how DoorDash makes money and its full business model. It not only gives you in-depth knowledge of the technology company but you will be inspired to make some extra money working for the company.
How much do DoorDash shoppers make?
According to Glassdoor, Full-Service Shoppers make anywhere from $7-$26/hour. During busy times, you can make closer to $20/hour. Full-service shoppers will see an estimate of how much they will make per order before they take it.
Can you make money Working with DoorDash?
By picking up and delivering food orders door-to – door, you can earn some extra money or even a full-time salary as a DoorDash driver. In other words, by by satisfying customer demand, you make money!
How much money can I make from DoorDash?
The more work you do, obviously, the more money you can make. DoorDash confirms that the price you can start is $15 to $25 per hour range.
There are also other rewards that give you more money, such as making 30 deliveries in 30 days or getting a new Dasher to sign up to their app.
Doordash Business Model
According to Yelo, the business model of DoorDash is designed to benefit users as well as the restaurants. It enables users to find a restaurant and order food on one hand and on the other DoorDash gives restaurants access to extended customer base.
It also benefits people by offering them employment for delivering food. Since its foundation, DoorDash has managed to raise decent funding from investors and has tied up with many popular restaurant chains in major cities of the USA.
Some Facts about DoorDash
- Founders: Andy Fang, Stanley Tang, Evan Moore & Tony Xu
- Year of Foundation: 2013
- Headquarters: San Francisco, California
- Funding: $186.7M (As of May 2016).
- Valuation: $717M (As of March 2016, According to VB).
- DoorDash is a Y Combinator-backed company.
Interesting Features of DoorDash
- DoorDash hires its own drivers who are called Dashers.
- Delivery delivery fee charges per order are $5 to $8 for the customer.
- The commission for the company is close to 20% (covered from the restaurants).
- It operates in over 20 markets across U.S. and Canada.
- The Dashers working for DoorDash make more than $600 within a calendar year in the U.S.
DoorDash’s 3 Customer Segments
DoorDash acts as an integrator between restaurants and users who want to order food online. It also provides employment to people who are looking for a full-time/part-time job. Thus, the customer segments involved with DoorDash Business Model are:
- Foodie people with no time to go out.
- Corporates, business people who wish to treat their team without wasting time and affecting their work routine.
- People who don’t want to cook.
- College going as well as working people with no kitchen facility.
- Restaurants without home delivery services.
- Food joints which do not have good sitting areas.
- Restaurants which want more customers and online branding.
- People who desire a delivery job with flexible timings.
- People who desire a job with good tips.
Value Propositions offered by DoorDash
DoorDash has a Business Model Y system, which focuses on all three sides of the business model of food distribution, to create collaboration between restaurants, drivers and customers.
By providing them with the facility to monitor the location of the driver so as to predict the time of dispatch and delivery, it empowers restaurants and customers.
DoorDash is able to take care of the entire distribution chain through a merchant alliance, driver contracts and easy communication apps, which together lead to a seamless experience for everyone.
- Superior experience with better pricing and increased efficiency.
- A facility to track the delivery after placing an order.
- Customer Service available 24×7.
- A straight-forward, reliable and easy to use product covering a massive number of restaurant menus just involving click and choose options.
- No tension of getting food delivered.
- Extended customer base.
- An easy, cheap and fast way of delivering orders.
- Empowerment of small restaurant owners to work at a wider platform.
Dashers at Doordash get a flat payment for every delivery they make on a weekly basis and usually make more than $600. (in the U.S).
- A source of employment (full time as well as part-time).
- An opportunity to receive good tips from customers.
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The 4 Step Model – How DoorDash Works
A similar model is used by most logistics-based On-Demand startups, but the small variations involved make a difference. It is important that you take note of these points if you are an entrepreneur willing to start a similar business.
- Choose order: Users choose their favorite food by pressing a button that shows up on the list of restaurants with a variety of menus listed on DoorDash. Features such as search, nearby restaurants, and making choices based on categories, also help the users for better sorting.
- Payment: Users make the required transactions after placing their orders online. Once the order has been received by DoorDash, it forwards it to the respective restaurant where it is prepared and packed for delivery.
- Track order: The delivery person picks up the packed food order from the respective restaurant. The in-built software used by drivers in their phones allows them to accept orders whenever they have downtime. DoorDash provides the facility to track the food location so as to have an estimate of the time of delivery.
- Delivery: The dashers try to make shorten the delivery period as much as is practical. The customers, although not necessarily but usually tip the dashers, the dashers get to keep 100% of the tip received.
Revenue Generation Model – How Doordash Makes Money
Knowing the mode of revenue generation is of crucial importance for a young entrepreneur eager to join On Demand Logistics or start-up food distribution.
The business model of DoorDash is focused on offering a service to both restaurants and individuals who want something to eat. Without a delivery service, hungry users can find an eatery and get DoorDash to carry their food to their door.
Restaurants often profit from receiving orders from fresh sources and connections to the expanded client base of the start-up.
In the following 3-tier manner, the business makes cash:
Commission on each order
DoorDash delivers to customers who place food orders online via the app. They deliver from the restaurant to the doorsteps of such customers. The third part company charges a commission percentage on each and every order delivered for the same purpose.
Usually, the proportion of commission from restaurants is 20%. The company also receives a commission fee, usually 20%, from restaurants for each order.
The price is much higher than what is currently charged by its competitors. The Delivery Hero charges between 10 percent and 11 percent on each order, according to Vator, while GrubHub is said to take an average cut of 13.5 percent.
The fact that DoorDash can charge more means that restaurants have a fair amount of sway over hem. “Kurt Kane, Wendy ‘s chief concept and marketing officer, said that because of its focus on quality, DoorDash became its “lead horse.” Also, Bloomberg reports that the food delivered by DoorDash always arrives hot.
Restaurant Advertising on DoorDash platform
Besides commission, they DoorDash also charges restaurants for their marketing and advertising on their App. To be on the top of the list of restaurants for a limited time, for pop up in advanced search, DoorDash charges commission.
DoorDash is so popular with restaurants that it is also able to charge them for marketing and advertising. The company charges an extra commission to restaurants who want to appear at the top of search results on its app.
Business model of charging high fees
DoorDash’s business model of charging high fees to restaurants so far appears to be working. It is the fastest growing business in its sector, yet still trails GrubHub and Uber Eats in market share, indicating that there’s further scope to grow.
One worry is that the impending initial public offerings of Postmates and Uber could impact its ability to gain a stronger foothold over the industry. DoorDash is under pressure to raise capital to protect is position in the market and ensure that its offering remains valid as some of its closest rivals find new ways to secure much-needed funds,
Followers of the company will be mindful that the likes of Postmates, Uber Eats and GrubHub still have a lot more expanding to do. None of its biggest rivals currently have the same reach across the U.S. If and when that changes, customers could be stolen away and pricing power might be squeezed.
The billion-dollar food delivery industry has further scope to grow. However, like all mushrooming sectors, companies without enough innovative ideas and cashflow to back them will likely to be taken down along the way.
DoorDash hires drivers called Dashers. The delivery rate depends on the travel distance and consideration of DoorDash’s tie-up with the restaurant, but on average, the delivery fee for DoorDash is $5 to $8 per order.
Depending on the distance traveled, time of day and its relationship with the restaurant where the order has been put, the company charges an average of $5 to $8 per order. Deliveries are fulfilled by DoorDash’s own squad, known as Dashers, of hired drivers.
We trust this inspired you to either start up that business or decide to be a dasher and earn some extra cash.
whatever your decision, we wish you only the very best.