We knew a DoorDash IPO was on the way, and it arrived this past week packaged with news that the company turned a profit in Q2 and has enough cash stockpiled to float along for quite some time. Throw on top of that DoorDash’s recent win on Prop 22 and its popularity among U.S. consumers, and it seems as if the company and its controversial business model for restaurant delivery are are unstoppable. Or are they? The other big news this week came from rideshare service Lyft. Cofounder and president John Zimmer said on the company’s earnings call this week that Lyft had spoken with restaurants about many issues plaguing third-party delivery, including the sky-high commission fees companies like DoorDash charge per transaction. “These businesses want to partner, someone to help them move their goods from point A to point B, but one that does not step in between them and their customers,” he said. In other words, restaurants need someone to deliver the actual food but not necessarily own the order and payment process or the customer relationships (and data). Lyft more or less said it’s aiming to create that delivery model. Even just one year ago, making this model a successful play for restaurants on a widespread basis would have been a long shot. The technical logistics of delivery are complex. A sophisticated mobile order app a la Starbucks would cost a restaurant tens if not hundreds of thousands of dollars to make. Apps have to allow users to browse a menu and order meals, and they have to be secure around processing payments and storing customer data. With a few exceptions, using a third-party delivery platform for this piece of the delivery stack has historically been the easiest and most cost-effective path for restaurants. In the early days of the pandemic, restaurants had to either accept this situation and use a third-party delivery platform’s entire stack or risk going under. (A lot of them went under anyway.) But over the last few months, a number of different options have surfaced that allow restaurants to power their own digital storefronts and only rely on delivery services for the last mile. ChowNow, Toast, Lunchbox, . . . the list gets longer each month. Each of these services offers the ability to power a branded storefront through which the restaurant maintains the direct relationship with the customer but doesn’t have to go out and build a mobile order app from the ground up. Most of these services also partner with the major delivery platforms, who still handle the last mile. Restaurants would still have to pay a small commission fee for the actual delivery, but it’s drastically lower than the 30 percent it can reach to when using the full stack. Lyft’s comments at its earnings call this week suggest the company is ready to capitalize on this trend. Imagine a restaurant using a system like ChowNow’s to power its mobile ordering and payments. The restaurant controls the branding, menus, prices, and customer relationship. Integration with Lyft’s software would mean once an order is placed, a Lyft driver would retrieve the food and drop it with the customer. Lyft is also well-established across the U.S. and claims to have more than 1 million available drivers, so its existing user base could make it additionally attractive to restaurants and their customers. The question is whether this approach could differentiate Lyft enough to make much of a difference. After all, restaurants nowadays can approach a similar delivery model by processing orders through a company like ChowNow then letting an established delivery player like DoorDash handle the last mile. Lyft would have to offer ultra-competitive rates on commission fees and an extremely wide delivery radius to make itself stand out. Zimmer said on this week’s call that it was still “early days” for this concept, though Lyft already has a partnership with Grubhub for a separate initiative. But between the pandemic, Prop 22, DoorDash’s insane growth numbers, and all sorts of other controversies, the need for a new delivery system gets more urgent for restaurants each week. This one might be a viable option. *By Jennifer Marston, The Spoon*

One thought on “Lyft vs. DoorDash

  1. Terrance Hates Uber says:

    Just what the country needs another app-based food delivery service. Lyft is late to the party even during the pandemic.

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