A restaurant’s placement on apps like DoorDash and Uber Eats is based on a variety of factors, including marketing fees. But the specifics are still something of a mystery. Here’s a look at what we know.
When a customer picks up their phone and opens their favorite food delivery app, the options that pop up are not random. They’re determined by an algorithm—a set of rules designed to show restaurants that will appeal to that customer.
Those rules play a big role in the traffic a restaurant can expect to get from each app, and are therefore of great interest to operators—especially mom and pops, who have less brand recognition and smaller marketing budgets than big chains.
Delivery algorithms have been in the spotlight recently because of contentious legislation in New York City that would ease the city’s cap on what delivery apps can charge restaurants. In essence, the amendment would allow restaurants to pay the apps more in exchange for better visibility on their marketplaces.
But marketing commissions are not the only factor that determine where restaurants show up on the apps. And the big delivery providers—DoorDash, Uber Eats and Grubhub—have not been especially forthcoming about how exactly visibility is determined.
“There’s a lot of mystery around how the algorithm works,” said Michael Fuquay, co-owner of The Queensboro restaurant in Queens, during a hearing before the New York City Council last week. The lack of transparency is one reason The Queensboro has stopped using third-party delivery providers.
The reason for the apps’ caginess is understandable: Their algorithms are proprietary, and they aren’t eager to make those secrets public. The formulas are also complex and apparently difficult to explain, even for those in the know.
“It’s a complicated algorithm,” said Joshua Bocian, Grubhub’s senior manager of government affairs, during the hearing. “I will freely admit that the tech guys know a lot more about it than I do.”
Though specifics are hard to come by, we do know that a restaurant’s location, popularity, accuracy and speed can play a role in placement, as do those pesky marketing commissions. Here’s a look at some of the key checks and balances that govern delivery algorithms.
The marketing commissions that restaurants pay delivery providers go a long way in determining where they will show up on the apps.
In recent years, all three big delivery providers have started offering a tiered pricing structure for restaurants that includes both delivery and marketing services. Restaurants that opt in to a higher pricing plan can expect more exposure. Prices differ by app and range from as low as 5% of each order total to as high as 30%.
What those commissions do for restaurants also depends on the app. Restaurants that choose the lowest-priced plan are paying at the very least for the right to be listed on the app’s marketplace. Their ability to boost themselves beyond that varies.
On Uber Eats, for instance, the Lite plan (15% commission), allows a restaurant to be discovered only when a customer deliberately searches for it.
But on DoorDash, restaurants that choose the Basic plan (15%), can still be included in prominent in-app carousels that show the fastest deliveries or most popular restaurants nearby.
“You’re still getting valuable placement based off of that algorithm, even at the 15% option,” said Sascha Owen, senior manager of government relations for DoorDash, during the City Council hearing.
With Grubhub, marketing fees are just one factor determining placement, Bocian said. “It is not the defining factor.”
Of course, restaurants that go with a pricier plan will get a bigger boost. Here’s a quick look at what higher commission tiers can do for restaurants’ visibility on each app.
DoorDash: Plus and Premier tiers give restaurants access to DashPass subscribers and a wider delivery radius.
Grubhub: Plus tiers give access to Grubhub+ subscribers. Premium tier gives access to promotion and loyalty tools and the ability to respond to customer ratings and reviews.
Uber Eats: Plus tier gives access to Uber One subscribers and better discoverability. Premium tier unlocks matching advertising spending up to $100 a month.
DashPass, Grubhub+ and Uber One are the delivery apps’ subscription programs. Customers can pay $10 a month in exchange for zero delivery fees. These customers are valuable for restaurants because they tend to order more often.
So marketing commissions are a sort of baseline for restaurants’ exposure on delivery apps. But there are other factors that play a role, some of which restaurants can control and others that they can’t.
In the race to the top of delivery apps, it behooves restaurants to be fast, accurate and tasty.
On Uber Eats, a restaurant’s visibility can be affected by historical order size, customer ratings, average food preparation time, and the restaurant’s accuracy and speed. Those last two variables are apparently measured by the number of errors, cancellations and customer complaints a restaurant gets.
Performance metrics could also be factors for DoorDash and Grubhub, but Restaurant Business was unable to confirm that.
This one is obvious: Apps will only surface restaurants that are within a customer’s delivery area, although the precise radius is unclear.
“If you live in Coney Island, we’re not going to show a restaurant on the Upper West Side, regardless of their marketing fee,” Bocian said.
Customer ordering habits
The apps take into account users’ past orders when determining what restaurants to promote to them. If a person orders a lot of pizza, they will see more pizza on their app relative to other cuisines.
“Someone who orders from the same restaurant once a week is going to see that more prominently than one that they’ve never ordered from,” Bocian said.
On Uber Eats, a restaurant’s “general popularity” also has an impact, although it was unclear how popularity is measured.
Customers can also filter restaurants by cuisine, price, speed and ratings, which obviously will change what they see. But the default view appears to be largely determined by the algorithm.
All three apps allow restaurants to pay for promotions in addition to their per-order commissions. They can choose to subsidize free delivery for a period of time or offer discounts, for instance.
Offering promotions can help a restaurant rank higher. And the apps also reserve special space for restaurants that are running deals. On Grubhub and DoorDash, there is an “Offers” section, while Uber Eats highlights discounts on a page labeled “Latest Deals.”
What we don’t know
What is still unclear is how the above factors rank relative to one another. If a restaurant is close to the customer but tends to be slower, will it rank lower than a restaurant that is farther away but faster? Will an independent burger joint take precedent over the nearest McDonald’s? We may never know.
Published By: Restaurant Business