McDonald’s has entered into a pair of new agreements with DoorDash and Uber Eats.
The fast food giant announced last month that its new deals with two of its largest food delivery service providers offer better terms to the chain’s franchise operators. Though details of the agreements were not made public, McDonald’s said its franchisees should be able to earn more profit and attract more cash flow under the new deals.
The agreements also enable McDonald’s to integrate delivery into its own mobile app through DoorDash and Uber Eats’ “white label” services called DoorDash Drive and Uber Direct, respectively.
The announcement of the new deals came just two weeks after McDonald’s execs said they were renegotiating the chain’s contracts with DoorDash and Uber Eats in an attempt to seek better terms.
“What we’re trying to do with these conversations is leverage the fact that we are the largest restaurant company in the world, that we have an ability to drive traffic onto their apps that we think is second to none,” McDonald’s CEO Chris Kempczinski told analysts last October. “And that should be reflected in the rates that we’re paying.”
The new deals also prove that third-party delivery services play a huge role in McDonald’s overall business. According to Restaurant Business Magazine, McDonald’s digital sales have totaled $13 billion in total sales year-to-date in the chain’s six largest markets, accounting for 20% of the company’s business, thanks in large part to delivery.
McDonald’s delivery business only took off during the onset of the COVID-19 pandemic, but it’s worthy to note that it hasn’t pulled back yet even though markets have started to reopen. “We’re continuing to see, even as markets reopen and things start to get back to normal, delivery remains elevated,” Kempczinski said.
McDonald’s first jumped into the delivery business in 2017 with an exclusive deal with Uber Eats. At the time, only 3,000 of the chain’s global restaurants offered the service. Now, more than 30,000 of the company’s 39,000 restaurants have a third-party delivery feature.
According to ComicBook.com, the high cost of commissions paid to third-party delivery companies in the past made it difficult for McDonald’s to make profit from the service. For instance, Uber Eats usually takes between 15% and 30% of the order’s cost to provide restaurants with delivery services. Though McDonald’s has always been at the low end of that scale, the chain had renegotiated its delivery deals several times in a bid to ensure franchise operators can profit from delivery orders.
At present, about 13,000 McDonald’s locations in the U.S., Canada, and Australia, use DoorDash. While there are other third-party delivery companies that offer their services to McDonald’s, Uber Eats currently dominates most of the non-DoorDash markets.