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DoorDash COO Christopher Payne talks the delivery company's next steps now that it has gone public.

What to expect from DoorDash now that it's gone public

COO Christopher Payne sees a return to the company's last-mile delivery roots

DoorDash made a splashy debut on Wall Street, having built its reputation as the country’s top food delivery provider by strategically going after suburban markets. 

Now, as a newly minted publicly traded company, DoorDash plans to leverage Wall Street as it looks to return to its delivery roots.

DoorDash’s original founders, including CEO Tony Xu, initially created the platform to provide delivery services for local businesses, not just restaurants. For more than a year, DoorDash has been expanding its services to include delivery of convenience-store items and groceries while also working with restaurants seeking new revenue channels through ghost kitchen operations.

“This type of [public] fundraising allows us to accelerate our efforts, and serve not just restaurants, but also to broaden that to serve Tony's original vision, which was all local businesses,” Chief Operating Officer Christopher Payne told Nation’s Restaurant News in a Zoom interview held just before DoorDash closed its first day of trading Wednesday.

The company ended the day strong with shares trading at $189.51, well above the opening day target price of $102. 

What's next for DoorDash?

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Payne (left) said the San Francisco-based company has been working hard over the last several months addressing the “convenience economy,” where consumers are demanding all types of basic needs delivered to their doorstep. 

“People are wanting things now in minutes, not days,” he said. 

That means returning to the company's last-mile delivery roots.

DoorDash was born in a Stanford dorm room in 2013 as an on-demand delivery service looking to drive sales to brick and mortar businesses that didn’t have the budget or infrastructure to deliver their own products.

The IPO allows the brand more flexibility to expand these services with partners ranging from restaurants to grocery stores. 

“We've been building more and more merchant services at the bequest of our merchant partners,” Payne said.

The most recent new service is Self Delivery, which debuted this month. It is geared for brands with their own delivery fleets. Restaurants like Jimmy John's can now leverage DoorDash’s vast marketplace to increase orders. Restaurants pay a fee for marketplace placement, but don’t have to pay a delivery fee.

The program adds diversity to its services, which include DoorDash Drive. First launched in 2016, Drive allows chains like Chipotle Mexican Grill to use DoorDash to fulfill delivery orders made through their branded channels.

The service is mutually beneficial as DoorDash receives a fee for the last-mile delivery, while restaurants gain access to valuable consumer data without having to pay for placement on DoorDash’s marketplace app.

In recent months, DoorDash has added more convenience stores and supermarkets to its platform in addition to providing last-mile delivery for brands such as Walmart, Albertsons and Hy-Vee.

Expect DoorDash to step up these services, and possibly expand to new markets outside the U.S.

"It [the IPO] gives us a little bit of flexibility to do broader things like other categories, as well as potentially [enter] international markets. We're in Canada and Australia today. But it's a big world out there," he said.

DoorDash Kitchens and virtual brands

In late 2019, DoorDash launched a shared kitchen space dubbed DoorDash Kitchens. At the time, the company called it an experiment that offered independent restaurants and chains like Chick-fil-A a chance to expand their delivery footprint without opening a brick and mortar store. 

Over the summer, DoorDash partnered with Brinker International Inc. for the company’s debut of its first virtual brand on DoorDash: It’s Just Wings. 

With the pandemic accelerating ghost kitchen operations and the virtual brand movement, Payne addressed DoorDash’s position on both trends.

He said the rise of virtual brands, or a menu that is available for delivery only, is a “very healthy trend.”

“I think it allows restaurants to more fully leverage their fixed assets and their kitchen capabilities,” he said. “And then it allows the consumer to get a broader range of selection.”

DoorDash can play a role by sharing data about the types of cuisines that might be successful in certain markets, Payne said.

“I see that happening organically. DoorDash will encourage it through data,” he said.

Is there such a thing as too many virtual brands?

“I've thought about this,” Payne said. “I think the key to this is the more selection we add, the better it is for the consumers. So all of the merchants and DoorDash benefit when the ecosystem increases.”

As for DoorDash Kitchens, Payne said that’s still in the experimentation phase.  

Eventually, “you'll see us do that in different locations around the country,” he said. “But, [we’re] not ready to say that we'll roll our own built kitchens broadly. It's still in the experimental phase."

“We will do more.”

Commission Caps

The pandemic has fueled a surge in off premise orders as consumers rely more heavily on drive-thru, curbside pickup and delivery.   Delivery companies like DoorDash have benefited from the rise in delivery orders, especially among new consumers.

According to The NPD Group, delivery represents 11% share of restaurant industry transactions, up from about 3% two years ago. In October, delivery orders increased 125% compared to a year ago, the foodservice market research firm said in a report this week.

When the pandemic first hit, delivery became a crucial revenue channel and lifeline for many restaurants, especially full service restaurants. But with commission fees hovering around 30% to 35%, many restaurants complained that they were losing money from each delivery transaction. 

That forced many cities, and some states, to implement commission caps. Delivery companies argue that fees pay for a combination of fixed costs and tailored marketing that helps drive order volume. Reducing fees results in fewer orders for restaurants, higher prices for consumers and negatively impacts overall service. 

But what will DoorDash do if cities try to make these caps permanent?

“We've been working on lots of things to provide merchant relief,” Payne said. “So, the thing I want to communicate is that thematically, we're working very hard to help Main Street stay strong.”

Payne is referring to a series of relief programs and e-commerce solutions the company began rolling out at the onset of the pandemic such as DoorDash Storefront, which allows restaurants to establish their online stores to generate orders.  DoorDash also cut by 50% commission fees for independent restaurants at the start of the pandemic.

“We want to work with restaurants. We want to work with government. We want to work with them to try to navigate through this crisis,” he said.

But, when it comes to commission caps, Payne said he generally doesn’t “think price control is a good idea.” 

Ultimately, DoorDash prefers to work “on broader solutions to help consumers, merchants and Dashers,” he said. 

“But we recognize that this is a challenging fundamental time and we want to help as many restaurants get through this time to the other side, and hopefully, that that comes soon,” he said.

Contact Nancy Luna at [email protected] 

Follow her on Twitter: @fastfoodmaven

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