As evolving regulations change the economics of third-party restaurant delivery, DoorDash is rolling back certain driver perks in New York City in response to the increased minimum wage for delivery workers.
The United States’ leading aggregator announced Monday (Dec. 4) that it is making changes for its “Dashers” (delivery drivers) in the city. This includes having the prompt for consumers to tip come after they have already checked out, which will likely reduce tipping.
Additionally, the aggregator stated that it would be putting on hold its “Dasher Priority Access” offering, which awarded high-rated drivers with first dibs on higher-paying offers.
“As we have repeatedly made clear in recent months, the ill-conceived, extreme minimum pay rate for food delivery workers in New York City will have significant consequences for everyone who uses our platform,” the aggregator stated in Monday’s announcement. “Unfortunately, these regulations will significantly increase the costs of facilitating delivery in NYC and force us to make a number of operational changes.”
The move comes months after the New York City Supreme Court blocked an attempt by Uber, DoorDash and Grubhub to challenge the increased minimum pay for delivery orders in late September, and days after the decision was upheld in a New York State appeals court at the end of November. Per the new law, drivers must be paid $17.96/hour in the city, a figure that will go up to nearly $20 an hour in April 2025.
In an effort to curry public support of the changes it is making, DoorDash describes the new pay as “at least $29.93 per hour of active time,” discarding time drivers spend waiting for orders.
The move comes as evolving regulations shift the economics of food delivery, which have never been the strongest at the best of times. Grubhub has faced ongoing struggles with profitability — challenges that are not helped by the aggregator losing millions of orders. Plus, last year, DoorDash saw an annual net loss of $1.3 billion.
Moreover, it is not as if, while these third parties struggle with the economics, restaurants or consumers are particularly pleased either. Restaurants struggle with the high commissions aggregators levy, while consumers are disincentivized by the high cost of the ordering channel.
PYMNTS Intelligence’s study “Connected Dining: Rising Costs Push Consumers Toward Pickup,” which drew from a survey of more than 2,100 U.S. consumers, revealed that 58% of takeout customers said they pick up their meals to save on the delivery fee. Moreover, nearly half of consumers noted that they have been more likely to pick up their restaurant orders themselves rather than have them delivered due to inflation.
In fact, additional findings from the Connected Dining series reveal that only about 5% of restaurant orders are placed for third-party delivery. Plus, the study found that, among those who do not use aggregators, 50% stated that aggregators are too expensive. Indeed, throughout this year, major restaurant brands have seen consumers shifting from delivery to pickup to save a few bucks.
As such, with new regulations further shifting the economics of restaurant delivery, it is likely that changes such as DoorDash’s may be coming down the line from competitors. Even DoorDash will likely make more such adjustments going forward.
“We anticipate needing to make other operational changes in response to these new regulations that will further impact the experience of consumers, Dashers, and merchants on DoorDash in New York City,” the company stated Monday.