The profitability of DoorDash is probably the first question that would come to your mind if you are a restaurant looking to build your customer base or if you are a delivery guy looking to join a food delivery platform.
Walking to a restaurant and buying food seemed easy once, but with the rising popularity of food delivery apps like DoorDash, a lot has changed, and customers have started embracing this change.
And why not? Who doesn’t like getting mouth-watering food delivered right to their doorstep after a long and tiring day?
Taking advantage of this, many more food delivery businesses have flourished, and in case you want to find out the nitty-gritty of DoorDash from a business point of view, then this article is just for you!
What Is DoorDash Business Model?
DoorDash is a food delivery app that connects restaurants to customers for the delivery of food right in the comfort of the user’s home.
The company has a wide network of 450,000 restaurants and over a million drivers who fulfill customer orders.
DoorDash is used by 20 million users annually and is a dominator in the food delivery segment beating competitors like Uber Eats, Grubhub, etc.
Restaurants pay a commission of 20% to DoorDash for every delivered order, and in return, DoorDash offers them a platform to increase their customer reach.
However, the business model of DoorDash is not as simple as it may seem.
Moving further, we are going to discuss how DoorDash makes money, whether or not it is profitable, and how it compares to its competitors.
How Does DoorDash Make Money?
DoorDash has multiple revenue streams from which it makes money, including:
Advertisements
To increase their visibility, restaurants can advertise on DoorDash. Advertising allows restaurants to show themselves on top of the search results against other competitors and gain more customers.
For example, the restaurant might pay $400 a month to DoorDash to advertise their restaurant on the app.
Delivery Fees
Customers ordering food from DoorDash are required to pay a delivery fee that ideally ranges from $5 to $8, depending on their location and distance from the restaurant.
So if a customer makes an order of $50 from Chipotle, the order total comes down to $55 or $58, where $5 / $8 goes directly to DoorDash.
Restaurant Commissions
For each delivered order, DoorDash charges a commission of 20% to the restaurant for giving them a platform to increase their reach.
So, for example, if a customer places an order of $50 from Chipotle, then the restaurant will pay $10 to DoorDash.
Subscriptions
DoorDash offers a subscription service to customers known as Dash Pass that costs $9.99.
Using this subscription, customers can enjoy zero delivery fee on their orders and gets a reduction in the service fee on orders above $12 and $25 for grocery orders.
This helps DoorDash in gaining more customers and helps the customer save $4-$5 on every order.
Dashmart
DoorDash offers a service for convenience stores using which they can deliver household goods and retail products to customers via the DoorDash app.
The convenience store pays a 20% commission on each delivered order for this service.
DoorDash Drive
DoorDash also offers white-label delivery services, using which companies or restaurants can partner with DoorDash to fulfill deliveries for orders made on the company’s own website. To incur this service, the company pays a flat fee to DoorDash.
Other Projects
DoorDash owns a couple of different companies, including Scotty Labs, Caviar, and Chowbotics. Scotty Labs is a company working on self-driving vehicles.
Chowbotics sells robots that are involved in creating cereal bowls, salads, etc. And Caviar is a high-end delivery service.
DoorDash Annual Revenue
DoorDash’s annual revenue increased by 34.8% to $6.58 billion in 2022.
But Is DoorDash Profitable?
Although DoorDash made $6.58 billion in revenue in 2022, a 34% increase from the previous year, it does not mean it is profitable.
Generating consistently high revenue and making a profit are two entirely different things.
DoorDash is not profitable, and in 2022, its total net loss amounted to $1.3 billion compared to the net loss of $468 million in the previous year.
This seems shocking as DoorDash, with a 65% market share, dominates the food delivery industry.
It even processes billions of dollars in orders annually but still has been making consistent losses except for the second quarter of 2020, when it made a profit of $23 million.
Why Does it Keep Loosing Money Inspite of Increasing Revenue?
Even though the revenue of DoorDash has been steady, the company is yet to generate positive operating profits over the course of 12 month period.
DoorDash has high variable costs on every order that makes up for 50% of revenue, and then it spends 25% of its revenue on marketing and sales to retain and attract more customers.
In order to become profitable, DoorDash needs to cut down on its expenses that go towards advertisement and marketing.
DoorDash Losses
Is DoorDash Profitable For Restaurants?
According to a study conducted by Economic Impact Report to measure the effect of delivery providers, some key insights were found that answers are DoorDash profitable for restaurants:
- Over half of the restaurants that have partnered with DoorDash said that their partnership has brought them incremental revenue and more customers.
- Nearly six in ten restaurants said that DoorDash had helped them in increasing their overall revenue.
- 58% of restaurants said that without DoorDash, their overall sales would have declined. 35% said that their revenue would have been the same, and 7% thought that their revenue would have been higher.
- 42% of restaurants said that their customer growth would have been slower, 42% said their customer growth would have been the same, and 7% thought it would have been more.
- 71% of them said they would recommend DoorDash to other restaurants or food businesses.
These key statistics are based on the responses of 736 U.S. DoorDash merchants from May 26 to June 2. And overall, the study proves that DoorDash is profitable for restaurants.
DoorDash Restaurants
Is DoorDash Profitable For Drivers?
DoorDash pays its drivers between $2 and $10 for each delivery, depending on the time, delivery type, distance, etc.
Additionally, DoorDash has now allowed Dashers to keep 100% of their tips, giving them an opportunity to increase their earnings.
However, the main question is, is Doordash profitable for drivers?
DoorDash drivers can make a decent amount of money provided that they take up maximum orders, minimize their expenses, work during peak hours, and keep their ratings good.
How Much Does a DoorDash Driver Make?
According to Indeed, DoorDash delivery drivers make approximately $4,172 on average, which is 80% higher than the national average.
This data is based on 174,909 data points collected from DoorDash employees directly.
How is the Dasher Paid?
Base pay (Time + distance + desirability) + Promotions (Peak pay + challenges) + Tips (100% customer tips) = Total Earnings.
So, for example, you get paid:
$2.75 as base pay + $1.00 of peak pay + $5.50 of customer tip, then your total earnings are $9.25.
DoorDash Earn By Order vs Earn By Time
How Can Dashers Withdraw Their Money?
Dashers can withdraw their money in three ways:
- Dasher Direct: This is a pre-paid business card from which you can get your earnings transferred to your bank account.
- Fast Pay: This is the fastest way to access your money. Using Fast Pay, you can get your money transferred to your debit card but for a transfer fee.
- Direct Deposit: If you do not use any of the two above-mentioned methods, then your earnings will be sent to you via direct deposit.
((https://dasher.doordash.com/en-us/about/pay))
DoorDash Annual Users
In 2022, DoorDash had 32 million active users increasing the user count by 7 million in the past 12 months.
Will DoorDash Ever Be Profitable?
As per 25 American Online Retail analysts, DoorDash is bordering on breakeven, and the company thinks that DoorDash will incur its final loss in the year 2024 before it starts making net profits of US$65m in 2025.
So the company is predicted to break even in two years from today.
In order to become profitable, DoorDash needs to have a minimum growth rate of 65% which is rather achievable.
And if the company surpasses this figure, then it might turn out to be more profitable than is predicted.
DoorDash U.S. Vs. Competitors
DoorDash Vs. Grubhub
| Feature | DoorDash | GrubHub |
|---|---|---|
| Availability | 7,000+ cities | 4,000+ cities |
| Minimum requirements | 18 years old Car, bike, or scooter Personal background check | 19 years old Car, bike, or scooter. Personal background check. Checking account with direct deposit (to avoid instant deposit fees) |
| Weekly Pay Dates | Wednesday nights | Thursdays |
| Instant Debit Card Cash-out Cost | Fees apply | $0.50 (Free for Chase Bank customers) |
| Better For | Delivering in smaller cities and participating in challenges | Larger cities and college campuses |
Is Uber Eats Profitable?
No, Uber Eats is not profitable. As you can see from the graph below, Uber Eats’ EBITDA was -$348 million in the year 2021 as compared to -$870 million in the previous year.
Wrap Up
DoorDash, in spite of being a major dominant in the food delivery business and after making positive revenue, is not a profitable company.
High variable expenses and marketing costs are the culprits to be blamed. However, DoorDash is predicted to start making net profits post 2024, and that time will tell.
We hope you found this article on whether DoorDash is profitable or useful.
FAQs
What is DoorDash's average order size?
DoorDash has an average order size of $37.28, and only 20% of customers spend more than $50.
Has DoorDash ever been profitable?
DoorDash has never been profitable. However, it did make profits of $23 million in the second quarter of 2020.
DoorDash is available in how many cities?
DoorDash is available in 7,000 cities in the United States, Australia, Canada, and Japan.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.