How Does DoorDash Make Money: a Unique Business Model (2024)

Everyone knows about DoorDash — it’s the largest food delivery app in the US, but the platform didn’t achieve this in a single day. During the pandemic, the demand for delivery services skyrocketed, and DoorDash made sure to capitalize on that. Today, the company continues to grow — in 2023, its revenue increased by 31% compared to the year prior.

But how does DoorDash make money? In this article, we’ll do a deep dive into the platform’s business model, key features of the DoorDash app, and examine the company’s revenue sources. Also, we’ll explain why making a similar food delivery platform isn’t as hard as it might seem at first glance.

How does the DoorDash app work?

DoorDash is a food delivery service: it gives you a wide choice of restaurants based on your location and makes ordering easy. Even if you’re in a remote area, you can still find something delicious on DoorDash and have it delivered.

The company was founded in 2012 by four Stanford University students. After talking to restaurant owners in California, they realized there was a need for a convenient food delivery service. Local restaurants had trouble getting food to their customers — many of them just couldn’t keep up with the demand.

That’s where DoorDash came in. It was launched as a simple website called PaloAltoDelivery.com. At first, the founders even delivered the food themselves, using their own cars and bicycles. By doing this, they figured out what it takes to create an efficient delivery service, and by 2023, DoorDash made $8.6 billion in total revenue and had more than 7 million drivers working for them.

Features of DoorDash

To answer the question, “How does DoorDash make money?” we first need to look at the app’s core features:

🌎 Real-time location tracking

This feature gives peace of mind to both customers and couriers. Users can see where their food is at every step of the process, and the courier has a map with helpful in-app directions to help them reach the client’s address on time. The location tracking feature boosts customer satisfaction and makes the driver’s job easier.

☝️ Top menu

The top menu of the DoorDash app lets you quickly browse various categories of food and groceries. It streamlines the in-app user flow, making the ordering process smooth and intuitive. Instead of scrolling through dozens of unsorted restaurants, you can just tap on the desired category and instantly see the best picks.

🍕 Smart recommendations

Personalized recommendations make the process of browsing the DoorDash marketplace much more engaging. Based on your order history and reviews, the app suggests various restaurants on the home screen. This feature is powered by AI algorithms that take into account your taste, the current trends, and the time of day.

🏆 Double rating system

The DoorDash app lets users rate both food and delivery quality. Thanks to this system, restaurants can get feedback from clients that won’t be tainted by problems with delivery, and vice versa. This allows DoorDash to improve the quality of their service and recommend only the best-reviewed places to users. All the while, rewarding the couriers for their efforts.

📅 Delivery scheduling

The DoorDash app allows you to schedule deliveries in advance. Users can choose a date and pick a free time slot. The restaurant staff will be notified about the scheduled order, giving them time to prepare. This feature makes the delivery process even more convenient and offers users more options for ordering meals.

How does DoorDash make money?

Now that we’re familiar with the app’s features, it’s time to look at the DoorDash revenue generation strategy. This will help us understand why the DoorDash business model is so profitable.

Delivery fees

That’s the bread and butter of most food delivery services. When ordering, service and delivery fees are automatically added to the total amount. The delivery fee covers the logistics costs and the service fees go towards platform maintenance. This approach serves as the backbone of the business model, consistently generating revenue.

Restaurant commissions

Another key ingredient of the DoorDash business model. Any restaurant can partner with DoorDash to get access to their delivery infrastructure. DoorDash offers three partnership tiers: Basic, Plus, and Premier. Basic offers standard delivery integration for a 15% commission. The Plus and Premier tiers cost more but give restaurants certain privileges. Overall, the restaurant partnership system is one of the strongest pillars of the DoorDash revenue model.

Ad revenue

Nowadays, most apps rely on advertising to make money, and DoorDash is no different. The platform’s versatile revenue model includes several types of advertising. In addition to the classic in-app banners, there are also merchant sponsorships. Restaurants can pay DoorDash to be listed at the top of the search page, boosting their visibility and income.

Premium subscription

One of the most important elements of the DoorDash business model is DashPass, their premium subscription service. It gives users access to exclusive deals, removes the need to pay the delivery fee, and lowers the service fees. This subscription service encourages clients to use DoorDash on a regular basis to get the most out of their premium plan. This results in an increased number of repeat customers.

Catering services

The DoorDash business model also includes a catering service. Using the app, businesses can order group meals for corporate meetings or events. To provide this service, DoorDash partners up with restaurant chains that have catering experience. Group orders can be prepared in just two hours, making this option very convenient. By including catering, DoorDash has managed to make its business model even stronger.

What makes DoorDash successful?

How does DoorDash serve multiple customer segments?

Let’s go over the benefits that DoorDash offers to its three main customer segments: app users, restaurants, and couriers.

👥 Users

DoorDash targets several types of users:

• • People who don’t have time to cook
  • People with no cooking experience
  • University students living in dorms
  • People who like to explore new cuisines

Here are the key benefits that DoorDash provides to its users:

🍱 Restaurants

The DoorDash business model relies on 3 kinds of businesses:

• • Local restaurants
  • Large restaurant chains
  • Stores and pharmacies

Let’s see what benefits DoorDash offers to its B2B customers:

🛵 Couriers

These are the types of people that usually get hired by DoorDash to deliver orders:

• • People looking to supplement their income
  • People who want to work flexible hours
  • Experienced drivers and professional couriers

And here’s how DoorDash wins them over:

It’s clear that the DoorDash business model is highly versatile. The platform provides equal value to all three customer segments, so it’s no wonder it has become so successful.

Why make a food delivery app with Purrweb?

At Purrweb, we create user-friendly delivery apps similar to DoorDash. We do everything, from designing sleek UIs to building solid backend systems. Foodtech is a familiar niche for us, take a look at our FoodTech projects.

Here’s an example: we worked on Cargo, an on-demand delivery app. In less than 4 months, we managed to create a fully functioning MVP for multiple platforms that helped the company attract new clients.

When starting this project, we quickly realized that the app wouldn’t succeed without a strong user flow. To make the delivery process as convenient as possible, we created a streamlined interface for couriers with no more than 2 actions on a single screen. We chose a simple yet striking color scheme that helps direct the user’s attention to the most important elements of the UI.

We developed the app’s frontend using React Native. It helped us create responsive and eye-catching interfaces in the shortest amount of time. We know this framework well, so the bug-fixing process went smoothly, and the app was delivered on time.

In the end, our chosen tech stack allowed us to deliver a user-friendly app with a high scalability potential. The service has grown in popularity, and today, it’s offered as part of the Illuminate Software Solutions product line. The client was happy and so were we.

4 takeaways from the DoorDash business model

Connecting restaurants with customers. DoorDash bridges the gap between restaurants, customers, and couriers, providing their own online ordering system and delivery services. By serving three segments at once, the company has managed to build a profitable food delivery business.

Taking advantage of multiple revenue sources. Delivery fees, subscriptions, service fees, ad revenue — the list goes on. DoorDash makes an effort to capitalize on as many income streams as possible to maintain a strong revenue model.

Focusing on customer satisfaction. The customer is always right, and the DoorDash business model is built on that principle. The success of their business model is mostly driven by the smooth user experience of their app.

Partnering with popular brands. Affiliate marketing is an effective tool, and exclusive partnerships with large companies like Walmart help DoorDash make money — more and more each year.