DoorDash
- DoorDash CEO Tony Xu said he founded his company to help small businesses, many of which shuttered during the coronavirus pandemic.
- The National Bureau of Economic Research estimates one in five businesses have closed permanently as a result of the COVID-19 outbreak.
- But some restaurants say food delivery apps charge high commissions that cut into profit.
- DoorDash filed for an initial public offering Friday.
- Visit Business Insider’s homepage for more stories.
DoorDash CEO Tony Xu said he founded his company to help small restaurants, many of which are shuttering during the coronavirus pandemic.
In a letter attached to his initial public offering prospectus, Xu said his mom, who worked as a Chinese restaurant server to pay for medical school, inspired him to build DoorDash. He described DoorDash’s mission as “fighting for the underdog,” including community restaurant workers like his mom and owners of local stores.
The National Bureau of Economic Research estimates one in five businesses have closed permanently due to the coronavirus pandemic. Independent restaurant owners said as many as 85% of their shops could permanently shutter before 2021. In the letter, Xu recognized the way the pandemic hit small restaurants, and said DoorDash helped “local businesses succeed.”
“While small businesses are vital to our communities … they now risk being left behind in the convenience economy where consumers have become accustomed to obtaining everything in a few clicks, a trend that has only accelerated in a COVID world,” Xu wrote.
DoorDash filed for an initial public offering Friday. The Form S-1 filing revealed the company shrunk losses during the pandemic as people ordered delivery when indoor dining closed. The company generated a $149 million loss on a revenue of $1.9 billion this year, compared with a $667 million loss on $587 million in revenue in 2019.
In June, DoorDash raised $400 million in new equity financing that brought the startup's valuation to $16 billion.
Xu said DoorDash helped small businesses by lowering commissions by 50% of local restaurants, benefiting 180,000 businesses in the US, Canada, and Australia. But restaurants have spoken up against high commissions delivery apps charge. Customers filed a class-action lawsuit in April against DoorDash for overcharging restaurants to process delivery orders, resulting in higher menu prices.
The 50% reduced commission program Xu touted in the letter ended on May 31.
Many independent restaurants said they have attempted to bypass apps like DoorDash because of their high commission fees. DoorDash does not publicly disclose the average commission rate it charges restaurants.
"Hopefully the industry will come to its senses and push those restaurant delivery services out of the picture, because I have yet to see anything where it's positive for the restaurant industry," James Parrott, a director of economic and fiscal policies at The New School, previously told Business Insider. "It helps crowd out locally owned, smaller restaurants."