DoorDash was founded in 2013 by a group of Stanford University students
who provided restaurants and consumers with technology and a work force to
solve a classic "pain point," paving the way for food delivery service that until
then was largely confined to pizza shops and Chinese restaurants.
How it works: Restaurants receive DoorDash orders through a tablet provided
by the company, and they pay a commission ranging from 15% to 30% of the
sale. And customers ordering through the DoorDash website or app pay for
the price of their food, local taxes, a delivery fee, a service fee and an optional
tip.
The idea of leaving a tip before the service was provided instead of after was
unusual. But DoorDash has grown. In the third quarter of 2023, the company
had 543 million orders and $2.2 billion in revenue. And it is the biggest food-
delivery service, with 66% of the market, according to Bloomberg. Uber Eats,
with 23% of the market, ranks second.
"Technology played a role, but this was also a function of pent-up consumer
demand and business needs to meet an age-old preference for the convenience
of restaurant delivery," said Gary Minkoff, a professor of professional practice
at Rutgers Business School in Newark and New Brunswick. "It just wasn’t
something that was a focus for restaurants, for various operational reasons."
To resolve one operational issue, how to find enough workers to make
deliveries, DoorDash turned to drivers willing to work as independent
contractors. Drivers are paid a base pay, a tip and a premium during busy
hours. They can get paid by the order or a guaranteed hourly rate. As
independent contractors, they can decline an order if, say, they don't think it
pays enough or is too far. But the company's pay is set by an algorithm and
can fluctuate.
Herlihy said the base pay when he started was typically $3 an order. But now,
he gets base pay of $2 on about 85% of his deliveries. "That will go up as more
drivers decline the order," he said.