This analytics research

proposal will assist the

DoorDash corporation
in determining their
position in the local
business community.
Prepared for Jeremy
Morgan, PhD by
Jessica Ibarra
MGMT 311 - 0003

DOORDASH, INC.
Section 1

DoorDash, Inc. was initially founded as PaloAltoDelivery.com in October 2012 by Stanford

students Tony Xu, Stanley Tang, Andy Fang and Evan Moore. They incorporated as DoorDash
in June of 2013 (vator.tv). In December of 2018, it was reported that DoorDash overtook Uber
Eats to obtain the second position of total US delivery sales – the first position being held by
GrubHub (qz.com). By the following March in 2019, DoorDash surpassed GrubHub in sales and
became the largest third-party food delivery provider in the US and has held the position in 2020
(restaurantdive.com).

As an avid DoorDash consumer, I find it very convenient to get my favorite meals from my
favorite restaurant delivered to my doorstep when the restaurant didn’t traditionally offer
delivery. There are hundreds of nationally and internationally known fast food chains and
restaurants to choose from, but I find it discouraging when I’m craving something local and the
restaurant is not listed to provide delivery.

This business analytic research report will determine DoorDash’s decision in delving into the
local business market. I stress the term ‘business market’ because I feel as if DoorDash also has a
unique opportunity to step into multiple business markets opposed to just the food industry.

I believe a full analytics report will benefit DoorDash because it will allow the company to see a
possible missed opportunity to broaden its market, as well as namesake. To accommodate to
smaller business and not just larger corporations will make DoorDash a more appealing business
partner as well raising the standard of the way larger corporations work with and cater to smaller
businesses.

Responsible stakeholders or decision makers in this report will be DoorDash executive officers,
independent contractors, and local business owners. This report will give DoorDash a better
understanding of its ability to not only enter the local food industry but also the local business
market. Knowledge gained from this report will provide the stakeholder’s an idea of the market
range that can be obtained through the basis of delivery.

Executive Officers:

 Tony Xu Chief Executive Officer and Director

 Prabir Adarkar Chief Financial Officer
 Christopher Payne Chief Operating Officer
 Keith Yandell Chief Business and Legal Officer and Secretary

Section 2

In this situation, the problem DoorDash has is not a failing to meet an objective; the problem is
an opportunity. DoorDash is a very successful third-party delivery service in the forefront of the
food industry, but their disconnect begins with the ability to supply service to local businesses.
DoorDash’s opportunity to service small and local businesses has the ability to stimulate the
local economy.
Symptoms of the problem:

 Cost of commission fees

 Lack of profit margin consideration

Probable causes to the symptoms:

 Various restaurants and grocery stores are not partnering with DoorDash because
competitors are charging lower commission fees
 DoorDash charges the same amount of commission for both a national food chain and
local business

I believe the probable cause is the cost of the commission fees that DoorDash charges businesses
for its service. For larger food chains like McDonald’s, Chipotle, Cheesecake Factory, etc., these
fees are very miniscule compared to their everyday sales. For smaller local businesses, these fees
can make or break the business.

DoorDash’s commission fee is one of the highest in the market, at 30%. Large chains making
$10,000+ in sales a day compared to local restaurants who sometimes can only make $1,500+,
30% is a sizeable difference (laist.com). If this price was adjusted to the number of sales each
business rang in on an average a day, it would open more doors for businesses to begin a contract
and healthy business with DoorDash.

Section 3

It’s important to collect accurate data to give an accurate commission rate. Many businesses do
this sort of consultation work when determining the amount to charge for a good or service. This
information gathered from the business will be the constructs to be analyzed to determine the
commission rate that will be charged to the business to use DoorDash’s service.

The information needed to determine the amount of commission to charge a local business would
be:
 Average yearly revenue for businesses two years and older
 Average monthly revenue for a business that has been opened for less than two years

This information would better justify the fee that would be charged to provide DoorDash’s
services and would be reviewed at the end of every fiscal tax year to uphold the appropriate rate
for the business.

Since the property that will be measured is money, the measurement that will be used in
acquiring this data will be a scale measure. Ratios are continuous and have a natural zero point –
this will be used when determining how much a business has sold (Evans, 2019, p119).
Section 4

The statistical method that would be able to determine how much a business should get charged
for commission from DoorDash based on their revenue at years end would be a cluster analysis,
more specifically agglomerative hierarchical clustering.

A cluster analysis is a collection of techniques that seek to group or segment a collection of

objects into subjects or clusters such that objects within each cluster are more closely related to
one another than objects assigned to different clusters. The objects within clusters exhibits a high
amount of similarity (Evans, 2019, p358).

Agglomerative hierarchical clustering is used to group objects in clusters based on their

similarity. The algorithm starts by treating each object as a singleton cluster. Next, pairs of
clusters are merged until all clusters have been into one big cluster containing all objects (Evans,
2019, p358).

This method will be able to group the businesses together according to end of the year revenue
and determine their commission rates.

Section 5

The data needed to determine the commission rates for a local business would be where that
business’ year-end revenue coincide with other smaller business compared to bigger food chains.
This means of clustering end of the year revenue’s today will make it simple to categorize and
determine how much of a commission fee a business should be charged.

If a popular fast-food chain is ending the year with $1.4 billion in revenue, then a local business
who ends the year with $1.5 million in revenue should not both be charged with a 30%
commission fee.

Section 6

It would be appropriate for larger businesses who use DoorDash’s service to get charged what
could be a premium commission charge, since they are more prominent in the food industry. To
charge a smaller business whose commission fee actually makes a dent in sales for every time
the service is used the same amount as those prominent businesses, is immoral and detrimental to
the local economy.
Reference:

Evans, J. (2019). Business Analytics (3rd ed.) [E-book]. Pearson. https://etext-

ise.pearson.com/courses/5478833/products/142893/pages/144?locale=&platformId=1030

Griswold, A. (2019, February 14). DoorDash overtook Uber Eats in US online food delivery,
Second Measure finds. Quartz. https://qz.com/1549084/doordash-overtook-uber-eats-in-
us-online-food-delivery-second-measure-finds/

Littman, J., & Littman, J. (2019, March 13). DoorDash overtakes Grubhub in delivery market
share. Restaurant Dive. https://www.restaurantdive.com/news/doordash-overtakes-
grubhub-in-delivery-market-share/550338/

Pollack, B. G. (2020, August 10). For Restaurants Trying To Ditch Delivery Apps, The Struggle
Is Real. LAist.
https://laist.com/2020/08/10/why_so_many_restaurants_hate_food_delivery_apps.php

When DoorDash was young: the early years. (2019, January 4). VatorNews.
https://vator.tv/news/2019-01-04-when-doordash-was-young-the-early-years