DoorDash now lends money to restaurants

As part of the company’s ongoing growth and expansion efforts, DoorDash announced that it is moving into the financial services industry with plans to offer cash advances to restaurants that will be automatically repaid via deductions on each DoorDash order executed by the establishment. DoorDash Capital will offer what the company describes as “fair, fast and convenient financing” that it says can help restaurant owners cover payroll and rent if revenue is insufficient, to establishments that use DoorDash to manage orders. delivery and pick-up.

In an FAQ on the company’s website, DoorDash makes it very clear that its new financing product is a cash advance and not a traditional loan. Instead of the typical interest structure, DoorDash will charge a one-time flat fee (up to 10% of the total advance, per restaurant) that can be repaid in installments alongside the cash advance. The company says the amount a restaurant is eligible to borrow is based on its sales history with DoorDash, and that cash advance repayments will be deducted from the restaurant’s sales on a regular basis.

This decision comes as no surprise to anyone who has watched DoorDash over the past year. The pandemic has been hugely profitable for the company, and it’s using all that new revenue to build infrastructure that will make DoorDash nearly impossible for many restaurants to avoid. As Bloomberg points out, DoorDash is not the first digital dining platform to implement this type of program. In 2019, Toast Inc., which operates the ToastTab platform used by many restaurants for online ordering, began offering loans, alongside Block Inc., the company behind the platform. of Square service point.

In November, DoorDash aimed straight for the neck of online ordering platform Goldbelly with a new nationwide shipping program, which allows restaurants to package and ship their wares nationwide. DoorDash already controls the majority – 58% – of the food delivery market, and its recent moves indicate that DoorDash clearly wants to operate as a one-stop-shop for restaurants and all their business needs, sometimes adopting services offered by competitors by first.

In October 2021, DoorDash launched an advertising program that allowed restaurants to create paid “sponsored ads” to promote their businesses, much like Postmates and its parent company, Uber. Now that DoorDash can lend money to restaurants, those establishments may soon be indebted to DoorDash for managing their deliveries, managing online marketing and advertising, and their finances.

It’s too early to tell how restaurants will react to DoorDash’s new cash advances, but many establishments may have to take the cash just to keep doors open — even as the number of COVID-19 cases drops, from many restaurants are still in financial difficulty. Despite some appetite in Congress for a replenishment of the Restaurant Revitalization Fund, governments have largely left restaurants to fend for themselves. And so it’s perhaps no surprise that a profit-hungry tech company is rushing in with a band-aid solution that could help struggling restaurants make ends meet.

Still, it’s likely that many restaurateurs will avoid the program based on their individual experiences with DoorDash. If they’ve ever been charged exorbitant fees by the app for the privilege of facilitating delivery orders or fought with the company to advertise their restaurant on the platform without permission, will- Do they really trust DoorDash to manage the financial health of their business?

Troy M. Hoffman