The DoorDash IPO: The perfect holiday splurge for that Disrupted restaurant worker on your list
If all goes as planned the invincible American stock market will today mint three new billionaires: the thirtysomething co-founders of the food delivery app DoorDash, a company that pays its workers $1.45 an hour and just spent around $51.5 million preserving its right to keep doing that in the nation’s most populous state.
To most who’ve had dealings with the company, the “success” of DoorDash is something of a mystery: it claims more than half of the nation’s delivery app market share, but it crashes completely no less than twice a month; it chronically sends drivers to restaurants that are not open to pick up food items that are no longer on the menu; famously enabled a Kansas pizza shop owner to send himself hundreds no-cheese, no-topping pizzas in a hilarious arbitrage scheme whose mastermind went viral in May; its customer service can charitably be called “abysmal.” Unsurprisingly, it is not profitable; like so many of its Softbank-backed cousins in Disruption DoorDash has burned more than a billion dollars in its seven-year existence, but that was hardly a red flag to the institutional investors who just fell over themselves to shower the company with an extra $3.37 billion it doesn’t need: after all, DoorDash has already proven itself powerful enough to write its own laws, whereas the $900 billion dollar restaurant industry from which it extracts its revenues has failed for nine months now to pass a law that would compensate itself for the ruinous series of shutdown orders that has left 100,000 restaurants permanently closed.
Kristen Corral is a longtime animal right activist who owns a couple of vegan Mexican restaurants in Las Vegas; since the pandemic she’s spent an extra 25 hours a week trying to educate local politicians and her fellow restaurant owners about the threat posed by DoorDash and its ilk. “For some reason owners tend to personalize it. They take their frustrations out on the delivery drivers. They don’t read their invoices. I had one restaurant owner admit to me he’s paid delivery apps five hundred thousand dollars this year. And I explain, that’s why we need to fight against laws like Prop 22! Restaurants aren’t allowed to hire some guy sight unseen with no training and then pretend he’s an ‘independent contractor’. We have to contribute to their health insurance, worker’s comp, payroll taxes, car insurance, food handling certification, and then we have to pay the minimum wage. As we should! But the apps don’t have to do any of that. In Nevada they don’t even have to get a business license, for some reason. And we can’t compete with that, of course.”
But for the same reason it’s hard to get their message out amid the din of corporate speech. Since March DoorDash has hired a dozen full-time lobbyists at three of Washington’s most powerful shops, including two former staffers of Mitch McConnell’s. Independent restaurants have zero lobbyists on retainer. The DoorDash prospectus uses the word “empower” no fewer than 20 times in reference to its relationships with the restaurants from which it extracts a 30% cut of sales and the “Dashers” it pays a little as a dollar per gig to deliver their meals. Perhaps understandably, a spokesman for the fledgling Independent Restaurant Coalition, while expressing sympathy with the cause, declined to speak on the record when I queried the organization about its stance on efforts to rein in delivery app commissions during the pandemic; a few months later, the organization would rely on financial assistance from DoorDash to underwrite its television ad campaign featuring commercials narrated by Morgan Freeman promoting a bill that would have established a $120 billion “restaurant stabilization fund.” The bill was a nonstarter; a vendor with ties to the IRC says he was told Mitch McConnell had specifically ruled out any talk of an “industry specific” rescue package.
It’s worth acknowledging here the one legitimate business “innovation” DoorDash institutionalized: offering delivery services from restaurants without their consent (or even, knowledge.) Postmates did this first, to be fair, but DoorDash brought the scale, defying cease-and-desist letters to offer delivery services from restaurant brands as formidable as Legal Sea Foods and In-N-Out Burger. For small restaurants, the practice at first seemed merely annoying: managers found themselves constantly fielding mysterious takeout orders in fall for dishes they hadn’t served since spring, and unhappy customers would take to Yelp to complain about soggy delivery meals. But it was a great bait-and-switch for DoorDash, which typically refused to remove menus but was happy to sign restaurants of any size on as “official partners” in exchange for a 30% cut of the sales they processed. In March restaurant groups in San Francisco and Boston attempted to collectively negotiate lower commissions with the apps, all of which flatly refused; the restaurants could hardly go on strike en masse from the apps if the apps could continue offering their menus without their consent, and restaurants in March were hardly in a position to even threaten a strike.
And even if all the restaurants went under at once, DoorDash would be fine. The company operates its own “ghost kitchens” in California and owns its own Chick-fil-A franchise. Its fellow Softbank sponsees Reef Kitchens and Ordermark have raised hundreds of millions of dollars to establish “virtual restaurants” in abandoned lots and parking garages and hotel kitchens. Travis Kalanick’s Saudi-funded CloudKitchens has spent the pandemic buying up liquor licenses and distressed commercial real estate in virtually every major metropolitan market. In fact, if there are any Big Short fans on your list bummed about missing out on all the ingenious ways the 1% has managed to so handsomely profit from the chaos of 2020, a share or two of DoorDash might make the perfect Christmas gift.