How Does DoorDash Make Money?

DoorDash is an online food delivery service that partners with local restaurants to deliver delicious meals to customers conveniently. Deliveries are executed by independent contractors called "Dashers" who work on a flexible schedule.

DoorDash generates revenue through various channels, including commissions, service and delivery fees, advertising, cash advance fees, a white-label logistics service, premium subscriptions, and catering for other companies.

What is DoorDash?

DoorDash, Inc. is the platform that oversees online food ordering and delivery. This San Francisco-based company has dominated the US meal delivery market, capturing an impressive 56% share. It also dominates the convenience delivery category with a 60% market share.

DoorDash is a tech company that serves as a bridge between local eateries and customers, connecting them with self-employed or independent contractor delivery drivers.

Some Interesting Facts About DoorDash

• After two years in operation, DoorDash expanded its reach to over 18 cities across the United States and achieved an impressive valuation exceeding $600 million.
• DoorDash captured 34% of the US market in 2019.
• When it comes to doorstep convenience delivery, it also holds a significant 60% market share.
• In November 2021, DoorDash invested $8.1 billion to acquire Wolt, a Finland-based company, expanding its reach in the delivery service industry.
• With a 34% increase from 2021 to 2022, DoorDash brought in $6.58 billion in revenue.
• Over 32 million individuals have utilized DoorDash across 25 countries. The majority of users are based in the US.
• A decade after its launch, DoorDash's revenue reached $8.15 billion in 2023.

What Does DoorDash Do?

In 2013, Stanford graduates, including Andy Fang, Tony Xu, Evan Moore, and Stanley Tang, embarked on a mission to transform the food delivery industry by establishing their own company. In the early days, meal delivery services used to only provide a list of restaurants, leaving the responsibility of delivering customers' orders to the eateries themselves.

The company started as "PaloAltoDelivery.com." After receiving hundreds of orders in its initial weeks, the founders decided to establish a more structured operation, giving rise to the birth of DoorDash.

After just two years, DoorDash expanded its reach to 18 cities across the United States and achieved an impressive valuation of $600 million in 2015.

Want to build an app like DoorDash? If you are an entrepreneur interested in start a business like Doordash or other food delivery platforms. This is the perfect place for you.

How Does DoorDash Delivery Service Work?

DoorDash has implemented a platform-to-consumer model that enables users to conveniently place food orders from its partner restaurants. These orders can then be delivered straight to their homes by the restaurant or a dasher.

So, how does a DoorDash delivery service work? Take a look:

Step 1: Choose what to order

There is a wide range of food options available for users to explore. Customers have the flexibility to customize their search and choose accordingly based on their specific requirements. Customers can conveniently save their preferred restaurants for future orders.

Step 2: Make payment

Integrating in-app payment method like UPI is a crucial element of DoorDash's growth strategy. In this step, you'll be required to provide the restaurant's details and the delivery address. The delivery fee for DoorDash is calculated based on the distance between the pickup and drop-off locations. The orders are sent to the restaurants, and the food is prepared once the payment is made.

3. Track the order

Customers have the option to track the progress of their orders easily through the DoorDash mobile app. This feature was carefully crafted to ensure ease of use and seamless integration within the application.

4. Delivery

The Dashers deliver the food to the specified locations. Customers can provide tips to the Dashers if they wish, although the DoorDash delivery fee is already included in the payment process. However, the client ultimately has the authority to make the final decision.

Why is Doordash Successful?

The strong focus on customer satisfaction has played a significant role in Doordash's remarkable achievements. The firm goes above and beyond to ensure complete satisfaction for its clients. 

In addition, DoorDash consistently introduces fresh features and expands its range of services. The outcome is a rise in the number of new and repeat customers for the company. 

One factor contributing to DoorDash's remarkable success is its exceptional level of convenience. The service is designed to be easily navigated by users and provides the added benefit of delivering customers' preferred meals directly to their doorstep. 

DoorDash prioritizes customer satisfaction and strives to simplify their daily routines. As a result, the company has expanded to become a top player in the global meal delivery industry.

How Does Doordash Make Money?

Let’s have a look at the strategies DoorDash follows to bring money to the table.

1. Commission-Based Revenue Model

Doordash charges merchants a commission for listing on their marketplace, while customers must pay variable fees for services such as delivery and other additional services.

For restaurants, there are three plans to choose from: Basic, Plus, and Premier.

The percentage deducted from each order's total varies based on the restaurant's selected plan.

• Basic: 15%
• Plus: 25%
• Premier: 30%

DoorDash charges a 6% fee for order pick-up, regardless of the restaurant's plan.

This allows the company to generate revenue through its partnerships with restaurants.

2. Delivery Fee

Another great way to generate revenue from DoorDash is through the delivery fee. The demand and distance between the pickup and drop-off locations determine the delivery fee.

Consumers pay a fixed delivery fee and a variable service fee based on the total dollar value of goods ordered for each order. 

The price per order typically ranges from $5 to $8.

Customers find it incredibly convenient to use the app due to its wide range of restaurants, dishes, and user-friendly features. It's a hassle-free way to enjoy a delicious meal without unnecessary effort. 

DoorDash processed a staggering 816 million orders in 2020.

The delivery expenses alone reach billions of dollars.

For orders below $8 to $10 (depending on the market), DoorDash also applies a modest $2 fee.

3. Advertising

Similar to other apps, DoorDash generates significant revenue through advertisements. Restaurants and businesses can pay for increased visibility on the DoorDash platform. DoorDash offers an enticing $100 credit per store.

DoorDash offers a range of marketing services, including sponsored listings and special promotions, for which they charge a fee.

4. Subscriptions

By signing up for DashPass by DoorDash, users can save money on delivery and service fees.

Customers can avoid paying delivery fees on orders above $12 by paying a flat rate of $9.99 monthly. In addition, there is a discount on the service fees. By subscribing to DashPass, customers can enjoy savings of $4 to $5 on every order, according to DoorDash.

By signing up for DashPass by DoorDash, users can save money on delivery and service fees.

Customers can avoid paying delivery fees on orders above $12 by paying a flat rate of $9.99 monthly. In addition, there is a discount on the service fees. By subscribing to DashPass, customers can enjoy savings of $4 to $5 on every order, according to DoorDash.

Providing clients with the option to subscribe to DashPass has many benefits. To start with, to recover the cost of the service, it makes them more eager to place orders on DoorDash.

The second advantage is that DoorDash can immediately put the funds to work in other departments. Both Sam's Club and Amazon (via Prime) had popularized that tactic.

5. Corporate Catering

DoorDash's corporate catering service provides an additional stream of income. Companies have the option to conveniently place bulk orders for their workers. Doordash attracts a larger customer base by offering corporate catering at more affordable rates than individual orders.

6. Dynamic Pricing

Regarding delivery fees, DoorDash has implemented dynamic pricing, which is commonly referred to as surge pricing. This enables them to capitalize on peak periods by increasing prices slightly during high demand.

7. Software as a service (SaaS) Revenue Model

The DoorDash Storefront is a software-as-a-service (SaaS) revenue model that restaurants can utilize with DoorDash.

With DoorDash Storefront's software solution, you can efficiently handle your restaurant's online orders for delivery or pickup.

Although DoorDash Storefront does not have monthly software or commission fees, merchants and restaurants must pay a credit card processing fee of 2.9% and a minimum order fee of $0.30.

Want to Build an App Like DoorDash?

Doesn't the remarkable journey of DoorDash offer valuable lessons for startups, small businesses, and entrepreneurs in the food industry and beyond? "How to develop food delivery app?" is a valid question to inquire if you are interested in this area. 

To create an app similar to DoorDash, it is advisable to seek the assistance of professionals specializing in this field. The leading mobile app development company experts possess the necessary knowledge and skills to develop a platform that can efficiently deliver food on demand. If you seek cutting-edge app development solutions, look no further than RisingMax, a frontrunner in the food delivery app industry. 

Launch your food delivery business quickly and efficiently with our ready-to-launch solutions.

If you need help developing your meal delivery app, don't hesitate to contact our team of experts.