DoorDash, the food delivery giant, is urging restaurants to maintain consistent pricing across all channels to avoid frustrating customers and hurting sales. The company has been warning operators that charging excessive markups on its app could damage their placement on the platform. Conversely, restaurants that keep their prices lower can expect better sales.
Many restaurants raise their prices on third-party delivery menus to protect their margins, but this has caused concern amongst consumers who feel they are being overcharged. DoorDash claims that significant discrepancies in menu pricing can result in up to a 37% decrease in sales, a 78% reduction in reorder rates, and an increase in negative reviews.
According to a document shared with Restaurant Business, restaurants that maintain price parity will get priority in the DoorDash app, while those that gouge will become harder to find. The document further suggests that reduced visibility can cause a restaurant’s sales to fall by up to 40%.
DoorDash is testing ways to inform customers when a restaurant’s prices are consistent across channels. In-app labels and tags are being tried with select restaurants to help customers make informed choices. The move comes as delivery sales have shown signs of slowing, with companies such as McDonald’s, Chipotle, and Domino’s reporting declines in delivery sales.
While many restaurants use third-party delivery services to boost their sales, they pay a high price for this service, with commissions of up to 30% on delivery orders cutting into their profits. A Credit Suisse study found that limited-service brands raised their prices by an average of 20% on delivery apps, making third-party delivery margin-neutral or even profitable for many.
In DoorDash’s mission to improve the customer and merchant experience, they encourage restaurants to set DoorDash prices that more closely reflect in-store menu prices. A DoorDash spokesperson said, “We understand that there may be many reasons why restaurants choose to raise their prices. However, we encourage restaurants to maintain price parity across all channels to ensure a better customer experience.”