Third-party delivery provider DoorDash is abandoning a plan to charge Washington, D.C., restaurants their contractual rate on orders from its DashPass subscription program.
In May, D.C. capped at 15% the fees and commissions delivery companies like DoorDash can charge restaurants. Last week, DoorDash informed restaurants that to help offset the impacts of the cap, it would begin charging them the regular rate associated with DashPass, Washington City Paper reported. DashPass is a $9.99 monthly subscription service that waives delivery fees for diners at participating restaurants.
However, the company said this week it won’t move forward with that plan. The decision comes after D.C.’s Office of the Attorney General sent the company a cease-and-desist letter, the Washington Post reported.
“We recognize that there has been confusion as a result of our response to the unintended consequences of the pricing regulations in Washington, D.C.,” a DoorDash spokesperson said in an email to Restaurant Business. “While DashPass is a premium marketing offering and provides benefits to many restaurants, we have decided to not charge D.C. restaurants their contractual DashPass rate at this time.”
DashPass, which has more than 5 million users, offers value to diners who use DoorDash often. Restaurants that opt in to DashPass are therefore able to get in front of those frequent customers. It’s unclear how much restaurants pay to be included on DashPass, but DoorDash’s fees and commissions on regular orders can amount to 30% or more.
While restaurants have largely welcomed the fee caps intended to help them weather the pandemic, third-party delivery companies say they will ultimately hurt restaurants because the costs will be passed to consumers. DoorDash is testing that tactic in Denver and Chicago, where it has tacked on additional fees for customers.
It has been an eventful week for the San Francisco-based company, which saw its value skyrocket upon its initial public offering Wednesday.