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  • Food Delivery Services DoorDash, Uber Eats, and Postmates Might Merge

Food Delivery Services DoorDash, Uber Eats, and Postmates Might Merge

  • Categories Retail News, Top News
  • Date March 3, 2020
  • Comments 0 comment

Food delivery service DoorDash announced Thursday it has taken a first step toward a public offering.

DoorDash raised $700 million in its most recent Series G funding round, Bloomberg reported in November, valuing the company around $13 billion. The company became the leader in digital food delivery in 2019, capturing a third of all food delivery sales in the U.S., according to data from analytics firm Second Measure. The firm found it overtook GrubHub, Uber Eats and Postmates.

Restaurants ranging from local eateries to global fast-food chains like McDonald’s have turned to delivery aggregators like DoorDash to find new customers, who are looking more convenient dining options. But high commission fees from DoorDash and its rivals have put pressure on restaurant profits. Restaurants have turned to local regulators for help. The New York City Council announced six bills on Thursday targeting delivery providers, including a 10% cap on commissions paid by restaurants.

DoorDash’s disclosure comes after the company explored a merger with rival Uber last year, according to a Financial Times report. SoftBank, which invested heavily in both companies through its Vision Fund, encouraged the merger discussions, the FT reported based on sources familiar with the matter who said they had not ruled out the possibility of resuming talks.

A successful IPO for DoorDash would be an important win for SoftBank, which has reportedly backed off of some of its heavy spending in the months since WeWork’s IPO fell apart as potential investors criticized its financials and unusual corporate governance structure. The Vision Fund recently backed out of several start-up investments after the IPO flame-out, Axios reported in January.

DoorDash’s confidential filing doesn’t necessarily mean that its IPO will happen any time soon. Rival delivery service Postmates said last February it submitted a confidential draft S-1, but it still hasn’t made its public debut. Market conditions impacted by the coronavirus could force DoorDash to postpone its public offering. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all in correction territory as of Thursday.

DoorDash faces a couple key legal and regulatory battles as well. In November, the attorney general for the District of Columbia announced he was suing DoorDash for offering a “deceptive” tipping model. The attorney general alleged that DoorDash’s model, which allowed customers to tip their delivery person, did not make clear that such money subsidized the workers’ “guaranteed amount” rather than give them an additional payment. In a statement following the lawsuit, DoorDash said, “We strongly disagree with and are disappointed by the action taken… We believe the assertions made in the complaint are without merit and we look forward to responding to them through the legal process.”

The company also has to contend with California’s new law that could reclassify its workers as employees, rather than contractors, which would make DoorDash and other gig economy companies responsible for providing additional benefits. DoorDash has joined Uber and Lyft in funding a $90 million campaign to include a ballot initiative in 2020 to create an exemption for their companies.

Source: CNBC

Tag:DoorDash, food delivery, Postmates, Uber Eats

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