How does DoorDash work? A Study on DoorDash Business Model & Revenue

How does DoorDash work A Study on DoorDash Business Model & Revenue

If you wish to learn how DoorDash became one of the top food delivery apps in the world, keep reading. We’ll be exploring the complete DoorDash business model and working process in this blog.

DoorDash – The Future Of Comfort Living

Why do you work?

Why do you make money?

All of it is to just fulfill our basic human needs. And one of the most vital needs is food. A bunch of Stanford students realized this amazing business opportunity and grabbed it by the horns. In 2013 the four founders Tony Xu, Stanley Tang, Andy Fang, and Evan Moore, came up with a brilliant idea to create a mobile app platform where people could order food to be delivered at their doorsteps by drivers whom they address as “Dashers.”

Hence the name DoorDash.

DoorDash initially began in Palo alto (the western hub of digital startups), and with time and consistent efforts and innovation, now they have spread across 4000+ cities and more than 340,000 stores in the USA and Canada.

This food delivery service company is on the verge of becoming a conglomerate by acquiring four different companies: Rickshaw, lvl5, Caviar, and Scotty Labs.

DoorDash is proof of everything that an on-demand service-based company can do right. Today we will be studying the DoorDash business model, how DoorDash works, and how it makes money. But let’s look at the company profile first.

DoorDash – Company Profile

Here are some basic stats about the company to give you a more precise idea of its nature.

Year of Foundation: July 2013

Founders: Tony Xu, Stanley Tang, Evan Moore, Andy Fang

CEO: Tony Xu

Headquarters: Rialto Building, San Francisco, California, U.S.

DoorDash net worth: $717M

DoorDash total valuation: $12.6 Bn

Number of employees: 7,549

Type of business: Privately held company

DoorDash Company Profile

How DoorDash work?

DoorDash works just like several other top-ranking food delivery app services like UberEats and Grubhub. The basic principle is the same.

Customer Places The Order

The customers registered with the DoorDash food delivery app will place an order for their favorite food item from their choice of the restaurant listed on the app. It’s a digital paradise for foodies as they get to choose from a large selection of restaurants and cuisines with just a few taps on the app.

Also, With smart AI integration, the user recommendations have become more accurate and less intrusive for the customers. So, the users can choose from all the available options and place their orders within seconds.

Payment Of The Bill

The next step comes to pay for the order that the user placed. The charges are calculated based on the order as well as the distance from the restaurant to the delivery point and additional taxes. When the user pays the amount, the order goes through, and the restaurant starts the preparation and packing.

DoorDash offers a wide range of payment options for its app users ranging from all the major credit and debit cards, including Visa, MasterCard, Discover and American Express, as well as in-app wallet and Amazon Payments.

Know more: How to Create a Restaurant App?

Order Dispatched

Once the food is prepared and packaged, it is dispatched from the restaurant to be delivered to the customer. The delivery persons are called dashers, so these dashers will collect the package and follow the delivery route and instructions via their dasher app. This task is assigned to any available dasher that is closest to the restaurant.

The customers can track the status and location of their orders with the customer app. They can see on a map where their food is and how much estimated time it will take to reach the customer’s location.

Delivery & Rating

The dasher will follow the map on their app and deliver the food parcel to the customer’s at the door. The customer accepts the parcel, and that’s it, now they enjoy the food. Now one final thing, they can rate and give a review of their experience with the food and delivery.

The user can rate and give useful comments to know what the restaurant or a dasher did right or wrong. The ordering can also be done via the DoorDash website, but the mobile app would feel more convenient.

Read also: Benefit to invest in Pizza Delivery App Development

DoorDash Business Model Canvas

Are you more of a technical and analytical person? Then you’ll love this section. Here is the DoorDash business model canvas to make you understand in precise points how this food delivery service business works and all its moving gears.

doordash business model canvas

DoorDash Value Proposition

A business will only succeed until it provides value to all its stakeholders (not just the customers). So, let’s check out how and what value this DoorDash business model brings for all the concerned parties.

The DoorDash business model follows a Y-structure plan, focusing on all three sides of the food delivery business model and coordinating between restaurants, drivers and customers. DoorDash has formed the perfect system with merchant partnerships, contracts with drivers and convenient communication software between the three stakeholders.

So let’s check out how DoorDash works for restaurants, dashers, and customers and what this system has to offer.

DoorDash’s Value Proposition For Customers

DoorDash app is built with user-friendliness and a customer-centric approach. Every feature and design integration is to give the app users the best experience. Here are the top value propositions that DoorDash offers to its customers.

  • Superior User Experience
  • Better Competitive Prices
  • Track Order Delivery via App
  • Customer Service Available 24×7
  • Wide Range of Restaurants & Cuisines
  • Multiple Payment Option
  • Advance Booking Parcels
  • Safe & Contact-free Delivery During Covid-19 Times

DoorDash’s Value Proposition For Restaurant Partners

Restaurants need to find different ways to sell their food than just waiting for customers to show up. After the global pandemic that all of us witnessed, it is clear not to stay dependent on a single source of sales. So here is the value proposition that DoorDash has to offer restaurant owners.

  • Get The Much Needed Exposure
  • Extended Customer Base
  • Better Traction For Their Business
  • Marketing Tools For Restaurants
  • Give Customers A Unique Food Experience
  • 24×7 Customer Service Available
  • Empowering Small Restaurant Businesses

DoorDash’s Value Proposition For Dashers

The DoorDash drivers or Dashers as they are called are an important pillar of the DoorDash business model. The company understands this very well and does everything to accommodate and help their dashers function efficiently and get good pay.

  • A Source of (Full-time or Part-time) Employment
  • Receive Tips From Customers For Good Service
  • Anyone with a vehicle (car or bike) can join
  • Dashers Are Free To Choose Their Suitable Delivery Hours
  • They Work As Independent Contractor
  • Tips From The Customers Are 100% Dasher’s Earning

Also Read:  Grubhub Business Model

DoorDash Revenue Model

Why do people launch and run a business? The honest answer is for the money. Every entrepreneur loves to earn more revenue from their business, and it can only be done with a foolproof business model like DoorDash.

Understanding the mode of revenue generation for a food delivery service business is of vital importance if you wanna take a swing in this industry. It’s for the budding entrepreneurs planning to enter the on-demand food delivery service industry; the DoorDash revenue model will definitely interest you. Let’s check out how does DoorDash makes money.

How DoorDash Makes Money?

There are several costs to run a business like DoorDash like maintenance costs, sales costs, the Dashers’ salary, retention of its personnel, and many more. But the DoorDash business model’s revenue is a lot more, and there are multiple revenue streams through which DoorDash makes that kind of money.

Commission On Each Order

The main source of earning for DoorDash is through the commissions that they earn from all the orders. DoorDash charges a commission percentage out of each and every order made on their platform (app and website), Usually 20% from restaurants.

Delivery Fees

There is another side of the transaction that brings in money for DoorDash. The DoorDash business model works by delivering people their favorite food at their doorstep, and that service is what pays for the business. The delivery rate depends upon the distance the dasher has to travel to deliver as well as DoorDash’s deal with the concerned restaurant.

Restaurant Advertising on DoorDash Platform

Another interesting revenue stream of the DoorDash business model entails advertising. DoorDash charges restaurants for their marketing and advertising on their App. So, restaurants would pay good money to DoorDash to keep them on the top of the list of restaurants for a limited time or pop-up banners.
Planning to launch food delivery app service like DoorDash

DoorDash Vs UberEats Vs Grubhub Vs Postmates

Let’s compare our champion with all the other big boys of the food delivery service game. DoorDash against three other worthy competitors: Grubhub, Uber Eats, and Postmates.

Grubhub, Uber Eats, and Postmates charts

 

Conclusion

So, that’s it from our side. You know the entire DoorDash business model and how DoorDash makes money. Now it’s time for you to take the first step towards developing your on-demand food delivery service business like DoorDash.

Now the next step comes to get the perfect development team or a digital solution to build and launch your food delivery empire around. Well, aPurple can help.

Also Read: Food Delivery App Development Cost

FAQs

What is DoorDash and how does it work?

DoorDash is an on-demand food delivery app currently operating in about 300 cities across 32 major markets in the U.S.A. It is a mobile app that facilitates a user to find a suitable restaurant and order food.

The customer registered on Doordash places an order from the listed restaurant on Doordash. Once the order has been placed, the system takes you to the payment gateway. You can choose from the various modes of payment. After that, the dasher would collect your order and deliver it to your mentioned location. “Dashers” are the food delivery personals.

At last, the user can rate and give useful comments to know what the restaurant or a dasher did right or wrong.

How does DoorDash work for restaurants?

At DoorDash, restaurants have three options for their order protocol:

  • Using A Tablet: The restaurant only needs to download DoorDash’s order manager app for receiving, organizing, and managing orders.
  • Using A DoorDash PoS Integration: When there is an order generated in DoorDash it is directly shown in the restaurant PoS system which connects to the kitchen.
  • Via Email: When DoorDash receives an order, they will forward it to you and you have to send the confirmation mail back to them.

Restaurants can choose any option that is the most convenient to them.

How much does DoorDash make?

There are three ways by which DoorDash makes money. Firstly, every order that gets placed through the DoorDash app, it takes a 20% commission from the restaurants. Secondly, the company earns money through various promotional activities like restaurants paying some amount to appear at the top of the search result. Lastly, DoorDash charges $5 to $8 on every delivery made by their dasher.

What are DoorDash’s revenue sources?

As explained earlier DoorDash generates revenue through three sources: commission, advertising, and delivery fees.

Why is DoorDash successful?

With excellent logistics and operating systems, Doordash has become the epitome of the food delivery business. Building a bridge between restaurants and customers by providing quality food more conveniently. Hence, DoorDash is everything that an on-demand service-based company can do right.

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