Third-party delivery platforms are a risky business for small restaurants, where commission fees are steep and the competition is overwhelming. While DoorDash's new initiative is a nice step for the 10 participating restaurants, many other independent restaurateurs feel gouged by its pricing structure.
— Erika Adams
Independent restaurateurs need all the help they can get to stand out from the crowd on third-party delivery platforms, where users are faced with a sea of meal options at any given time.
DoorDash’s latest promotion, Kitchens Without Borders, aims to do just that. Launching today, the initiative highlights 10 immigrant and refugee-owned restaurants in San Francisco through a dedicated microsite and video series featuring the owners and their backstories.
“We want these restaurants to be part of the conversation of the city,” said David Bornoff, head of brand and creative at DoorDash. “We think that the more attention they are gaining, that’s success for us. People who didn’t know who they were before, now get to think about them as part of their wider selection on DoorDash.”
The promotion comes with free marketing support, too. All 10 restaurants will receive premium placement in DoorDash’s in-app carousel and be able to offer $0 delivery to their customers for up to six weeks. They’ll also receive other DoorDash-funded marketing support via email and social media promotion.
“We saw that there was this great opportunity to do more with the local community, to really help build up our restaurants and our merchant partners in a meaningful way,” Bornoff said.
The Value of Free Marketing
DoorDash declined to provide details of the company’s marketing budget for this initiative or to specify the monetary value of the free marketing support for the restaurants, only saying that it varied by order volume per restaurant.
According to one New York City restaurateur who lists multiple restaurants on DoorDash’s marketplace, the company’s marketing materials typically dictate an extra commission fee in order to be featured in DoorDash’s various promotional channels.
The restaurant group pays a base 20 percent commission on delivery orders through DoorDash. To be included on the company’s DashPass subscription platform (where users pay a small monthly fee for $0 delivery for orders over $15 from participating restaurants), the group would be charged a commission rate of 25 percent. To be included on the in-app promotional carousel, the group would be charged at least a 27 percent commission rate for two weeks in that featured slot. Promotional email features are decided by local DoorDash teams and there are no direct costs associated with that for the restaurants.
DoorDash noted that advertising fees vary per merchant, and there are over 300,000 stores on its platform.
For many restaurants the extra fees are prohibitive to participating in add-on programs. In general, third-party delivery marketplaces charge restaurant operators between 20 to 30 percent on orders generated through their platforms. The CEO of Good Times Restaurants, which owns regional chain Bad Daddy’s, told Skift Table last month that because of the 20 to 25 percent commission fees that Bad Daddy’s is charged on delivery through DoorDash, the chain is testing a 10 percent price increase on its delivery menus to offset the profit margin pressure.
Supporting the Community
Bornoff said that the company had been working on the Kitchen Without Borders launch for roughly the past eight months, and each of the featured restaurants are equipped and ready for the influx of orders that will likely come with the public launch of the initiative.
While there are no concrete plans yet on when the company will expand the program outside of its hometown of San Francisco, DoorDash expects the Kitchen Without Borders initiative to resonate with its user base.
“We believe that this will be a wildly successful program that will get to travel outside of the Bay Area and into other cities and do the same thing,” Bornoff said. “We want to identify those kitchens and those partners where we think we can help build something with them.”