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Food delivery services have popped up here and there due to the large demand. Especially in this time of the pandemic where people aren’t so free to go out and buy food, delivery services are more needed than ever.
Doordash alone had 39 billion app downloads in 2020. And no, they were not the first food app. Imagine the potential?
Thankfully, technology and the internet have paved the way to make these services more available through online and mobile apps.
Aside from the obvious need for their services, DoorDash and similar apps also make millions – even billions of dollars in revenue. In 2021, DoorDash made a revenue of $4.55 billion, making it one of the companies with the strongest performance in the industry.
And you can do it too! If you’re wondering how apps like DoorDash make money in hopes of building your own, then read on to find out.
What is DoorDash?
DoorDash is an online food delivery service that connects customers or users to different restaurants. Orders are then delivered to the customer with the help of independent contractors who act as drivers, also known as Dashers.
Through DoorDash, restaurants are now able to expand their services by offering delivery without the need to hire their own drivers or spend on delivery equipment and vehicles.
At the same time, DoorDash earns through commissions, delivery and service fees, and extra services like subscriptions, catering, and more.
Since its founding in 2013, DoorDash is now available in more than 7,000 cities in the United States, Canada, Australia, and Japan with more than 20 million active users as of early 2021.
DoorDash also acquired 56% of the U.S. market share in the delivery industry as of December 2021 according to the recent data from SecondMeasure.
History of DoorDash
Before DoorDash was founded, meal delivery platforms only list down restaurants, requiring them to make their own deliveries. This resulted in longer delivery times and numerous cancellations due to much demand.
To solve this, four Stanford graduates, namely, Andy Fang, Evan Moore, Stanley Tang, and Tony Xu launched PaloAltoDelivery.com and started helping restaurants improve their business by solving their delivery problems.
The four founders learned a lot with this launch and rebranded their company to DoorDash with the mission of providing the best delivery experience to their users.
How does DoorDash work?
DoorDash is an online and on-demand food delivery service platform where users order food and beverage from restaurants, and have them delivered right to their doorstep. This can be done through the DoorDash website or mobile app, which is available both for iOS and Android.
When an order is made, the contractual drivers call Dashers to pick up the meal and make the deliveries.
Since the drivers are hired as contractors, they don’t enjoy the fixed salary and benefits that DoorDash employees have. Instead, they are paid based on the following:
- Base pay, which is dependent on the time worked and distance traveled
- Bonuses and extra pay, such as promotions, rewards from completing DoorDash challenges like achieving a certain number of deliveries, and working at peak hours
- Tips from customers
For every order made, the customer sends the payment to the DoorDash platform and is processed by DoorDash’s back-end team.
The restaurants then collect their share from DoorDash after the commission and fees are deducted.
Features We Love
If you want to build your own app, you have to identify the features that your target market needs from your business. For DoorDash, here are some top features that customers love and are also used by similar platforms in the industry:
Suggested and Most Popular Items
Using AI machine learning and the users’ data, DoorDash has developed an algorithm that gives you personalized recommendations on what to order.
What’s more, is that DoorDash also shows the customer the most popular items in a menu using data gathered from their orders and ratings. With this feature, choosing orders is now easier and quicker.
Two-system Rating
Typically, apps only ask for you to rate your general experience with their service. In the case of food delivery apps, having only one avenue to rate both the meal and deliveries can lead to inaccurate results.
With the two-system ratings in DoorDash, users can now rate the meal or restaurant and the delivery separately.
DoorDash can now see how they can improve their service based on the data, and also use the restaurant rankings when recommending food to users.
Live Tracking
Using the power of GPS, DoorDash not only sends detailed updates on the order status but also allows users to track the Dasher’s real-time location with maps.
With this feature, the users can now estimate how long before the Dashers arrive by checking DoorDash, and there will be less need to personally call or text them.
Competitors in the Delivery Market
Since the delivery market has a large demand especially now that we’re in a pandemic, it’s only natural that a lot of apps similar to DoorDash emerge. Aside from DoorDash, here are some competitors addressing the shortage in delivery services.
Uber Eats
If you use Uber for your ride booking needs, then you’ve probably also heard of Uber Eats, which is made to cater to your food delivery needs.
Uber Eats is available in more than 6,000 cities in 45 countries worldwide, including the United States, France, Spain, Italy, and many more.
As of last year, Uber Eats also surpassed DoorDash in terms of revenue, making a total of $5.8 billion for that year. Data also shows that the company acquired 24% of the U.S. delivery market share as of December 2021, the second-highest in the market.
Grubhub
Grubhub is another app for food pick-up and delivery orders. It offers features such as refining search by cuisine type, or by typing in a specific menu item. It also offers corporate packages, making it an app of choice for companies that sponsor meals for employees.
Postmates
Aside from delivering food, Postmates is known for delivering just about anything like groceries and alcohol. Postmates is also mostly known for its flexibility and timely deliveries.
In November 2020, the company was acquired by Uber Eats in hopes of consolidating its market share. Last year, data shows that Postmates accumulated 3% of the market share, making Uber Eats’ total share equal to 27%.
How do food delivery service apps make money?
Every good business needs a feasible monetization model. The same goes with building apps, you must know how you can monetize them.
Now that you’re familiar with the different apps for food delivery services, it’s time to learn the common strategies on how DoorDash and other apps excel in the business and make money.
Restaurant Commissions
A significant portion of the revenue that DoorDash and other apps earn comes from commissions they get from partner restaurants.
For DoorDash, specifically, the company makes money from a commission model set up for partners indicating the percentage of commission fees they have to pay DoorDash.
In this model, the lowest commission fee, 15%, charges the highest delivery fees to the customers and has the smallest service area.
On the other hand, the largest fee, 30%, puts the restaurant in the DoorDash loyalty program, offers the lowest delivery fees, and largest service area. The company also guarantees at least 20 orders per month, or else, the restaurant gets their money back.
Service and Delivery Fee
Aside from commissions, these apps also charge service and delivery fees per order to the customer.
DoorDash’s delivery fee typically costs $6-$8, which depends on the location and current demand. The Dashers also get a portion of this fee as part of their pay.
The service fee is then calculated as a percentage of the meal subtotal. This fee is mostly used for back-end costs of the company like the development of the app, and the marketing.
Advertisements
One more way that restaurants can be more visible is through paid advertisements. By launching and boosting the restaurants’ campaigns, the food delivery apps are now able to earn more revenue.
Subscriptions
DoorDash and other apps also offer subscriptions to their customers as a way for them to save money when availing of their service. For DoorDash’s DashPass, the company claims that users can save an average of $4-$5 per order when subscribed.
Both DashPass and Uber Eats’ subscription program called Eats Pass cost $9.99 and feature free delivery fees and reduced service fees upon reaching $12 for DoorDash and $15 for Uber Eats.
Companies can also use DashPass for Work, which is offered by DoorDash, to sponsor their employees’ DashPass.
Extra Services
These apps also maximize their earnings offering a lot of extra services to their customers and partners. Some of these services were launched during the pandemic to cater to people who need to stay at home.
DoorDash and Grubhub are known to offer catering for corporate settings. For this service, customers make group orders, set spending limits, and have these apps deliver their meals either to the office or to their homes.
For your grocery needs, Postmates, and DoorDash can pick up items from stores like 7Eleven, and Walgreens and deliver them right to your doorstep.
A white-label logistics service called DoorDash Drive is also offered by DoorDash where restaurants who are not on the platform can pay DoorDash and hire a Dasher to make meal deliveries for them.
DoorDash Drive makes a perfect solution for partners who get enough customers from their own sites alone but do not have enough amount of manpower for the deliveries.
Growth Strategies for Delivery Services
While the monetization models these apps have are already great, there are still a lot of ways for food delivery apps to grow.
One of the latest features that DoorDash launched that could be a game-changer in the industry is the Storefront model, where restaurants can set up their own websites and facilitate their online delivery systems.
Self-delivery is also another growth avenue of the company where restaurants and partners can use the app’s platform to get orders but still use their in-house delivery teams.
How much does building food delivery apps cost?
The cost of building your own food delivery app depends on many factors including project requirements, advanced features, and how far along you want your product to be.
Costing can start at $5,000 for making a Minimum Viable Product or MVP and can reach up to $100,000 for a fully-fledged app.
You should also consider whether you want to build your app for Android, iOS, or both. Some of the languages and technology stacks that can be used for developing these apps are:
- Java
- Swift
- Flutter
- React Native
- AWS
- Azure
- Facebook SDK
- Paypal
- Stripe
- Google Maps
- Google Analytics
- Foursquare API
Developing your app also includes a lot of stages such as UI/UX design, front-end development, back-end development, creating the admin panel and server, app testing, and a lot more.
The most important part, however, is choosing the development partner that is perfect for your needs. Since you’ll be working with them for a long time, ensuring the right fit plays a huge part in making your app a success.
Want to build your own app?
Are you now excited about developing the next DoorDash? Then you’ve come to the right place!
For over a decade, our team of award-winning developers and designers at Dom & Tom have worked with different Fortune 500 companies and startups in thousands of projects and case studies, providing them with our world-class expertise and services.
Here at Dom & Tom, we can be with you every step of the way, from discovery and research to creating, launching, maintaining, and growing your app.
Don’t let your idea wait. Contact us today and let’s start building your dream app!