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DoorDash has hurt small businesses. Now its CEO is on Shark Tank.

DoorDash has hurt small businesses. Now its CEO is on Shark Tank.
A Doordash delivery bag on a scooter (Photo by Doordash)

Shark Tank’s newest guest shark, DoorDash CEO Tony Xu, went from working in his mother’s restaurant as a kid to co-founding a company that today is valued at more than $20 billion.

Xu and his wife have signed The Giving Pledge, which “commit to give the majority of their wealth to charitable causes, either during their lifetimes or in their wills.”

That seems like a perfect fit for Shark Tank, on which self-made millionaires and billionaires hear pitches from founders and entrepreneurs, many of them small businesses.

Tony Xu wearing a suit sitting in a white chair, with products on a table in front of him
Doordash CEO Tony Xu on Shark Tank season 14. (Photo by Christopher Willard/ABC)

DoorDash’s newsroom is full of headlines about how the company is “helping local communities” and “supporting local communities,” and doing admirable things like “broadening food access in local communities.”

It also published an Economic Impact Report saying that it “supported an estimated $68.9 billion in U.S. GDP with over 500,000 merchants active on the DoorDash platform.”

Xu’s Doordash bio says “Tony came to America with his parents and grew up working in his mom’s restaurant. He started DoorDash to help small business owners succeed.”

His ABC bio expands on that, saying “He and his co-founders started DoorDash to help local businesses like that restaurant succeed.”

Yet DoorDash has also done the opposite of helping local restaurants and the people who deliver food for the company, accused of “predatory” tactics that “hurt” businesses and consumers.

A smartphone being held by a person's hand with the Doordash home screen visible
Doordash’s app (Photo by Doordash)

DoorDash has actually hurt some of the small, local businesses it purports to help, even in the worst part of the pandemic.

Part of that is just its business model: DoorDash takes fees and commissions from restaurants. Last year DoorDash created new plans in response to what Eater called “industry backlash against creeping fees and diners’ overreliance on the apps.”

But those new fees range from 15 percent to 30 percent—a considerable chunk of revenue.

There’s been more egregious behavior, though. For example, DoorDash has included restaurants on its app that had refused to partner with it, still “charging both a delivery fee and higher menu prices,” Eater reported. DoorDash was sued by In-N-Out for doing that very thing.

DoorDash admitted to this practice, saying in a 2019 letter to shareholders that “listing restaurants on platforms without any partnership allowed other players to expand restaurant inventory rapidly,” and that “resulted in significant growth in both orders and new diners.”

The City of Chicago sued DoorDash in 2021, saying it used “unfair and deceptive tactics to take advantage of restaurants and consumers who were struggling to stay afloat” and the lawsuit would seek “restitution for restaurants and consumers hurt by these predatory tactics, and civil penalties for violations of the law.” DoorDash called those allegations “baseless.”

In a press release, The City of Chicago said that DoorDash and GrubHub would both:

  • Advertise order and delivery services from unaffiliated restaurants without their consent, leaving restaurants to repair reputational damage and resolve consumer complaints caused by Defendants. 
  • Lure consumers into a bait-and-switch with deceptively small delivery fees upfront, only to charge misleading fees at the end of the transaction.  This increases the total cost of delivery by as much as six times the amount initially advertised.   
  • Hide that menu prices on their platforms are often significantly higher than the prices available if ordering directly from the restaurant.  

If you don’t have warm and fuzzy feelings for DoorDash yet, there’s more: DoorDash also took drivers’ tip money for itself.

In 2019, Tony Xu defended this model on Twitter, but also announced a change, saying “Dashers’ earnings will increase by the exact amount a customer tips on every order.”

So yes, DoorDash changed their policy so that tips would actually go to the people getting tipped, and it’s unbelievable the company would ever think that drivers or customers would think tips would go anywhere other than to the person delivering. Yet DoorDash kept doing that even after promising to change.

In San Francisco, DoorDash agreed to “pay $5.3 million to settle allegations with San Francisco that it stiffed almost 4,500 delivery workers of the city’s mandated health care coverage and paid sick leave,” although the company “did not admit wrongdoing,” the San Francisco Chronicle reported.

DoorDash recently fired 1,250 people, even though, as Xu wrote in a blog post, “our business remains strong and continues to grow,” but they’re worried “our operating expenses—if left unabated—would continue to outgrow our revenue.”

It’s worth noting that DoorDash is certainly not alone in these—and even more appalling—practices. The City of Chicago said that GrubHub was “Publishing deceptive ‘routing’ telephone numbers that Grubhub represented as the restaurant’s direct number, and regularly charging commissions even when calls to these numbers did not result in an order,” and “Creating and maintaining “impostor websites’ for restaurants, which look like the restaurant’s actual website but route unsuspecting consumers to Grubhub.”

Deepti Sharma, who created the competing delivery service FoodtoEat, wrote in Eater about “the destructive power of delivery services like Grubhub, DoorDash, and Uber Eats,” and “how they harm the restaurant industry,” and that “subsidized the ‘true’ cost of delivery, making it cheap for consumers while squeezing restaurants with high fees and pocketing courier tips.”

Maybe this is Silicon Valley culture—or just American business: screwing people over in order to profit, earning more money at all costs.

As much as I love Shark Tank, highlighting a company with a sketchy track record isn’t its only blemish.

Another guest shark this season, Gwyneth Paltrow, has sold pseudoscience nonsense under the guise of “wellness”; even Gwyneth’s own former COO and co-star of The Goop Lab, Elise Loehnen, spoke out about how “toxic” it is. A product pitched but rejected on Shark Tank been horrible for our society.

Meanwhile, one of Shark Tank’s permanent sharks has a toxic presence on the show. And its very likely that some of the businesses the sharks have invested in also have problematic histories, or that they do as investors or business owners themselves.

But it’s worth asking why Shark Tank wants to center and promote a company with behavior like DoorDash’s. I asked ABC about that very thing, and have not yet heard back.

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About the author

  • Andy Dehnart

    Andy Dehnart is the creator of reality blurred and a writer and teacher who obsessively and critically covers reality TV and unscripted entertainment, focusing on how it’s made and what it means.

Discussion: your turn

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Happy discussing!

Amber

Monday 16th of January 2023

As for DOORDASH why are they not sued?

Amber

Monday 16th of January 2023

It's very disheartening, disappointing, & disturbing the very LACK of morals people have theses days & flaunt them. Are we to praise shark tank & be so eager to have money we forget core values, morals,ethics & such & deceive people? I used to want to watch the show, but there's nothing up there motiving you to be decent, just steal ,steal,steal....You can't take money to HELL with you, & whether actually going or living in it here,hummm,the price u pay for scumdum,yes I made that word up...

Gaurang

Sunday 15th of January 2023

Good analysis, well supported arguments. Tony and Gwyneth are not exemplary business magnates who should sit in judgment of fledgling ideas in need of support.

Sol

Sunday 15th of January 2023

Door dash needs to stop stealing dashers tip money and with gas prices going up why is the base pay not going up

Amber

Monday 16th of January 2023

@Mandy, did u not see that when a tip is left DD TAKES THAT? & THE UPCHARGES ARE TERRIBLE, I ORDERED 30 wings from WINGSTOP, DOOR DASH CHARGED ME OVER 64 JUST FOR THE WINGS, WE'RE NOT EVEN TALKING THE FEES,SMH when my order got here it wasn't even complete, 20 wings, bones in my food,fries cold, and missing items

Mandy

Monday 16th of January 2023

@Sol, They call the dashers, independent contractors. So, if that is true, a dasher is a business person. But, when you decline an order that is not profitable fir you as a dasher, Doordash actually punishes you by bringing your rating down. Some of the fees that Doordash offers the dashers are clearly fraudulent, even a lid would know that they got much more money and they are offering a lot less. One of the biggest frauds is purchasing for a customer. You get an order for $20, but you need to spend time to find 14 specific items that each will take more than several minutes to complete, at the end, the dasher realizes time spent to find the items, and milage to deliver the items to the customer will leave you with no profit.

Kg

Saturday 14th of January 2023

Thanks for calling attention to this. Laws and enforcement of those laws need to improve to protect small businesses and individuals. Maybe we need an undercover employee type show. Underpaid, exploited employees sneak into the boardroom and expose how these people really think in primetime. It'll be fun hidden camera viewing for the whole family.