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Revealed: Doordash Business Model and Revenue Sources

By Dileep Gupta
October 15, 2018 8. min read
Last update on: September 1, 2020

What started with the intention of delivering logistics to the customers, DoorDash has now become a renowned brand in the on-demand food delivery market. The company has counted among the top food delivery business and has even acquired 4 different companies, namely Rickshaw, lvl5, Caviar, and Scotty Labs.

This has not solely made entrepreneurs and investors show an interest in on demand app development, but has also encouraged them to look into DoorDash business model. And thereafter, find a quick answer to all the questions regarding revenue generation, such as “How does DoorDash make money?”, “How much does DoorDash charge?” and “How Does doordash work”, etc.

Assuming you to be one of those entrepreneurs, we will be revealing the doordash model for accelerating their business growth and revenue strategies in this article.

But before that, we will be focusing on the funding timeline of the food delivery startup. 

Facts and Funding Timeline of DoorDash

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

Timeline of Doordash

With this attended to, let’s take a glance into features and functionalities that backs the Doordash business plan and adds to its revenue growth. 

Top 5 Doordash Features

There are five app features that stand out for Doordash. Ones that are now being copied to a great extent to develop food delivery apps

Doordash Features

1. Suggested List

The app makes use of AI to give a suggested list to the customers on the basis of the people’s choice. 

2. Top Menu

To make the whole food ordering process a lot more customer-centric, they offer a top menu option in the app, wherein they show the top foods that have been ordered by customers in a specific restaurant. 

3. Dual Rating

Doordash gives you the option to give your rating two times – 

  • To the food and delivery quality, and
  • To the person delivering the food at your doorstep. 

4. Live Tracking

They give you the option to live track where your food has reached after you have ordered them online. They also send regular updates of where the food has reached on your device. 

5. Schedule Delivery

The application gives you the ease to schedule orders even a week in advance! Thus saving your time and peace when ordering in peak time or during festivals.

What makes DoorDash stand out?

Any business stands out because of the extraordinary things they provide to the customers. The products and services that they offer should be of the best quality and should fulfill the needs of the customers. So, how does Doordash work? The On-demand food delivery brand has some unique features that have made DoorDash business and revenue model stand out:

  • Benefits each segment all at the same time.
  • DoorDash has their own drivers whom they address as “Dashers”.
  • The DoorDash delivery fee is between $5 to $8 for the users.
  • DoorDash revenue comes from a 20% commission fee charged from the merchants.
  • The Dashers make more than $600 in one year.
  • DoorDash operates in more than 4,000 cities and across 340,000 stores in the USA and Canada.

Many online food services like Zomato, Swiggy, Foodpanda, etc. have started serving in India after seeing business models like DoorDash succeed. The food service apps of these Indian companies not only lets customers order food but also find the perfect restaurant for the right occasion. If you are wondering how to build restaurant finder mobile apps just like Zomato, check the linked article.

Like any other startup, DoorDash has seen hurdles during the early days. Despite all the difficulties that this on demand food delivery service had to face, they have generated a healthy amount of funds for the business. All thanks to the DoorDash value proposition.

DoorDash Value Propositions

The DoorDash business model is of Y structure. It focuses on all three segments and keeps them well connected for the smooth running of business.

Discuss With Our Experts

This is done by connecting the drivers with restaurants and customers so that tracking the delivery time becomes easy.

How DoorDash works for its segments:

For users:

  • Massive number of restaurants to choose from all over the city.
  • Service available 24 hours a day, 7 days a week.
  • A feature to track the delivery orders on the way.
  • Simple cost effective solution to hunger.

For restaurants:

  • An extended customer base.
  • Provides their own delivery guy to deliver.
  • An easy and cheap way of reaching customers across the city.
  • Branding and marketing for restaurants.

For Dashers:

  • A great source of income.
  • Dashers can earn up to $600 in a year.
  • Chances of tips from customers depending on service quality.

DoorDash Customer Segments

This on demand food delivery service targets the same customers that most of the eateries in the city do. But then how doordash makes money? The aim of the business is to fill the gaps that other eateries or service providers are creating.

The customer segments that DoorDash serves are:

Users:

  • People cannot cook due to lack of time.
  • Professionals who can’t go out during lunch because time is the constraint.
  • Students who don’t have a kitchen facility.
  • People who don’t know how to cook.

Restaurants:

  • Food joints that have no delivery service.
  • Restaurants with poor seating arrangements.
  • New restaurants that need a huge customer base.
  • Eateries looking for advertising and marketing.

Drivers:

  • People looking for part time or full-time work.
  • People looking for good income via salary and tips.

Customer Relationship

You must be wondering how an on demand food delivery service works on its strong customer relationship. To build a sturdy relationship with the target market audience, Doordash has taken amazing steps. They have used social media to a great extent to connect with their customers directly. Socials like Twitter, Instagram and Facebook are the most active place for the business. This way they are reaching a huge audience and also staying in touch with the regular ones.

Having a good customer relationship has helped the business grow and retain the existing audience. DoorDash also provides good online support to its users such as feedback, complaints, ratings and suggestions. These things help improve the business by taking hints of what customers need.

Another way DoorDash is doing things right is by reaching customers via email to inform them about discounts, offers or any development in the business. This approach gives a personal touch to the process and keeps the customers reminded of the business. Customers are also given the facility of contacting someone from the company just in case they need to.

[Also read: Grubhub Business Model and Revenue Sources: {Full Explanation}]

How does DoorDash work?

Now that we have learned what DoorDash is, let’s take a look at how Doordash works as a business. The following four steps is all you need to know to learn how to use DoorDash if you are a user, driver or a merchant:

Step 1: Choose what to order

The users can browse through a wide range of options for their choice of food. The search can be filtered as per the need of the customer and selections can be made. They are also given the facility to favorite frequently selected restaurants to make it easy to order the next time.

Step 2: Making payment

With the help of in-app payment integration, DoorDash makes it easier for users to pay for their food from inside the app. In this process the restaurant and the delivery location has to be mentioned. The distance between the pickup and drop off points has always decided how much does DoorDash charge for delivery. Once the payment is made, the order is sent to the respective restaurants and the food is prepared.

Step 3: Track the order

The Dasher picks up the packaged food from the food joint and sets out for delivery. For the convenience of customers, the DoorDash mobile app has the feature to track the order. This feature was specially built in the application for user convenience.

Step 4: Delivery

The Dashers reach the drop off points and deliver the food. The DoorDash delivery fee has already been paid during the payment process but the users can tip the Dashers if they wish to. However, this completely depends on the customer.

DoorDash Business and Pricing Model

DoorDash Business and Pricing Model

DoorDash revenue model

The revenue generation model for any business be it a startup or a well-established business should be quite strategic. This is where the cost of the business is paid by and the profit is generated. The DoorDash cost includes maintenance costs, sales cost, Dasher’s salary and retention of its personnel, and not to forget the on-demand delivery app development cost

[Extra: Restaurant App Development: Benefits Of Online Food Ordering Services]

DoorDash earns from the following sources:

  • Commission – DoorDash serves the customers by delivering the food from restaurants to the customers. They have become a huge platform and when a restaurant is chosen by any DoorDash user, it earns 20% commission from the restaurants on each order.

     

  • Advertisement – Any restaurant that wishes to advertise themselves on the DoorDash app has to pay in order to be ranked in one of the top places. This is done to increase the visibility of the restaurants and earn more customers. For this placement, DoorDash charges.

     

  • Delivery fee – The delivery fee is another source of income for DoorDash. The amount is decided during the payment process depending on the distance from the pickup to the delivery point. Usually, the delivery fee ranges from $5 to $8.

     

  • Channels – DoorDash operates through an online website www.doordash.com and most of its networking is done via website. This website also can be used to order food and track delivery packages.

With the increase in demand for mobile applications, DoorDash decided to have a mobile application for iOS first and used a reliable iPhone app development company for the same. Later, as the business grew they also got one for Android users. The application has all the necessary features from ‘Search nearby restaurants’ to ‘How to use DoorDash app’ guide. DoorDash has a Person to Person type of on demand delivery app development where one demands services from another person using the same app.

[Want to build an app like DoorDash? See How to Build a Successful On-Demand Delivery App?]

Dashers are the guys they use for the purpose of delivering in various areas of a city. 

The Future of DoorDash

DoorDash has recently acquired square’s food delivery service, Caviar and sponsored a set of AR lenses that enables Snapchat users to immerse themselves in the virtual environment of the reputed restaurant chains, like Cheesecake Factory, Baskin Robbins, Chili’s and Outback Steakhouse, and more. And are looking ahead to introduce better features and innovative strategies in the doordash business plan. Something that has again encouraged entrepreneurs and app builders to invest in the cost of building an MVP version of Doordash-like app, which ranges between $5000 to $30,000. Also, it has made them look into ways to reduce the app development costs and this way, relish higher profits from DoorDash-like business.

So, in case you are also interested in going with the same idea, aka, building an application following the DoorDash business model, connect with our experts.

Frequently Asked Questions Related to Doordash Business Model

Q. Can you actually make money with a DoorDash like app?

Yes, there are three ways you can earn money with an app if your application is based on the Doordash model – advertisements, commission, and delivery fees. 

Q. Can DoorDash drivers see tip?

No. What they are able to see is the weekly accumulated money – the amount paid by Doordash and money they have received as tips. They are not able to see the tips individually. 

Q. Why is Doordash successful?

This on-demand food delivery business is turning out to be successful because it is bridging the gap between customers, restaurants, and drivers. On one side, it is giving customers an opportunity to get food delivered at their doorstep. While, on the other side, it enables local restaurants to come across drivers who could help them extend their services beyond their nearby areas and this way earn more.

Q. Is DoorDash a profitable company?

Ofcourse, it is. DoorDash, since its inception back in 2013, has acquired 4 startups and has raised a funding amount of $2. 1Bn in total, with the latest in Series G round.

Q. What is DoorDash and how does it work?

Doordash is a food delivery app. It contains a list of restaurants and their menu which the users can choose from. Once the user has made their choice and has selected a payment mode, it is made available to them by the door dashers – the delivery team of Doordash. 

Q. How do door dashers get paid?

For every order, the door dashers get $1. But when you make delivery at peak time and some other conditions that fall under their peak pay policy, you get to make extra dollars on the delivery. 

Q. Does DoorDash delivery fee go to the driver?

No, the delivery fee goes to the business and not drivers. Drivers only get $1 per delivery charge and all the tips that they earn on top of it.

Dileep Gupta
Dileep Gupta
Chief Delivery Officer
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