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The Spoon

Daily news and analysis about the food tech revolution

DoorDash

DoorDash Heads to Montreal, Strikes National U.S. Deal With Applebee’s

It’s only the middle of the week and DoorDash has already made multiple announcements around its continued expansion up, down, and across North America.

Now that it’s service is available in all 50 U.S. states, DoorDash is heading north and expanding into its first-ever non-English-speaking territory. The third-party delivery service today announced its official launch into Montréal, a predominantly French-speaking market and DoorDash’s first in the Canadian province of Quebec.

The addition of Montreal makes DoorDash available in 78 Canadian cities, including Winnipeg, Halifax, and Saskatoon. In a press release, the company said it plans to be in more than 100 cities across Canada by the end of 2019.

DoorDash will compete in those markets with Uber Eats, which already has a strong presence in Canada. But the rideshare giant isn’t the only company DoorDash will contend with. Delivery service Just Eat has long served Canada, and its recent $10 billion merger with Netherlands-based Takeaway.com creates one of the world’s biggest online food delivery services.

Back in the States, DoorDash continued its U.S. takeover this week by striking a national partnership with Applebee’s. While Applebee’s franchisees have independently worked with the service for some time, this new partnership is an official deal between DoorDash and Applebee’s parent company, Dine Brands Global Inc.

More importantly, the partnership addresses a growing concern among restaurant chains: retaining customer data and preserving brand integrity. DoorDash will power Applebee’s delivery, but customers will be able to order directly through the restaurant’s website and mobile app.

The partnership is now active at 1,300 of Applebee’s 1,700 locations. It is not exclusive; franchisees will continue their relationships with other third-party delivery services.

DoorDash also added partnership this week with sandwich chain Potbelly, who operates across the U.S. and has a heavy concentration of locations in the Midwest.

All these moves come on the heels of DoorDash’s recent acquisition of delivery service Caviar, a deal that expands DoorDash’s already giant geographic footprint. And last week, reports surfaced that the company was in talks to secure a line of credit ahead of a possible IPO. While DoorDash hasn’t made that news officially public, should an IPO indeed happen, the company will face the same issues around profitability its already public competitors Grubhub and Uber Eats face.

Expanding to almost every Applebee’s in America probably won’t solve the profitability issue. But it is noteworthy that Applebee’s isn’t the first chain to pick DoorDash as a national partner based on its perceived long-term viability as a food delivery service. In June, Chili’s expressed similar sentiments when it inked an exclusive partnership with the service. Again, long-term viability and actual profitability are two different things, especially when you get to the public markets, but it’s certainly not going to hurt DoorDash to have as many major chains and regions in its back pocket should an IPO come to pass.

Report: DoorDash In Talks to Secure $400M Ahead of IPO

DoorDash is in talks with banks to open a line of credit for $400 million ahead of a possible IPO, according to an article published on Bloomberg late Thursday.

As the article notes, securing a line of credit from Wall Street is common before an IPO. Sources for the Bloomberg article, who were not identified because the news isn’t yet officially public, said JPMorgan Chase & Co. is leading the potential financing. DoorDash could go public as early as next year, according to those sources.

Should that happen, the company will join rival third-party delivery companies Grubhub and Uber Eats on the public market.

Just last week, San Francisco-based DoorDash acquired food delivery service Caviar from Square for $410 million, and in 2019 alone DoorDash has raised $1 billion and become the first third-party delivery service with a presence in all 50 U.S. states.

The successes don’t come without controversies, though. DoorDash has also been under fire for its controversial tipping practices for workers and recently had to change its policies around tipping in the wake of a storm of bad press.

Nor is DoorDash the only third-party delivery service to be steeped in controversy of late. Grubhub’s summer has been chock-a-block with criticism around its fees for restaurant structures as well as accusations of cybersquatting and calls for an antitrust investigation into the company.

Uber Eats hasn’t recently had so many ethical thorns in its side, but parent company Uber just posted $5.2 billion in losses for the second quarter, and Uber CEO Dara Khosrowshahi said he didn’t expect Uber Eats “to be profitable in the next year or year after frankly.”

If DoorDash does move forward with an IPO next year, it will face the same struggles around profitability its rivals Uber Eats and Grubhub currently grapple with. Ultimately, that issue of profitability could have more sway over the long-term viability of these companies than any criticism over tipping policies or restaurant fee structures.

DoorDash Acquiring Caviar from Square for $410M

Food delivery startup DoorDash announced today that it has entered into an agreement to purchase Caviar from its parent company, Square, for $410 million dollars in a combination of cash and preferred stock.

The press release laid out the rationale for the deal, stating:

The acquisition underscores both DoorDash and Caviar’s strategic commitment to merchant selection. The addition of Caviar’s premium restaurants, with whom DoorDash will work closely to drive their growth, will enable the combined organization to cater to every food preference and occasion. Caviar’s complementary geographic footprint provides DoorDash with a significant number of new and unique customers, who will benefit from an even broader set of merchants.

Square acquired Caviar in 2014 for a reported $90 million, and reportedly tried to sell it just two years later but couldn’t find a buyer at the price the company wanted. A little more than a year ago Square acquired the assets of Zesty in a bid to bolster its corporate catering services.

But ultimately Square is in the business of transactions, not delivering the food itself, so offloading Caviar makes sense. Not having to deal with Caviar will help Square focus on the restaurant point of sale software platform that it launched last year that helped streamline orders from third-party services like DoorDash.

For its part, DoorDash has been making headlines all yearL raising a billion dollars in funding, becoming the first third-party food delivery startup to service all fifty states, and sticking by, and then ultimately caving in and changing a controversial tipping policy for its delivery drivers.

DoorDash’s deal to acquire Caviar is expected to close by the end of this year.

The White Castle-Uber Eats Deal Highlights the QSR Battleground for Delivery

Today White Castle announced a new delivery partnership with Uber Eats. The majority of the White Castle menu is now available via the Uber Eats app in over 330 of the fast-food chains’ locations.

Of course, if you’re of a certain generation, the name White Castle almost always brings to mind a certain cult classic film, and the launch of the Uber Eats program coincides with the 15-year anniversary of “Harold & Kumar Go to White Castle.” To celebrate, White Castle is giving away up to 1 million of its Original sliders (sorry, Impossible fans) to customers who order via the Uber Eats app. If you’re so inclined, you can also order a Harold & Kumar meal via the app that offers “special 2004 pricing” — which basically means it’s a cheaper deal.

Of course, when the movie came out in 2004 it was a very different QSR landscape from the one we see today. Nowadays, no amount of gimmicky moves like the above will guarantee you customers if you don’t also have a robust delivery strategy in place. White Castle already delivers via Grubhub and DoorDash, which makes the deal with Uber Eats neither surprising nor earth-shattering.

However, it does highlight just how heated competition between third-party delivery services is bound to get in the QSR arena. In fast food or otherwise, consumers don’t demonstrate a particular loyalty to any one of these third-party delivery services. At the same time, the services themselves are making moves to try and capture more of that elusive customer loyalty, particularly via subscription services that offer — depending on what you order — better prices and some discounts. All of which suggests QSRs like White Castle, who work with multiple delivery partners, could become a mini-battleground of sorts as the novelty of digital ordering and delivery wears off and consumers align with whatever service will get the food to their door cheapest and fastest.

Uber, for its part, has been hard at work initiatives that actually go beyond faster cheaper food when it comes to building customer loyalty: the company offers a $25/month subscription to its overall service, which is an Amazon Prime-like membership that offers discounted rides and free bike usage in addition to deals on Uber Eats. It’s also offering Eats functionality from the main Uber app, subsidizing customers’ rides to restaurants, and drone-dropping haute burgers, all of which are in part geared towards keeping customers in the Uber ecosystem. (Ok, maybe not that last one but drones are still cool.)

While publicity gimmicks like Harold & Kumar-themed meals are amusing and even commonplace when restaurants announce delivery deals, realistically, customer loyalty is going to come from how well Uber or any other service can execute on the above while still keeping menu prices competitive.

DoorDash CEO’s Tweet-a-Culpa: Says Delivery Company Changing its Much-Maligned Tipping Policy

Facing a growing backlash over how it treats tips for delivery drivers, DoorDash’s CEO indicated on Twitter today that the company is looking to change its controversial wage structure.

In a tweet thread last night, DoorDash CEO and Co-Founder Tony Xu wrote:

After a year of research and conversations with thousands of Dashers, we built a pay model to prioritize transparency, consistency of earnings, and to ensure all customers get their food as fast as possible.

But it’s clear from recent feedback that we didn’t strike the right balance. We thought we were doing the right thing by making Dashers whole when a customer left no tip. What we missed was that some customers who *did* tip would feel like their tip did not matter.

We did not launch our current model to pay Dashers less. In fact, when we moved to it, our average contribution to Dashers stayed the same.

Going forward, we’re changing our model – the new model will ensure that Dashers’ earnings will increase by the exact amount a customer tips on every order. We’ll have specific details in the coming days.

Customer obsession and getting 1% better everyday are core values at DoorDash. These beliefs have led us to improvements in the past and they serve as our guide for the future.

DoorDash had been facing a mountain of bad press over the past couple of months over the way it used tips left for its delivery drivers. Where a person placing the order might have thought that tips they left went straight to the Dasher’s pocket, they were, instead, being used by DoorDash to fill in pay gaps in order to ensure a guaranteed fee for the job. So it wasn’t extra for a job well done.

Xu’s thread was obviously light on details, but he must have seen things in DoorDash’s data that showed that keeping this odious policy was bad for business. Not helping was the fact that it came to light earlier this week that Uber is testing out a $25 a month subscription plan that includes free Uber Eats delivery. In the cutthroat battle for delivery dollars, continuing to mislead customers is a bad idea.

Here’s a tip for DoorDash and every delivery service: treat the people building your business fairly.

Protests Over Waitr’s Fee Structure Highlight How Flawed Third-Party Food Delivery Is — For Everyone

Restaurants and customers in Baton Rouge, LA are currently holding a weeklong boycott of restaurant delivery platform Waitr. The protests are in response to the company’s recent adjustments to its terms and fee structure deal it has with participating restaurants.

Lake Charles, LA-based Waitr runs a third-party food delivery service similar to those of Uber Eats or DoorDash. The biggest difference in their business models thus far has been around expansion: since its inception in 2015, Waitr has focused on serving smaller U.S. cities, rather than the country’s huge metropolises. The company went public in 2018, the same year it acquired Bite Squad, another delivery service targeting mid-sized markets.

These protests, which started this past Sunday, take a shot at Waitr’s new “performance-based rate structure” for restaurants, which it unveiled a little over a week ago. With this new structure, Waitr takes a higher commission from restaurants with a smaller volume of sales, and a lower one for those restaurants with larger volumes. According to The Advocate, Louisiana’s oldest newspaper, restaurants with monthly food sales above $20,000 will be charged 15 percent per-transaction commission. The commission caps at 25 percent for restaurants with food sales below $1,000, according to a new Master Services Agreement sent to restaurants working with Waitr.

The new terms are set to take effect on August 1. Any restaurant that doesn’t sign the new agreement will be removed from the Waitr platform by July 31, according to The Advocate.

But Waitr could lose restaurant customers over these new terms, and many have already voiced concerns and frustrations over the kind of financial impacts this performance-based structure will have on already thin margins.

“We’re very concerned about Waitr changing their fee structure,” Mitch Rotolo, founder of Rotolo’s Pizzeria in Baton Rouge, told The Advocate. “If their model requires more revenue, they need to ask the customer to pay more for the service, instead of going back to the vendor and squeezing them. That’s unfair.”

Baton Rouge restaurant owner Jim Uridales, who owns Mestizo, told Louisiana news channel WAFB9 that, “Most people would be surprised that most restaurants live in a five to two percent margin on food, so taking that margin away would mean that every transaction would be a loss for us.”

The other side of the picture, of course, is that Waitr is now a public company under pressure to become profitable, which suggests this new fee structure is an effort to prioritize restaurants with higher profiles, inevitably weeding out the smaller businesses in the process. As Rotolo said, it’s unfair. However, it’s also probably one of the only cards Waitr has to play at the moment to boost its margins, even as larger third-party delivery services, most notably DoorDash, continue aggressive expansions into what some days seems like every nook and cranny in the country. And Waitr doesn’t have the $2 billion DoorDash has rasied to help its cause.

According to WAFB9, Waitr released the following statement:

To stand out in the competitive food delivery landscape, Waitr has adopted a performance based rate model where the more our restaurant partners deliver, the lower their rate will be. Our partners will discover this is a far more attractive option than those offered by our competitors. Waitr constantly strives to be the most valuable partner to our restaurants and this structure is reflective of the quality and service we provide.

Back in March of this year, Waitr’s CEO, Chris Meaux, told me, “We believe in the next five to seven years or so, we have a chance to be a significant leader in the space.” He also seemed very optimistic about his company’s approach to growth, which he likened to Walmart’s in the 1960s, when the now-giant retailer slowly expanded from its home state of Arkansas and took decades to even reach the coastal metropolises.

That style of growth seems slow for a public company considering growth is what the market wants to see. But is it also too slow for the tech-driven delivery era, where companies must move as fast as possible to offer as much choice as possible to a user base that isn’t loyal to any one platform? And are smaller restaurants taking the hit for what could ultimately have just been an unfortunately short-sighted business decision by Waitr?

The bigger question, though, is how Waitr’s situation will contribute to the debate around third-party delivery services’ power, which grows louder each week. Grubhub and Uber Eats both partook of a recent oversight hearing in NYC that addressed commission fees for restaurants (which are every bit as high as Waitr’s, by the way), and Grubhub has also come under deep scrutiny for potential cybersquatting and antitrust issues.

One idea, as Rotolo noted, would be to push the burden of cost back onto consumers by raising delivery and/or service fees, though that would spark just as much if not more outcry, most likely.

Waitr laid off 20 employees at the end of June in an effort to get rid of redundancies from the Bite Squad acquisition. This week’s protests, however they end, won’t help the company’s reputation, which it can’t afford to lose as other third-party players continue their march into the mid-sized markets.

McDonald’s Adds DoorDash as Delivery Partner, Ends Uber Eats Exclusivity Deal

In what’s a bad news Uber Eats but a major win for DoorDash, McDonald’s announced today it has partnered with the latter to expand delivery in the U.S. This officially puts an end to McDonald’s exclusive partnership with Uber Eats, which the quick-service mega-chain had in place since 2017.

According to a press release, McDonald’s and DoorDash will launch the partnership with a pilot at more than 200 locations in the Houston, TX area. That’s slated to kick off on July 29. For those using DashPass, DoorDash’s monthly subscription service, McDonald’s will waive the delivery fee for orders of $12 or more.

It’s a surprising twist, said no one ever. The Uber Eats-McDonald’s exclusive deal technically ended in April of this year, just before Uber IPO’d. While that deal made delivery possible at about 64 percent of McDonald’s locations in the U.S., it seemed like only a matter of time before McDonald’s pulled the plug on the exclusivity factor in order to widen its ability to deliver to new markets. (The exclusive partnership was also a point of friction with some of the chain’s franchise operators.)

As a partner, DoorDash is a no-brainer, since the delivery service operates in all 50 U.S. states and, as I seem to be writing ad infinitum these days, is aggressively going after every suburban market in America.

Chris Kempczinski, President of McDonald’s USA, indicated as much in a statement in the press announcement: “Building on the success of McDelivery in the US, we’re excited to make McDelivery accessible to customers on DoorDash, which is available in all 50 states and reaches 80% of Americans, making it even more convenient for our customers to enjoy their favorite McDonald’s menu items on their terms.”

On the restaurant-tech front, two parties have integrated their systems so that DoorDash orders go directly to the McDonald’s POS system, speeding up the order process and (hopefully) making life easier for franchisees and employees working with the platform.

One area the press release didn’t mention but that’s worth keeping an eye on when it comes to McDonald’s news: artificial intelligence. McDonald’s acquired Dynamic Yield earlier this year, and has since implemented its AI tech in drive thrus, with plans to expand that program to kiosks. And not long ago, word got out that McDonald’s has actually been testing deep-frying robots to automated beverage equipment. It’s probably only a matter of time before AI makes its way to delivery, and something like a McDonald’s-DoorDash-Dynamic Yield delivery platform that can improve recommendations and personalize menus for customers doesn’t seem out of the realm of possibility.

Newsletter: Some Assembly Required, Is IKEA the Future of Food Tech?

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I spent a good chunk of the weekend building a cocktail robot. It was a kit I bought from MyBar.io, and to save $100 bucks, I opted for the DIY version ($299), all assembly required. And though it took a lot longer than the two hours the company said it requires to build (it’s still not done), I’ve actually had fun putting it together.

So much so, that when FarmBot announced yesterday it was launching an assemble-it-yourself vegetable garden robot, my first thought was “Hey, I could probably build that, too.” (SMASH CUT to my wife, just shaking her head).

But both MyBar and FarmBot got me wondering if we won’t see more DIY in our connected kitchens in the future a la IKEA. There are a few reasons why hardware food tech startups might want to borrow a page from the Swedish home furnishings giant.

First, DIY means something much different now than it did even a couple years ago. The MyBar kit I bought featured 3D printed parts, and the wiring required no soldering or crimping. Much like a piece of IKEA fürnitüre, there isn’t any real expertise needed going into the project, anyone with the set of instructions can do it.

Second, shifting the assembly labor to me is perfect for a tiny startup. Instead of spending their limited human resources on building each order, they can focus on design and product improvement.

And then there is the shipping. IKEA saves a ton of money in shipping because everything arrives in flat boxes. So too can cash-strapped startups save money by skipping the centralized assembly. The MyBar arrived at my door in a regular rectangular box. Inside there was no need for custom-fitting styrofoam to protect a put-together MyBar, as each separate flat piece was wrapped in plain ol’ bubble wrap. And, like IKEA, it even came with an allen wrench!

Obviously not every kitchen device will become DIY. I can’t imagine trying to put together a June oven or a Samsung smart fridge on my dining room table. But for small startups getting into the hardware game, DIY may be the best path to $$$.

Here’s a Tip: Learn How Your DoorDash Driver Gets Paid
If DIY isn’t your thing, especially when it comes to making a meal (no judgment), just about every restaurant does delivery now, and the biggest third-party delivery service of them all is DoorDash (raising $2 billion helps you build marketshare).

However, if you’re using DoorDash, you should know what is actually happening when you tip through its app. Jenn Martson broke down the controversy over DoorDash using tips to cover a “Dasher’s” base pay, and bottom line: The tips you’re leaving don’t necessarily translate into more dollars for your driver. In our consumer quest for convenience, we need to stop and see who’s paying who and how much.

We too, Have the Meats
Chances are good that if you are reading this, you’re doing so quickly, so you can get back to and finish up your work faster, so you can get out and celebrate the 4th of July holiday (and we don’t blame you).

If you’re grilling this Fourth, or at all over the summer, there are two things we wanted you to know about.

MEATER, which makes a wireless, connected meat thermometer, launched its new MEATER Block yesterday. It comes with four probes, all of which can be used to monitor four separate pieces of meat at once. Perfect for guests who prefer their steaks done differently, or for when you’re cooking different types of meat at once.

If you’re more of a plant-based meat eater, we celebrate you as well, and my colleague, Catherine came up with this handy guide for grilling Beyond Meat’s burgers and sausages (they’re both delicious), which you can wash down with a tasty cold brew.

Have a great and safe holiday!

Now the Top Food Delivery Service, DoorDash Stands Behind Its Controversial Pay Structure

While Grubhub made a lot of headlines this week as the poster child for controversial restaurant fees, DoorDash was all over the news for its controversial stance on how it pays its drivers.

Once considered the underdog of third-party delivery, DoorDash has spent the last year or so doubling down on its expansion efforts. The service became the first of the top four (which includes Grubhub, Uber Eats, and Postmates) to be available in all 50 U.S. states, and it’s seemingly made its way into every nook and cranny of suburban America through high-profile partnerships with major chain restaurants like The Cheesecake Factory, Chipotle, and the ubiquitous Chili’s. It’s also raised lots and lots (and lots) of funding.

So far those expansion efforts are paying off. In the last week, news surfaced that DoorDash now holds the number one spot in terms of marketshare for third-party food delivery services, unseating longtime leader Grubhub. Currently, DoorDash is valued at $12.6 billion, which is almost double the $6.5 billion market cap of the publicly traded Grubhub.

The growth isn’t without controversy, however, because in addition doubling down on its expansion plans, DoorDash has also, it seems, continued its controversial pay structure for drivers that many feel is unethical. TechCrunch reminded us of that point yesterday when it called out a blog post by DoorDash CEO Tony Xu that was meant highlight DoorDash’s commitment to “transparency” but really just wound up highlighting the fact that despite its $12 billion-plus valuation, the company seems to be barely paying its drivers.

“With our current pay model, Dashers see a guaranteed minimum — including tips — prior to accepting a delivery,” Xu wrote in the post.

For every delivery the DoorDash driver (also called a “Dasher”) takes, they are guaranteed a minimum pay amount. (Dashers see this number before they ever accept or decline a job.) Unlike a serving job in a brick-and-mortar restaurant, that guaranteed minimum pay isn’t derived from any kind of hourly wage. Rather, DoorDash pays a $1 base fee then uses the tip from that order to count towards that minimum guarantee. If tips plus that $1 aren’t enough, DoorDash makes up for the rest:

Image via DoorDash.

Where this becomes really problematic is when drivers (which the company calls Dashers) get an especially large tip that winds up not being a tip, but instead subsidizing the minimum guarantee:

Image via DoorDash.

It’s the same pay structure that made waves a few months ago for services like Instacart and Amazon Flex. Instacart wound up changing its structure and apologizing to workers. Amazon stood firmly by its policy, and it seems DoorDash has as well. If Xu’s blog post is anything to go by, it seems that rather than backpedal on its controversial model, DoorDash is just taking further steps to make sure the pay structure breakdown is 100 percent apparent — to Dashers, at least. One small step for transparency, one giant leap backwards for the ethics of the gig economy. Or as labor rights group Working Washington said in a statement to TC, “Talking about transparency is good. And admitting you pay $1/job is better than denying it. But $1 is still $1.”

So what do we do about it?

The easiest solution would be for more customers to just skip the “tip” option in the DoorDash interface and tip in cash. That’s unlikely, given how integrated digital tipping is in both our apps and our lives at this point. Plus, consumers shouldn’t have to go searching through FAQ pages to find out exactly where their tip money goes during a transaction. If DoorDash really wants to tout transparency as one of its priorities and values, it should be making clearer to its customers, within the digital transaction process, where their money goes. Leading someone to believe they’re paying a gratuity when they’re really just subsidizing a base pay is just flat-out deceptive, and it’s the sort of thing that could erode customer trust over time.

Including customer relationships in those transparency goals should definitely be a priority for DoorDash. But at the end of the day, giving Dashers a fair wage rests on the shoulders of the company itself, not its paying customers. Some, like Working Washington’s Pay Up Campaign, want a minimum pay wage for workers of $15/hour plus expenses. That’s a larger conversation that’s making its way around many parts of the gig economy right now, and it’s one we’ll likely hear more debate around in the coming months.

Even if DoorDash doesn’t adopt that policy, you’d think a company valued at over $12 billion could find some kind of middle ground between $15 minimum wage and $1 to pay its workers, and to do that without roping unknowing customers into the process. Perhaps amid plans to tackle the whole of suburbia, DoorDash should tackle how to treat the people building that empire more fairly.

What to Expect at Today’s Oversight Hearing for Third-Party Food Delivery in NYC

Today, New York City will hold its first-ever oversight hearing for third-party food delivery apps and the effect they have on local restaurants.

The hearing, set to take place this afternoon, will focus specifically on the fees Grubhub and other companies charge restaurants for use of their services. Perhaps even more significantly, as the NY Post reported recently, it could set the stage for potential government action that would impact third-party delivery operations in NYC.

Titled “The Changing Market for Food Delivery,” the hearing, held by the council’s Committee on Small Business and chaired by Bronx Councilman Mark Gjonaj, invites comments from all stakeholders in the business: restaurateurs, representatives from delivery services, and customers. Grubhub, who also owns Seamless, has already confirmed that a spokesperson will be present. There’s no word on whether people from Uber Eats, DoorDash, or Postmates will attend. The hearing starts at 1 p.m. at 250 W. Broadway in Manhattan.

Having a food delivery strategy is at this point table stakes for most restaurants. But not every business has the brand reach, money, and resources to go it alone à la national chains like Jimmy John’s or Olive Garden. For many, it makes more sense to pay Grubhub et al a fee and let them handle not only shuttling the food from restaurant to customer 24/7, but also the back-end logistics (like order processing and tracking) and even some marketing aspects.

Now, however, many are calling these fees into question. Depending on the terms of the deal and the specific delivery company (e.g., Grubhub versus Uber Eats), third-party services charge the restaurant anywhere between 12 and 30 percent of the final check on each order. It’s why you’ll sometimes see a restaurant charge a little more for an item to be delivered as opposed to eating in house. Third-party services often tout the uptick in orders as a way to offset these costs, which is fine if you’re McDonald’s but less effective if you’re the independently owned deli down the block.

Atop those fees and the concerns surrounding them come reports of late of third-party delivery services charging restaurants hidden fees, such as calls made through the dedicated phone numbers Grubhub and other service set up for restaurants. A class-action lawsuit filed in May of 2019 claimed that Grubhub has been charging for calls made to restaurants via Grubhub’s app, even when the calls didn’t result in an actual order being placed and fulfilled. While that lawsuit was filed in Pennsylvania, the NY Post reports that New York restauranteurs have made similar complaints, with some businesses being charged $9 and more for phone calls that didn’t result in orders. Calls for things like dinner reservations and general customer complaints are also being quietly charged, the Post said.

In turn, restaurants have been demanding refunds from delivery partners, only to be told said refunds are only good on orders going back 60 days (though one unnamed restaurant got a refund from Grubhub to the tune of $10,000 for charges dating back to 2014).

Will all these matters be discussed this afternoon at the hearing? Undoubtedly. Will they make a difference in how third-party delivery companies do business? It’s too soon to tell, but depending on how the discussion advances, the hearing could have serious effects on third-party delivery operations in NYC.

“There is always the potential that this hearing will lead to an investigative hearing from the public advocate, the city comptroller or the state attorney general,” Councilman Gjonaj told the Post in an exclusive interview.

Such action could result in legislation that limits the percentage third-party services can charge restaurants. Or, as the Post noted, it could require Grubhub and other companies to get “disclosed and fingerprinted” for the thousands of restaurants they work with, since NYC law requires anyone who shares revenues in a restaurant to be listed on the liquor license.

And there’s always the possibility of a ripple effect. The tone set by today’s gathering could influence whether other cities hold similar hearings, as well as what those hearings mean for the way third-party services will operate in the future across the country.

One thing is certain: the volume has been cranked up on this side of the delivery conversation, and it’s not going to soften any time soon as more stakeholders in the restaurant business call into question the line between a right and an abuse when it comes to doing business.

We’ll be keeping an eye on today’s events and updating our coverage accordingly. Stay tuned.

DoorDash Inks Exclusive Delivery Deal With Chili’s

DoorDash’s breakneck expansion across the U.S. continues this week, with the the third-party delivery service announcing an exclusive deal with casual dining chain Chili’s.

According to a press release sent via email, the partnership takes effect immediately at over 1,000 participating Chili’s restaurants in the U.S.

Chili’s, who is something of a poster child for the fast-casual American dining scene, has been vetting third-party delivery services for some time. At the end of April, the company said it was looking for a delivery partner that could adequately cover the suburban markets, where Chili’s has a substantial presence. In that light, DoorDash seems the obvious pick, as it currently holds 30 percent of the market share in sales and is the only third-party delivery company currently operating in all 50 U.S. states (as well as in 50 Canadian cities).

But DoorDash’s ability to integrate with Chili’s existing POS system might have been the real determining factor. Chili’s, along with its parent company, Brinker Internatoinal, has been skeptical about third-party delivery services overall. Brinker CEO Wyman Roberts said back in January that his company was “. . . cautious on business model implications and significant fees, but more importantly, the impact it has on our systems isn’t great.” In the same interview, Roberts added that, “From a technology standpoint, given that so many of these third parties are really priding themselves on being experts, we’re challenging them to integrate better.”

Integrating DoorDash directly into the restaurant chain’s POS system means all DoorDash orders are sent directly to Chili’s, without a server needing to manually input the information. As well, a direct integration means it’s easier and faster for Chili’s to onboard more of its locations onto this new delivery program.

This ability to integrate almost seamlessly into existing restaurant systems may be key for third-party services in future as they rush to gain and retain customers. All of the top services — Grubhub, Uber Eats, and Postmates along with DoorDash — offer POS integration capabilities. The question at this point appears to be more around who can offer it at the best price point for restaurants, and do so without introducing a lot of disruption to day-to-day operations. Might operational efficiency be yet-another area in which DoorDash can stand out?

DoorDash raised another $600 million in funding this past May, bringing the company’s total funding to $2 billion. This came on the heels of a $400 million Series F round raised in February of 2019. DoorDash has also said that since that Series F round, its business has grown 60 percent. Pair those numbers with the company’s continued and aggressive push across North America, as well as high-profile restaurant partnerships like the Chili’s deal, and there’s reason to suspect the company could be well on its way to nabbing the top spot in the market for third-party delivery.

O-M-Series G! DoorDash Raises Another $600 Million

Maybe DoorDash should change its name to MoreCash, because the food delivery company announced today that it has raised another $600 million in funding. This brings the total amount raised by DoorDash to $2 billion.

This Series G round brought in new investors Darsana Capital Partners and Sands Capital, which joined existing investors Coatue Management, Dragoneer, DST Global, Sequoia Capital, Softbank Vision Fund, and Temasek Capital Management. With the new money, DoorDash is now valued at $12.6 billion.

Today’s new funding comes just months after the company raised $400 million in February, which followed a $250 million round in September of last year.

In its corporate blog post announcement, DoorDash said its business has grown 60 percent since that Series F round in Feb., and that year over year, the company grew 280 percent, generating $7.5 billion in gross merchandise value sales (not all of that went to DoorDash as it includes the money that also went to restaurants).

All this growth is one of the reasons my colleague, Jenn Marston, pegged DoorDash as the food delivery company to watch, writing:

Part of those rising sales numbers are no doubt due to DoorDash’s aggressive push across the country. The service is the only third-party delivery service right now to be in all 50 U.S. states, in case you couldn’t tell from the endless numbers of promotions and partnerships the company does with everyone from Canter’s Deli in LA to Taco Bell to the Wyndham Hotels chain. The service is also now in 50 Canadian cities.

DoorDash’s big raise also comes at an interesting time, to say the least, in the food delivery market. Uber’s IPO was a dud despite the strong growth of Uber Eats, taking a bit of the shine off gig economy companies. A more direct comparison would be Postmates, which has also filed to go public. The outcome of that IPO could be more consequential for the future of DoorDash.

In addition to rival food delivery companies, DoorDash faces internal issues as well. It’s been under fire for allegedly pocketing workers tips, and was the target of a boycott for those practices.

More money, more problems.