McDonald's Gets New Delivery Partner Deal with DoorDash, Ending Exclusive Deal with UberEats

McDonald's Gets New Delivery Partner Deal with DoorDash, Ending Exclusive Deal with UberEats

July 23rd 2019

On Tuesday, burger giant McDonald's Corp confirms DoorDash Inc. as a new delivery partner. DoorDash will start making deliveries later this month from its restaurants all around Houston. This move comes as a big blow to UberEats, whose old relationship with McDonald's as the sole delivery partner in conveying its food to consumers in the United States.

America's love for readymade food services is encouraging a boom amongst startups for food delivery. But what is suitable for consumers may not be right for the food giants. McDonald's is amongst the first big restaurant giants to reach an agreement with Uber Eats. The company did the additional meal delivery service to its U.S. list in 2017. With the deal in place, Uber Eats offers delivery services from 9,000+ McDonald's restaurants.

The new move arises as firms, including Uber's Uber Eats, seek to take significant stakes in the growing food delivery business to consumers' homes and workplace. Major investors have made significant investments into startups (like PostMates Inc., DoorDash, etc.) and other competing services that filed early in 2019 to list its shares publicly.

With its recent valuation at $13 billion after early May $600 million funding round, DoorDash has rapidly enlarged it's dealing with various restaurants over the past months. DoorDash and McDonald's announced on Tuesday about DoorDash covering orders and delivery from 200 of McDonald's restaurants in Houston beginning on July 29. DoorDash's subscription service will also include McDonald's. The subscription service with over a million members, pay $9.99 monthly fee for free delivery and lesser services fees on orders of no less than $12.

The deal is likely to expand nationally in coming months if Houston turns out a success, executives from both companies can confirm. No discussions were offered concerning the terms of the agreement. Also, DoorDash's boost of several contract staffs within delivery distance of close to 80% of U.S. households assisted in completing the deal, said Bill Garrett, the burger giant's Senior Vice President of Operations.

Other leading restaurant brands have also recently taken a step back against the high charges. And additional delivery terms in the deal that is likely to make those orders not profitable. Last year, McDonald's negotiated a lower commission in its payment to Uber to handle its orders. Uber also agreed to the partnership to devote more money to marketing and promotions. These agreements form part of the new terms reached aby the two giants.

McDonald's has also recently opened up more negotiations with other delivery firms, like Grubhub Inc., according to sources familiar with the deals. Grubhub's experienced above 2% fall in stock prices last Tuesday, while Waitr Holdings Inc. was also down by nearly 6%.

McDonald's is not closing its door to new delivery partnerships soon, says Mr. Garrett. Uber and McDonald's executives believe the new delivery deals would be lucrative for both parties.

Christopher Payne, DoorDash COO, notes, "We are happy to make that perfect equation work."