First appeared on Restaurant Dive.
- McDonald's partnered with DoorDash, initially launching the service to more than 200 restaurants in the Houston market at the end of this month, according to a press release.
- The partnership will include access to DashPass, the delivery company's subscription program that offers members unlimited $0 delivery fees on orders of $12 or more to select merchants. The program has nearly 1 million members.
- The fast food chain and DoorDash also integrated their systems so that orders are sent directly to McDonald's POS system.
Reports started to surface in April that McDonald's could end its exclusivity with Uber Eats after a two-year relationship as the company renegotiated high commission fees. A franchise base, which has gained some leverage with corporate thorough the formation of the National Owners Association, had been growing frustrated by these fees and likely facilitated the negotiations. McDelivery is now a $3 billion business for the globally and is available in more than 9,000 of McDonald’s 14,000 U.S. system so a lot of money is on the line to get delivery right.
DoorDash is an attractive target for McDonald's for a number of reasons. It is available in all 50 states and reaches 80% of Americans, which complements the chain's ubiquitous footprint well. In March, DoorDash overtook Grubhub as the largest food delivery company, with 27.6% of market share after experiencing a 206% growth trajectory since January 2018. Comparatively, its competitors including Postmates, UberEats, Caviar and Grubhub, have remained flat or have declined slightly. Investors have been keen on DoorDash's model, too. In May, the company secured a funding round of $600 million and it is now valued at nearly $13 billion.
By spreading its wings to DoorDash, McDonald's is pushing its brand to a top-of-mind position on the largest delivery app by market share, which is sure to generate additional transactions and customers as they peruse the app to find last-minute meal options.
The integration of the DashPass program is also enticing. Recent research from Tillster shows that most QSR customers — 83% — would pay just up to $5 in delivery fees. Waiving those fees could inspire them to place bigger orders.
The end of its exclusivity with Uber Eats has put the ball squarely in McDonald's court, which could be counted as a win for all restaurants that have been grappling with high commission fees that erode their already thin profit margins. It is also no doubt a major blow to Uber Eats. But don't count the delivery company out entirely, as there is still plenty of room here. By next year, 6 million additional consumers are expected to adopt the use of apps for third-party food delivery.
And, just last weekend, McDonald's ran a fry giveaway promotion with Uber Eats, showing that the company is starting to market the service and is still very much prioritizing its original partner as it raises awareness and increases its delivery presence.