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12/05/2022

DoorDash Canada moves to tiered commission system

Basic plan starts at 20% for foodservice providers, but some may pay as much as 29%.
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DoorDash sticker on shop door

TORONTO - DoorDash is changing the way it charges commission to Canadian restaurants with a new, tiered model.

The San Francisco-based food delivery service announced the switch Tuesday, saying it will offer restaurants more "flexibility'' and help them take advantage of digital growth opportunities. [It's worth noting that many c-stores, particularly those that offer foodservice, also use DoorDash.]

"Part of the thinking ... was to give them that transparency of the available value proposition that we have to offer,'' said Shilpa Arora, DoorDash Canada's general manager.

The model resembles one launched in the U.S. last year and has three tiers starting with the basic plan, which charges a 20% commission on deliveries and 10% on orders picked up by diners and comes with the smallest delivery radius.

Beyond that, restaurants can choose plans with additional features.

One step above the basic plan is DoorDash Plus, which involves a 25% commission on deliveries and eight per cent on pickups. This plan also gives access to members of Dash Pass, a paid monthly subscription service offering no delivery fees, but at a heftier 27% commission. The service also offers courier services to a larger delivery area (DoorDash would not say what the specific radius is).

The final tier is DoorDash premium. It comes with a 29% delivery commission and eight per cent for pickups. The delivery area for these users is the largest, they get a $50 rebate for spending $100 or more on marketing every month and access to Dash Pass customers but at no difference in commission.

Every tier gets access to DoorDash Storefront, software for online ordering that allows restaurants offer digital sales through their websites.

Arora declined to say how different the tiers and their commission levels are from DoorDash's current Canadian offerings, but food delivery apps have been known to charge as much as 30% on couriered orders.

The commission levels used by apps like DoorDash, UberEats and SkipTheDishes have been a persistent complaint for restaurant owners, who say the platforms are eating up much of their profits.

These concerns have only been exacerbated by restaurants still working to recover from the COVID-19 pandemic, which caused many of their dining rooms to close, and from stubbornly high inflation rates that have pushed up costs.

However, Brian Kaufmann, DoorDash's head of Canada policy and government relations, defended the rates, saying they are the product of conversations with a restaurant advisory council, merchants on the platform and other business associations.

"We're hearing what pricing makes sense and this is what the market looks like now, and we're pretty proud of what we've come up with,'' he said.

During the COVID-19 pandemic, restaurants wanting to escape such commissions frequently called on to customers to avoid such delivery apps and order directly through eateries. For customers keen to stick with such apps, they recommended pickup because of its lower commissions.

Since then, health measures like temporary closures and masking mandates have largely been dropped, but many have stuck with apps like DoorDash.

Arora noticed demand for DoorDash in Canada is very season specific.

"We obviously see pickups pick up, for lack of a better word, in the summer months and then deliveries are obviously more appreciated as the weather starts to become a little bit harder to get out,'' she said.

She and Kauffman say meeting those needs has not been difficult as people increasingly rethink their careers, pursue more stable earnings or hop to remote work in the wake of the health crisis.

"I don't think we've been impacted at all by some of that change,'' said Kauffman.

However, the company's financial state was affected by the pandemic.

At the end of November, DoorDash co-founder and chief executive Tony Xu announced 1,250 workers - roughly 6% of the company's workforce - were being laid off.

The company has refused to say how many Canadians were impacted by the cut.

"This is the most difficult change to DoorDash that I've had to announce in our almost 10-year history,'' Xu said in an open letter announcing the cuts.

Xu took the blame for the layoffs, saying the company had to carry out such a move because DoorDash was "undersized'' before the pandemic and as opportunities swelled during the health crisis, he sped up hiring to "catch up with our growth.''

But expenses grew and Xu knew he had to act.

"We were not as rigorous as we should have been in managing our team growth,'' he wrote. "That's on me.''

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