DoorDash offers restaurants more flexible commission rates

Paying a lower rate shrinks the delivery area and bumps up customer delivery fees.

Carlo Allegri / reuters

Food delivery apps have long been criticized for the typically high commission rates they charge restaurants. In an industry where the profit margin is said to be around three to five percent on average, paying commission of up to 30 percent can be brutal.

The exact commission rates these apps charge haven't always been entirely clear. However, DoorDash has taken a step toward greater transparency. The company has introduced a tiered commissions system for local restaurants in the US for both DoorDash and Caviar.

Under the DoorDash Basic plan, restaurants will pay 15 percent commission and move a higher proportion of the delivery cost to customers. Their delivery area will be smaller than that of restaurants on higher-tier plans to "ensure that Dashers continue to make meaningful earnings." Restaurant owners can still take part in marketing programs to promote their business.

DoorDash Plus offers a larger delivery area and participation in the company's DashPass subscription service. Restaurants enrolled in the latter get a visibility boost in the app and customers are charged lower fees. DoorDash claims that, because DashPass subscribers place more orders, restaurants "see increased growth." Restaurants on this plan will fork over a 25 percent commission.

The top-tier plan is DoorDash Premier, which charges 30 percent commission. DoorDash says, along with DashPass benefits, this offers the widest delivery area and lowest customer delivery fees. If a restaurant on this plan accepts fewer than 20 orders for delivery, pickup and Caviar in a month (without canceling too many), DoorDash will refund commission on those.

Elsewhere, the company says it's reducing commission for pickup orders to six percent. It's also killing off all fees for the Storefront ordering platform for all restaurants, save for payment processing fees.

In December, the company gave restaurants the option to handle their own deliveries, including setting delivery fees and a custom service area. It promised a lower commission rate for those who opt for self-delivery.

When many restaurants had to close their doors to dine-in customers at the onset of the COVID-19 pandemic, DoorDash temporarily reduced or waived its commissions. That helped out restaurants at an especially difficult time. The tiered plans and reduced commission for pickup orders could come as welcome news for them as well.