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DoorDash, Grubhub, etc. may face a simplified menu

Investors bidding on DoorDash DASH’s newly listed shares -2.43%

Competitors should not take for granted the historically fragile relationship between food delivery platforms and the restaurants they serve.

It’s unclear what Sticky Eater’s business will look like in a distribution app after the coronavirus pandemic is over, but in many cases their loyalty can depend on whether their favorite restaurant remains. There is. It’s almost no guarantee.

A delivery platform is essential to the survival of many restaurants this year, bringing business even when the dining room remains closed. The platform may offer grants and relaxed shipping charges, but we are working to use the pandemic as an opportunity to prove its long-term value to restaurants. Many restaurants despised the service due to high fees and suspicious business. Practice.

So far, there is no doubt that the delivery company has won many new restaurants. This is evidenced by a significant increase across partner restaurant platforms, or by restaurants where the platforms have agreed to offer products to consumers. For example, in the first nine months of the year, regulatory submissions indicate Grubhub GRUB. -0.21%

About 90,000 affiliated restaurants have been added. That’s 37% of the total as of September 30th. UberTechnologies UBER 0.28%

Uber Eats said in a third-quarter report that it increased active partner restaurants by 70% year-on-year.

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DoorDash also seems to have added something like 50,000 merchants in the months before the initial public offering was submitted alone. According to DA Davidson analyst Tom White, its early growth may have been partially facilitated by facilitating delivery without the restaurant’s prior consent, but DoorDash is now a partner merchant’s total order for the platform. It accounts for almost all of the forehead.

However, it can be exhausted. Part of this year’s restaurant growth appears to be in favor of local regulators who have set temporary caps in many regions for the fees the platform can charge for services. Some caps, including those in major cities such as New York City and San Francisco, are familiar to investors, but the details of individual regulations are more esoteric. For example, the Philadelphia Ordinance is particularly strict on shipping platforms, limiting shipping charges at 10% of the purchase price of online orders.

The increasingly popping up small metropolitan and suburban caps are also underestimated. For example, earlier this month in Berkeley, California, the shipping fee limit was reduced from the previous limit of 15% to 10%. Prior to the pandemic, delivery platforms often charged restaurants up to 25% or more of the total price.

These limits are set to expire at various times as the restaurant reopens and the pandemic is eased. At that point, delivery platforms that aren’t making consistent profits this year could raise commissions. In urban areas where the need for discovery and delivery is low, restaurants may rethink the value each platform offers for an additional fee. This could put platforms such as Grubhub and Uber Eats, which have a greater presence in Tier 1 cities, at greater risk.

DoorDash Chief Financial Officer Prabir Adarkar believes that the platform will show its value to merchants during the pandemic and serve as the lifeline of many merchants, even after the pandemic is over. He said he expected to stay on board.

Ghost kitchens are emerging throughout the United States as food deliveries skyrocket during a pandemic and restaurant meals plummet. These businesses, which can host the cooking of multiple restaurants in one place, are of interest to investors and restaurants.Photo: Adam Folk / Wall Street Journal

However, the balance of power can change when all face-to-face dietary restrictions are lifted. Especially large national chains do not need much support from online platforms in the more normal world. This is important, according to Grubhub’s 2020 Year in Food report, all of the top 10 trending dishes of the year are items commonly ordered from large home chains, such as spicy chicken sandwiches and chicken burrito bowls. That’s why.

Ice latte is 157% more popular at Grubhub this year. Is this because the app included a previously unknown cafe, or was it simply because few people walked by Starbucks? Investors waiting for daily caffeine fix deliveries need to ask this very question.

Write to Laura Forman (laura.forman@wsj.com)

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DoorDash, Grubhub, etc. may face a simplified menu

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