DoorDash Business Model: How Does the App Makes Money?

DoorDash is one of the most popular food delivery apps in the USA. It has grown rapidly, changing the way people order food and how restaurants do business.

Many people and businesses wonder: What is DoorDash’s business model, and why is it so successful?

The app has not only solely made its services available from 600 to 7,000+ cities but also gained the limelight of the market by undergoing partnerships with nearly 80% of U.S. restaurants.

DoorDash business model is so successful that the app is expected to generate $320 billion by the end of 2029. Apart from understanding what makes DoorDash’s business model unique, let’s also explore the strategies that can be followed by an on-demand app development company to develop an app as successful as DoorDash.

The global pandemic has forced businesses around the world to adapt and evolve. Many industries struggled, but food delivery services like DoorDash saw a huge increase in demand as people stayed home and ordered food online.

In this article, we’ll explore how the pandemic has affected DoorDash and what it means for the company’s future.

What is the DoorDash Business Model and How it Started?

DoorDash was started in 2013 by four students at Stanford University: Tony Xu, Stanley Tang, Andy Fang, and Evan Moore. They first called it Palo Alto Delivery but then changed the name to DoorDash. The company is in San Francisco and delivers food in many countries, including the USA, Australia, Canada, Germany, and New Zealand.

DoorDash business model has been around for ten years and is now the biggest food delivery company in the USA, beating Uber Eats and Grubhub. In their first year, they started working with 70 restaurants near San Francisco and got $2.4 million to help them grow.

• Tracking DoorDash: A Growth Timeline

As of 2020, DoorDash was valued at over $13 billion and became the largest third-party delivery service in the USA.

How Does DoorDash Work—The Business Model Explained

The DoorDash business model reflects the Y-structure. You need to follow a food delivery app development guide that caters to the needs of three different entities – users, drivers (dashers), and partnered restaurants.

DoorDash for business not only offers users the opportunity to order delicious food from any local store without delivery service but also provides more business opportunities to restaurants & gives job satisfaction to dashers.

In simpler words, the DoorDash business model canvas is similar to the most popular revenue-generating apps that work based on these three segments:-

• Customers

Customers can use the DoorDash app or website to browse restaurants and order food. The app charges an average delivery fee of $5-$8 based on the order size and distance.

For frequent users, DashPass offers free delivery on orders above $12 for a small monthly fee, helping customers save money on multiple orders.

• Restaurants

Restaurants can register on DoorDash to reach more customers. They can showcase their menu, images, prices, and other details to attract food lovers.

DoorDash charges a commission fee on each order, which varies depending on the restaurant’s location and order volume. This allows restaurants to increase their sales without managing their own delivery services.

• Delivery Partners (Dashers)

Dashers are independent delivery partners who use their own vehicles to deliver food. They earn money through:

1. Base pay per delivery
2. Tips from customers
3. Bonuses and incentives for completing a certain number of deliveries or working during peak hours

This flexible model allows Dashers to work on their own schedule and earn based on the number of orders they complete.

DoorDash Business Model: Step-by-Step Process

Step 1: Customers Download the App and Sign Up

Users first download the DoorDash app from the Google Play Store or Apple App Store. After signing up with basic details, they can browse restaurants and dishes in their area.

Step 2: Users Place an Order

Once customers find their favorite dish or restaurant, they add items to the cart and place an order. DoorDash offers a wide selection of cuisines and restaurants, making it easy to order food in minutes.

Step 3: Restaurants Receive and Prepare the Order

The restaurant receives the order and starts preparing the food. Once they accept the order, the customer gets a notification with an estimated delivery time. Restaurants can also update their menu and prices anytime for flexibility.

Step 4: Dashers Pick Up and Deliver the Order

A Dasher (delivery partner) picks up the prepared food and delivers it to the customer’s location. Dashers are paid for each delivery and can earn extra through tips, incentives, and peak-hour bonuses.

Throughout the process, customers receive real-time updates on their order status. They can track deliveries, rate the service, and provide feedback to both the restaurant and the Dasher.

How Does DoorDash Make Money—The Revenue Model Explained

There are different factors that contribute to the success of the DoorDash app, further impacting the cost of developing an on-demand delivery app.

However, before understanding what makes DoorDash a successful app, it is important to comprehend the strategy and revenue model the app follows that helps bring money to the table.

• Delivery Fee Model

One of the major sources of revenue for DoorDash is its delivery fee model. With its capability of retaining users, DoorDash heavily relies on it. The delivery fee, charged by the user,  is calculated depending on the distance between the pick-up and the drop-off location and demand.

• Commission-Based Revenue Model

For every successful order made via its platform, Doordash earns a variable commission from the restaurants. The company has a tiered commission structure, as it offers three different plans for restaurants to choose from- Basic, Plus, and Premier.

Depending on the plan that the restaurant goes with, Doordash charges the percentage of the order subtotal.

• Subscription-Based Revenue Model

Doordash also has a subscription service called Dashpass for customers to save on delivery and service fees. This model generates revenue by charging the users a recurring fee that is processed at regular intervals.

• Software as a Service (SaaS) Revenue Model

Doordash has a SaaS revenue model in the form of a DoorDash storefront for restaurants. The software helps restaurants to set up their own online ordering system and take control of the online delivery and pickup orders.

• Advertisement-Based Revenue Model

Doordash also brings money to the table with its advertising-based revenue model. Restaurants and food joints are charged for their marketing and advertising on the platform. 

DoorDash is more than just a food delivery platform. DoorDash business model also generates considerable revenue from the acquisitions of companies, gift cards for customers, Doordash Store, and Doordash for Work.

The above-mentioned revenue models have resulted in consistent growth of the app. Have a look.

What Makes DoorDash Business Model Successful?

One of the main reasons behind the success of DoorDash is its aim to provide customer satisfaction. Today, the DoorDash business model is a part of the growth strategy of numerous service industries that drive an on-demand economy through constant funding. But what are some of the factors that make DoorDash’s business model successful? Check below. 

• DoorDash business model is to believe in constantly innovating and expanding its services which further allows the company to attract new customers while retaining the existing ones.
• Another reason that makes the on-demand app DoorDash successful is its extremely convenient services to the users.
• DoorDash has also utilized the power of social media platforms such as Twitter, Facebook, and other marketing techniques to promote the app. 
• Another factor that makes Doordash’s business model successful is its services to facilitate customer support via different modes, such as email, mobile app feedback page, etc.

Build An App Like DoorDash with Appventurez

The on-demand apps such as DoorDash, with options like 30-minute delivery windows and comprehensive insight into customer data, has already surpassed prominent players in the market. These features have also marked consistent improvement in DoorDash’s net worth, giving the brand an edge over its competitors. 

At Appventurez, we offer futuristic solutions for the development of an on-demand app with the utilization of tools to fulfill the demands of any business. One example is the development of a food delivery app ASAPP, where our experts integrated advanced features that revolutionized the food delivery landscape. 

Collaborating with our skilled developers will not only facilitate successful app development but also help the clients understand the latest market trends that could lead to its success. Connect with us today and experience your vision turned into reality.