Today, the world is far more instant and accessible than it was a decade ago. Food delivery could be cited as the biggest example of how far we’ve pioneered convenience. With just a few clicks, food is served on the table. As on-demand delivery services gained traction, food delivery apps have emerged from all around the world leading to more intense competition. Instant food delivery has forced new players in the market to enhance convenience as much as possible and adopt various business models to take advantage of the rising opportunity.
As so, when speaking about online food delivery apps, there are two names that stand out – DoorDash and Grubhub. Although these companies serve the same purpose, there are various differences in the way they do business. In this article, we’ll analyze both of them and show you how they work. Read on.
DoorDash
If there’s one platform that has made its way to become an online food-delivery giant within a short span of time, it has to be DoorDash. Founded in 2013 by a group of Stanford students, namely Tony Xu, Stanley Tang, Andy Fang, and Evan Moore, it was initially called ‘PaloAltoDelivery.com’. Later on, they incorporated the name DoorDash which then went on to become the largest food delivery company in the United States with a 56% market share. Additionally, in 2018, DoorDash expanded its operations to include grocery delivery services through a strategic partnership with Walmart. So how does DoorDash work and what do they owe this tremendous success to? Let’s find out.
DoorDash is essentially an on-demand delivery service solution for all your needs. It operates by connecting customers with a vast selection of local restaurants and allows them to order food for delivery or pickup. Their user-friendly app and website enable customers to browse menus, place orders, and track the delivery in real-time, ensuring a seamless and convenient experience. But what truly set them apart from the other apps that existed in the marketing was their in-house fleet of delivery drivers, called ‘Dashers’. This approach gave them greater control over the delivery process and allowed them to offer fast and reliable services to customers.
Business Operations
The food delivery giant functions on a three-tier system – customers, restaurants & dashers. Customers can use the DoorDash online food delivery app or website to browse through a wide selection of local restaurants and stores, and explore menus, read reviews, and choose the items they want to order. Then they are required to enter delivery details to ensure seamless delivery. Once they finalize their orders, they can confirm by making the payment and will receive an estimated delivery time upon confirmation.
After the order is placed, DoorDash assigns a ‘dasher’ (driver) for the delivery, who picks up the order from the particular restaurant who in turn also receives an alert upon the order confirmation. The dasher then delivers the order to the customer’s address while customers can track their order in real-time through the app.
Revenue Model
Most on-demand delivery services often share at least one common kind of revenue mechanism, which usually happens to be charging commissions. In the case of DoorDash, there are various channels through which they earn revenue. Let’s take a look:
- Commission Fees: DoorDash charges a commission fee to the restaurants and merchants that partner with the platform. This fee is a percentage of the total order value received from customers through DoorDash.
- Delivery Fees: Customers using DoorDash often pay a delivery fee for the convenience of having their orders delivered to their location. The delivery fee varies based on factors such as distance and demand. Typically, they levy a delivery charge ranging from $5 to $8 per order, depending on the location and distance covered.
- DashPass Subscription: DoorDash offers a subscription service called DashPass. Customers who subscribe to DashPass pay a monthly fee and receive benefits such as reduced or waived delivery fees on eligible orders.
- Promotional and Marketing Services: They offer promotional services to restaurants and businesses to boost their visibility on the online food delivery app. Restaurants may pay for featured placements, sponsored listings, or marketing campaigns, providing an additional revenue stream for DoorDash.
Grubhub
Grubhub could be best described as the culinary companion that won hearts across the nation with its delectable offerings and seamless service. Born in 2004 from the minds of Matt Maloney and Mike Evans in the vibrant city of Chicago, Grubhub started as a vision to bring local restaurant favorites right to your doorstep. Over the years, it has grown to become a household name, serving as a go-to online food delivery app for everyone craving a wide range of cuisines. In 2021, the company was acquired by Just Eat Takeaway.com for a whopping $7.8 billion.
The platform’s primary goal is to connect hungry diners with a vast selection of local partner restaurants. With an easy-to-use app and website, Grubhub allows users to explore menus, place orders, and have their favorite dishes delivered straight to their doorsteps or prepared for pickup. In contrast to DoorDash, Grubhub has historically relied more on partnering with restaurants that have their own delivery drivers.
Business Operations
When it comes to operations, Grubhub works similarly to that of DoorDash. Customers can use the Grubhub website or mobile app to browse through a variety of restaurants in their area. Initially, they are required to enter their delivery address so that they may view the available restaurants in their vicinity. Once they’ve finalized their orders by making the payment, Grubhub provides an order confirmation and an estimated delivery time. At the same time, Grubhub sends the order details to the respective restaurant, notifying them of the incoming order. The restaurant then begins preparing the food.
They offer both delivery and pickup options. The difference here is that if the restaurant has its own delivery drivers, the order is handed over to them. If not, Grubhub employs its own delivery drivers to fulfill the order. Meanwhile, customers are able to track their orders in real time through the app. They receive updates on the order’s status, including when it’s being prepared, picked up, and on its way to the delivery address. Finally, the order is completed by the delivery driver.
Revenue Model
When it comes to business, Grubhub generates revenue through various channels in its food delivery business including:
- Commission Fees: Grubhub charges restaurants a commission fee for every order made through its platform. This fee includes the processing charge as well, which is usually somewhere around 3.05%.
- Delivery Fees: Customers using Grubhub typically pay a delivery fee for the convenience of having their orders brought to their doorstep. The delivery fee varies depending on factors like distance and demand.
- Promotional and Marketing Services: They offer restaurants promotional opportunities to enhance their visibility on the platform. Restaurants can opt for featured placements, sponsored listings, or marketing campaigns to attract more customers.
- Grubhub+ Subscription: Grubhub operates a subscription service called “Grubhub+,” where customers pay a monthly fee to enjoy benefits like free delivery on eligible orders and exclusive discounts. This $9.99 subscription revenue significantly contributes Grubhub’s overall earnings.
Wrap Up
Although both DoorDash and Grubhub follow the same business process, DoorDash has the largest fleet of delivery drivers (or dashers) spread across 7,000+ cities partnering with
450,000+ restaurants making them the bigger player in the delivery game. Additionally, these companies are also competing in a saturated competitive landscape with other online food delivery apps like Uber Eats and Postmates taking a 23% and 2% market share respectively.
However, the primary revenue streams for both companies stem from commissions and delivery fees.
With food delivery businesses thriving with the growing rate of technology, there has never been a better time to capitalize on this trend and enter the market with your own on-demand delivery service app. As the competition intensifies, staying ahead requires innovative solutions that can set your app apart and deliver exceptional customer experiences. If you’re an entrepreneur wanting to make use of this opportunity, check out iScripts NetMenus Enterprise. It is an easy-to-go software solution that helps you develop an online multi-restaurant ordering platform capable of partnering with numerous restaurants across different cities and serving your customers with a simple and convenient way to order delivery or pickup.
Whether you’re looking to go with the DoorDash model or the Grubhub model, you have the option to customize it according to your requirements. It comes with a web application as well as a mobile app, making your job a whole lot easier. Now, if you’d like to give it a try, check out our Free Demo.
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