DoorDash eyes post-pandemic life
The era of pandemic-fueled growth could be ending
It’s been a year since DoorDash’s lone profitable quarter. During the height of lockdowns and pandemic restrictions, DoorDash managed a $23 million profit. I (and others!) have attributed this to extremely favorable business conditions — we were stuck at home, emboldened to “save restaurants.” In stock market lingo, that’s a “tailwind,” pushing business forward as the wind pushes a flight from LA to New York (remember travel?)
In the year since, travel has maybe, sort-of come back as people try to unearth a familiar “normal.” But DoorDash’s business has done anything but normalize — at least for now. It’s continued to grow, carried once again by pandemic tailwinds. Orders on the platform — including tax, tip, and delivery fees paid by consumers — totaled $10.5 billion, an increase of 70 percent from the same period last year. The amount of total orders is way up, too — 345 million, an increase of 69 percent.
Things could be settling. “We expect the pace of consumer behavioral shifts to slow compared to the extraordinary pace of change in recent quarters,” wrote CEO Tony Xu and chief financial officer Prabir Adarkar in an August 12 letter to investors. That is: the tailwinds are waning, so it’s time for more product development — or, as DoorDash execs describe it — investment in new categories, individual markets, and the services it offers restaurants.
The company has already worked to isolate itself from some of the challenges of its own pandemic reality. As cities levied temporary fee caps — generally 15 percent — on commissions restaurants pay, DoorDash introduced a new tiered pricing model for restaurants with a basic plan starting at... 15 percent commission. (During a press call announcing the change, a DoorDash exec said the company did not make the changes in response to the caps.)
DoorDash says the majority of merchants who have chosen a plan under the new structure have chosen one that carries commission rates of 25 or 30 percent. At the same time, it’s challenging the city of San Francisco in court over a permanent 15 percent cap on fees. In the same letter, Xu and Adarkar called the San Francisco law unconstitutional.
But as the pandemic wanes — or, as we learn to live with an endemic novel virus, I guess — DoorDash’s focus seems to be shifting from embracing explosive growth to building out the kind of incremental options that could give it an edge with small businesses. DoorDash Drive, the company’s white-label delivery service, is quietly humming, as is the company’s Storefront feature, which lets restaurants accept direct orders. Currently, these options, grouped under the “platform services” heading, serve 150,000 stores. “We intend to invest aggressively to expand our suite of services and make them easier to use, so that the smallest local merchants can build and manage a branded omni-channel experience that matches the quality and service levels of the world’s largest players,” the letter reads. (Of note, DoorDash said it added more active stores on these platforms in the second quarter of 2021 than any other quarter.)
Recently, the company hit another big milestone: in early August, a DoorDash courier delivered the platform’s two-billionth order. It was fortuitously (conveniently?) a direct order from Panda Express delivered through the Drive service. It took DoorDash over seven years to reach its billionth order, but just nine months to reach the second. That’s some tailwind.
OpenTable’s proof of vax
My colleague and friend Andrew Genung at Family Meal offered this week’s, uh, critical look at OpenTable’s new vaccination verification tool for restaurants. It’s not a vaccine passport, it’s just a box a restaurant can tick after the person who made the reservation proves their vaccination status. There’s no way to vet the whole party online, though, just the person with the OpenTable account who made the reservation. This information is shared only with the restaurant and potentially other restaurants in the same group, and OpenTable doesn’t actually store record of vaccination, only that the restaurant indicated that the person is good to go.
I’ll join Family Meal in questioning the actual usefulness of this feature, especially given we’re probably staring down a recommended booster shot rollout beginning next month. Just like we’re probably going to need bigger vaccine cards, companies who want to note which guests have been vaxxed vs. not-yet-proven will need more than basic functionality.
What else is happening?
Grubhub makes some changes on the phone. A couple years ago, some restaurants discovered they were mistakenly charged fees by Grubhub for phone calls routed through the delivery company. Starting next week, Grubhub has a new fix: “assisted ordering” which is a fancy term for a call center that allows specific options: ordering, question an existing order, or ask the restaurant questions. (In that case, the call is sent to the restaurant, in other cases, a Grubhub rep — offering, uh, “white-glove service” per the company’s website — handles the call.
Speaking of, Grubhub and Olo (finally) announced a partnership. Grubhub joins its peers in partnering with Olo Rails, the system that allows Olo’s chain restaurant customers to quickly accept orders via third parties. “Having Grubhub on board, we now have Caviar, DoorDash, Grubhub, Postmates, Seamless, Uber — all of the major national delivery aggregators and the regional and local aggregators that matter in specific geographies for our operators,” Olo CEO Noah Glass told Nation’s Restaurant News. Earlier this year, DoorDash sued Olo over fees charged in its Rails agreement. It’s since been resolved and DoorDash remains an Olo partner.
Wendy's launches its urban expansion strategy. Much of the expansion talk of late has been about expanding out of cities and into the suburbs, but Wendy’s is moving in the other direction. The fast food chain announced plans to open 700 ghost kitchens across the U.S., Canada, and the U.K. through a partnership with Reef — the parking lot trailers (er, vessels). Fifty of those locations are set to open by the end of the year. This is part of the company’s strategy to have more of a presence in dense, urban areas where it is traditionally underrepresented and there isn’t ample space for free-standing restaurants. Wendy’s estimates each ghost kitchen will have sales ranging from $500,000 to $1 million.
-Danielle Hyams
Robot pizza maker Picnic is taking preorders for its pizza robot. The machine can make 100 pizzas an hour, according to the company’s CEO, Clayton Wood. It’s been piloted across industries, from restaurants to sports stadiums. Businesses don’t purchase the machines outright, they pay a monthly fee between $3,500 and $5,000 — an amount Wood said is less than the amount the business saves in labor, training, and quality control by implementing the tech.
Sweetgreen gets a new CTO. Wouleta Ayele, former senior vice president of technology services at Starbucks, joins the salad giant as chief technology officer to help the company improve its supply chain model, operations and digital platform.
-DH
Bite Ninja announces pre-seed funding. The platform, which helps restaurants hire remote gig workers to man drive-thru lanes, raised $675,000 in pre-seed funding that will enable it to scale initiatives, hire more software engineers and prepare to rollout at national food chains. Bite Ninja launched earlier this year, and is currently used by several thousand stores around the country.
-DH