DoorDash believes it has the answer to the summer slowdown in restaurant traffic.
The third-party platform recently began promoting two initiatives that offer deep discounts to consumers: Lunch Specials and Happy Hour. The company said these programs aim to drive off-peak demand for restaurants while providing affordable options for customers.
But there’s a catch.
To participate in the two promotions, restaurants must commit to offering a minimum 25 percent discount on menu items. Additionally, restaurants must select five or more items per store to participate in either program, DoorDash told Food on Demand.
For restaurants with limited menus, this could result in the discounting of core menu items.
DoorDash said it launched these two discount programs in response to feedback from restaurants.
DoorDash consumers can find deals under Lunch Specials and Happy Hour discounts.
“Restaurants can see a dip in orders during certain times of the day,” DoorDash said. “This new suite of products was created as a result of feedback from our restaurant partners who are looking for new ways to make the most of their kitchen and staff, attract more customers, and help drive off-peak demand.”
The third-party delivery deals target lunch and afternoon meals, where order volume is significantly lower than dinner orders, according to DoorDash data. In the second quarter, DoorDash reported total orders increasing 19 percent to 635 million.
Consumers can find deals under Lunch Specials between 11 a.m. and 2 p.m. Happy Hour discounts are available between 2 p.m. and 5 p.m.
“On DoorDash, restaurants who use item level discounts have seen an average of 33 percent increase in sales during Happy Hour, and an average of 23 percent increase in sales during Lunch Specials,” the company said.
DoorDash said the data is based on nearly 1,000 DoorDash restaurants using the Lunch Specials feature over a three-week period and the Happy Hour feature over a six-week period.
In a statement provided by DoorDash, restaurateur Clinton Gray III said the new program is boosting his restaurant’s happy hour business.
“The revenue generated during these hours helps balance our labor costs while keeping our team members engaged during typically slow times of the day,” said Gray III, chief brand officer of Slim & Husky’s, which has multiple locations in Tennessee and Georgia. “It’s a great strategy for community-based businesses looking to find new customers that will lead to increased revenue week over week.”
Gray III did not respond to a request for comment on whether his restaurant is still able to make a profit under DoorDash’s program.
Vaibhav Goel, director of product management at DoorDash, said these new products are providing restaurants with valuable tools to reach new customers and boost their bottom line.
Profit is achievable, DoorDash said.
“Processing more volume during these hours allows restaurant owners to amortize their fixed costs (real estate, labor, etc.), which allows restaurant owners to generate a profit from the transaction, even after the discount,” the company said. “It’s also common practice for restaurants to run Lunch Specials or Happy Hour promotions for their in-store customers. With this feature, restaurants can bring the same practice to DoorDash.”
Restaurants participating in Lunch Specials or Happy Hour also have more visibility on the DoorDash app because they are highlighted in special carousels on the home page and featured on the Offers Tab, DoorDash said.
For a limited time, DoorDash is not charging a marketing fee for use of the Lunch Specials platform. Restaurants pay 99 cents per every Happy Hour order. The eventual fee for Lunch Specials was not provided.
DoorDash’s discounting features come as the restaurant industry is experiencing a slowdown in traffic. Consumers, fed up with rising menu costs, are cutting back on dining out. According to Lending Tree, three in four Americans typically eat fast food at least once a week, but 62 percent say they’re eating it less due to rising prices.
The slowdown has prompted chains like McDonald’s, Starbucks, Burger King, and Jack in the Box to offer bundled meal deals.
Sheryl Kimes, a revenue management expert and emeritus professor at Cornell University, said consumers love deals. But, offering daily discounts is a slippery slope for restaurants.
“Doing it every day of the week is not so bright,” Kimes said.
Restaurant tech executive Meredith Sandland recently highlighted the risks of restaurant discounts on third-party platforms during an episode of “The Digital Restaurant” podcast, which she co-hosts with industry consultant Carl Orsbourn.
Sandland, CEO of Empower Delivery, warned that continually offering promotions can train consumers to always expect deals.
Although she made these remarks before DoorDash announced its Happy Hour and Lunch Specials products, her insights remain highly relevant.
Discounts lead to “low-quality revenue” and that’s “never a good place to be” for any brand, she said.
As for DoorDash drivers, heavily discounted orders is usually bad news, said Sergio Avedian, a driver advocate who shares his best practices on The Rideshare Guy.
“These [low-value orders] will most likely be no tip orders with a base pay of $2,” Avedian told Food on Demand.
Nancy Luna is a contributing writer for Food on Demand. She can be reached at [email protected]
