DoorDash Customer Fees Go Up Thanks To Dumb Regulations
DoorDash regulators get a crash course in economics. Across the U.S., authorities are getting a lesson in how government price controls don’t work. When city and state regulators artificially cap prices for an in-demand product or service, providers of that product or service will simply recoup costs elsewhere.
The lesson comes courtesy of DoorDash, a food delivery app that soared in popularity among restaurants and consumers during the COVID-19 pandemic.
DoorDash drivers pick up carryout orders from restaurants and take them to consumers; in addition, the DoorDash app serves as a centralized place for consumers to search for restaurants, read their menus, and order food. For this service, DoorDash and similar apps (like Uber Eats) typically charge a commission to restaurants as well as fees to those getting delivery.
Pandemic-slammed restaurants—which tended to operate on very thin margins pre-COVID—frequently complain about the commissions DoorDash and its ilk take. But DoorDash needs to make money, too. And while restaurant owners might like for DoorDash to cut into their profits less, the fact that so many continue to use the service suggests it’s still a better deal for them than hiring their own delivery drivers or not doing delivery at all.
But in many places, authorities—always keen to pick winners and losers in the business sphere—answered restaurant owner complaints by capping allowable DoorDash commissions. Since the start of the pandemic, at least 68 cities, counties, and states have enacted food delivery commission limits and other locales are considering them, NBC News found.
Authorities seem to believe that delivery services can and will simply accept making less money so that restaurants can make more. DoorDash is showing them that this isn’t the case:
To recoup what it considers lost revenue, DoorDash has tacked on another flat surcharge of $1 to $2.50, which it often calls a “Regulatory Response Fee.” The money goes straight to DoorDash. Only when customers click a tiny button does an explanation pop up saying the city has “temporarily capped the fees that we may charge local restaurants.”
NBC News found that DoorDash added supplemental local fees in 57 of the 68 locations that have fee caps.
So, the lost revenue is now being recouped from delivery food c
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