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Over the weekend, the Wall Street Journal reported a notable detail in McDonald’s new contract with DoorDash: Slowly prepared orders will yield higher charges from the third-party delivery company to the chain’s franchisees.
It’s not an insignificant amount, either. According to the Journal, the delivery charge will be cut from 15.5% of the sale to as low as 11.6%. But those orders that take longer than seven minutes would yield fees as high as 20.1%. On a $10 order, therefore, the charge would go from $1.16 to $2.01.
Still, the deal gives McDonald’s operators some of the lowest delivery fees in the industry. That follows the comments CEO Chris Kempczinski made last year when he indicated the company was renegotiating its delivery deals.
“What we’re trying to do with these conversations is leverage the fact that we are the largest restaurant company in the world, that we that we have an ability to drive traffic onto their apps that is second to none, and that should be reflected in the rates that we’re paying,” he said.
The new payment structure is expected to be put into place next year. Orders from subscribers to DoorDash’s “DashPass” subscription service will cost operators 14.1%. Payments will increase if the driver has to wait four minutes and can be as high as 20.1% for DashPass orders that wait seven minutes or longer, according to the Journal. McDonald’s will also be responsible for refunds if mistakes are made at the store level.
The inclusion of different payment structures based on service times demonstrates both companies’ desire to increase speed to meet continued demand for takeout and delivery sales. By getting food out to customers more quickly, they can serve more customers.
For McDonald’s, speed has been a priority for years as a strategy for improving traffic. Much of it has focused on the drive-thru, home to 70% of its pre-pandemic sales (and more than 90% since). But as delivery increases in importance, getting those orders out the door is important, too. More than a quarter of McDonald’s U.S. sales come through digital channels, including delivery—up 60% over 2020.
For DoorDash, improving the speed of orders has become paramount because the more deliveries its drivers can do in a certain period, the more they make and the more likely DoorDash can turn a profit.
At the same time, the change in delivery charge based on speed opens some questions. Labor shortages at restaurants have periodically reflected service times in the restaurants, which can delay the preparation of some orders. The new deal will put the onus on the company to keep service times low, because there is a real cost to any delay.
But operators say that most of the time the drivers will miss their pickup window because they’re ordering their own food or using the restroom. Others will “stack” delivery pickups on top of one another for different services.
That said, the deal rewards good service, said Mark Salebra, chairman of McDonald’s National Franchisee Leadership Alliance, an internal franchise organization. “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,” he said in a statement. “We are all committed to maximizing those terms set forth.”
He also said the operators are working with McDonald’s and the delivery companies “to develop winning strategies, innovations and technologies that will maximize the customer experience and return on investment.”
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