How DoorDash Became a Leader in US Food Delivery

Editor's Note:This article is the first in a three-part series exploring how DoorDash became the dominant third-party food delivery aggregator in the United States.

Mistie Boulton, CEO of Oren's Hummus, a restaurant in Palo Alto, California, is accustomed to seeing young professionals and students pitch various inventions. Her partner, Oren Dobronsky, is a well-known angel investor in Silicon Valley who has successfully founded four startups. Boulton says people often come to the restaurant to pitch the latest novel ideas, and she acts like Dobronsky's "guard dog," evaluating whether these concepts are worth pursuing.

In 2013, when DoorDash co-founders Tony Xu, Andy Fang, and Stanley Tang first contacted Boulton to pitch their delivery product, she noticed their approach was somewhat different.

"Tony (and the co-founders) really listened. (They were) sincere and earnest, wanting to hear where (they) could do better," she said. "That was the most important thing to me. It was a pure passion with purpose and partnership."

Oren's Hummus partnered with DoorDash that same year and still uses the platform today, while also working with other top third-party aggregators. But Boulton believes "no one builds partnerships the way DoorDash does."

Boulton, who is also president and founder of the restaurant consulting firm EyeSpy, says she has seen many companies with great ideas for operators that are very attentive to customers in the first year or two, but then often communicate with customers only through mass emails.

"DoorDash is not like that at all. DoorDash people contact me regularly and care about my business," Boulton said.

From Backyard Delivery to National Expansion

DoorDash co-founder and Chief Technology Officer Andy Fang says that when the three founders met at Stanford University in 2012, they all wanted to do something that would genuinely help local businesses. Tony Xu grew up helping out at his mother's local restaurant, an experience that gave the founding team deep insight into the needs of the restaurant industry.

While evaluating business directions, Tang, Fang, and Xu learned that a local macaron shop had to cancel a large number of delivery orders due to being understaffed, so they began to consider offering a delivery service.

"That was a moment of realization for us," Fang said. "We realized that perhaps we could help local businesses with delivery by building a logistics system for them."

In 2013, the founding team created PaloAltoDelivery.com to provide delivery services for local businesses in the Bay Area. A few months later, they renamed the platform DoorDash. The founders personally completed the first 100 restaurant deliveries, learning about pickup processes, parking, and various other issues along the way.

"The biggest question we faced, and the one we asked ourselves, was 'Do customers really need this?'" Fang said. "Because if we could answer that question, we knew we would definitely find a way to help businesses increase sales and expand their online presence."

The founders got their answer quickly. After the platform launched, they received their first order within 45 minutes, which was completely unexpected, Fang said.

But maintaining early momentum was not easy. To recruit drivers, the company posted on Stanford's local job board, recruiting students to help. The delivery system was very rudimentary; the founders sent restaurant orders to drivers via text message and used Apple's "Find My Friends" feature to help drivers locate the nearest restaurant, Fang said.

DoorDash expanded early on to San Jose, which was close enough to company headquarters in Palo Alto to monitor deliveries. But when the business expanded to places like Los Angeles, oversight became much more difficult. The founders realized that a successful delivery platform needed to build local sales teams, merchant partners, and customers in every ZIP code area, Fang said.

That strategy has paid off—the company has been in a period of rapid growth for the past five years. DoorDash covered all 50 U.S. states in 2019, went public in 2020, and had a market value exceeding $21 billion as of November. Currently, DoorDash operates in more than 7,000 cities across the United States, Canada, Australia, Japan, and Germany.

"We didn't expect it to grow this fast and this big," Fang said. "We knew we wanted to be much more than a backyard delivery operation in Palo Alto. Now expanding nationwide and to other countries, and delivering other types of goods, I think that's exactly the role we want to play—helping all kinds of American businesses operate in an increasingly digital world."

Staying in Communication with Restaurants

DoorDash has established a system to ensure restaurant partners have channels to raise issues and provide feedback. Most communication is handled by local account representatives who proactively reach out to restaurant clients. DoorDash Chief Revenue Officer Tom Pickett says the company also established a Restaurant Advisory Council in 2020, providing a platform for restaurant owners and operators to tell DoorDash what is working and what is not.

In 2021, the company appointed its first Chief Restaurant Advisor, Stephanie Izard, a move that strengthened DoorDash's connection with partners. Pickett says Izard was interested in DoorDash's support model and helped expand the "Merchant Experience Partner" team. In the past, operators often said they felt somewhat lost in the DoorDash system, especially as the platform grew, and they didn't know who to contact. Merchant Experience Partners are dedicated contacts for restaurants who can answer questions about finances, menu updates, and account settings, according to DoorDash's website. Pickett says the Merchant Experience Partner team has helped improve support and engagement.

"These interactions happen every day... Now we have a customer management structure where there's either an account manager, a merchant experience partner, or both," Pickett said. "I think that's been very effective in getting feedback—it's a two-way conversation with restaurants."

Boulton says her DoorDash representative frequently asks how DoorDash can help, what the restaurant needs, and what information the company can provide to help the location grow. DoorDash representatives also share promotions that benefit Oren's Hummus or offer advice for addressing specific challenges.

One challenge Oren's Hummus faces is handling a high volume of takeout orders—which account for about 45% of its locations' order volume—without overburdening employees responsible for entering orders into the point-of-sale system. Boulton says DoorDash worked with the restaurant to integrate POS systems like Aloha and Toast, making order processing easier.

Boulton says monthly or quarterly meetings with DoorDash are helpful because the company can share data on how diners are responding to menu items, as well as data on any timing or food issues that arise. DoorDash also shares marketing campaign ideas with restaurant partners, and Boulton says the company's insights have helped inform her recommendations for potential new store locations. While Oren's Hummus has not yet specifically used these insights to open new restaurants, the company is always considering expansion opportunities.

Oren's Hummus's location in Los Gatos, California, was struggling at one point, but after Boulton spoke with DoorDash, she found ways to attract more customers. That conversation led Oren's to create 15,000 direct mail pieces distributed within a 6-mile radius of the restaurant to encourage people to visit. The direct mail campaign, implemented and tested in November, includes a DoorDash discount as well as in-restaurant giveaways. The promotion will run through the end of the year.

DoorDash also provided help when Oren's Hummus's liquor license was threatened. Previously, a third-party delivery aggregator had delivered alcohol to an underage customer, and the California Department of Alcoholic Beverage Control warned Boulton that she would lose her liquor license if another third-party company delivered alcohol to a minor. Boulton reached out to DoorDash, and the company quickly implemented a "mystery shopper" program to ensure customers received proper age verification.

How Feedback Drives Product Changes

Pickett says this ongoing communication is key to DoorDash's product development and to meeting merchant needs.

"The reason we've become the category leader in food delivery is largely due to our partnerships with restaurant owners, which helped us build leading selection, which drove customer demand, which allowed us to build the largest fleet of Dashers, ultimately improving delivery quality and speed," Pickett said.

Fang says DoorDash has always relied on data-driven decision-making and strives to operate at the most granular level to find ways that not only drive its own business growth but also help restaurant partners grow.

DoorDash focuses on merchant needs and considers itself a "merchant-first company," Pickett said.

"We always come back to the question: What do restaurants need to succeed? Often the answer is new customers and revenue growth. That's what we deliver through our core use case of delivery. But we're also continuing to find new opportunities with restaurant partners," Pickett said.

Historically, DoorDash used a uniform model, charging a 30% commission on each order. But after listening to account managers and the Restaurant Advisory Council, the company introduced a tiered commission structure in 2021, allowing merchants to choose the products they need. This decision also came after several cities implemented commission caps during the most severe pandemic restrictions. Its 15% commission tier offers basic delivery services, while the 25% and 30% tiers provide access to high-frequency DashPass customers and tools to attract more consumer demand, Pickett said.

DoorDash's pickup product also stemmed from discussions with merchants who wanted to allow customers to order ahead and pick up their food themselves, Fang said.

During the pandemic, DoorDash realized that 40% of small and medium-sized businesses lacked online ordering systems. DoorDash launched the Storefront product in 2020, allowing restaurants to build turnkey websites with online ordering capabilities at no commission. Boulton says Storefront has been a major success for Oren's Hummus.

"Orders increased significantly immediately after switching to Storefront," she said, adding that it greatly reduced the restaurant's costs.

Boulton says Storefront makes DoorDash's delivery system more affordable for a wider range of restaurants, adding that she believes many restaurants are not aware of this service.

"I think this will be a major trend across the entire delivery industry that other companies can't match. I haven't heard of any other delivery company offering Storefront or a similar system. I think DoorDash has a huge advantage in staying ahead by offering services like this."

DoorDash will continue to invest in restaurant products, such as customer insights, so restaurants can better understand DoorDash customers and then use additional features like advertising and promotions to precisely target specific customer segments on the platform, Pickett said. The company began selling advertising space in October 2021, allowing restaurants to pay to display ads above search results. Pickett says DoorDash expects more growth opportunities in this area.

"There's still a lot of room for growth in our core restaurant business," Fang said. "We've only scratched the surface of the U.S. market, reaching less than 20% of households each month. We currently account for less than 6% of total restaurant spending."

Correction:A previous version of this article misstated when DoorDash went public and when its Restaurant Advisory Council first convened. DoorDash went public in 2020, and the council also first convened in 2020. The previous version also misspelled chef Stephanie Izard's name and incorrectly identified the CEO of Oren's Hummus. The CEO of Oren's Hummus is Mistie Boulton.