DoorDash will start punishing McDonald's restaurants for slow service and order mistakes, report says
- The Wall Street Journal reported that
DoorDashis changing the way it does business with McDonald's.
- The delivery service is lowering its base commission rate for McDonald's.
Delivery service DoorDash and McDonald's have negotiated new contracts resulting in lowered overall fees for the fast-food chain. But the new deal will also see increased fees for franchises struggling to provide quick service.
DoorDash, which makes money in part by charging restaurants commission fees and consumers service fees, is lowering the base commission McDonald's pays on nonsubscriber orders, from 15.5% to 11.6%, according to the report. But McDonald's franchises that delay DoorDash drivers will get hit with higher commission fees up to 17.6% for regular consumers and 20.1% on orders from DashPass subscribers, WSJ reported. Restaurants that frequently mess up orders will have to eat refund costs.
A spokesperson for McDonald's did not address the renegotiated contracts, but told Insider that the company considers delivery to be "one of the largest growth engines of the McDonald's business globally."
"Commission rates are just one component we consider when establishing these strategic agreements, which often take into account unique and reciprocal business objectives and allow our partners to capitalize on the unmatched advantages that a global partnership with the largest restaurant company in the world provides," the spokesperson said in an email to Insider.
Around 93% of McDonald's locations around the globe are owned and operated by franchisees, rather than the company itself. This army of independent business owners has allowed the Golden Arches to spread to over 100 countries, with a total of around 38,000 restaurants.
"McDonald's Franchisees appreciate the relationship we enjoy with all of our Delivery partners," Mark Salebra, the chairman of the National Franchisee Leadership Alliance, said in a statement sent to Insider. "The fact that these long term agreements are, at their core, designed to financially reward best in class service and operations is something that we all can be supportive and excited for."
DoorDash declined to comment on the "confidential client contract terms" reported on in the WSJ.
"The fee structures for our merchant partnerships can vary by store or franchisee location and, in practice, can be determined by a variety of factors, including volume, average delivery distance, and value-added services, as well as operational performance and quality," a DoorDash spokesperson said in a statement sent to Insider. "Any summary figure is highly misleading. Our platform's quality-based incentives help reduce Dasher wait times in order to maximize their earnings and boost customer retention and revenue for our merchant partners."
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