DoorDash, one of the leading food delivery startups in the US, has entered into an agreement with payment platform Square to acquire its food delivery app Caviar. The deal, worth about $410 million in cash and DoorDash stock, will see Caviar and its higher-end restaurant partnerships move over to DoorDash’s platform, with Caviar head Gokul Rajaram and his full team working at DoorDash following the acquisition.
The acquisition will consolidate even more of the delivery market under DoorDash, now one of the leading food delivery services in the country. DoorDash competes directly with Uber’s own food delivery arm, Uber Eats, and market leader GrubHub and its network of websites. Caviar, however, was a far less accessible option, as it focused mainly on higher-end restaurants and commanded a higher price per order than your standard food delivery platform. With Caviar joining DoorDash, it seems like the latter will be able to cover a broader swath of restaurants that its lower-cost existing platform has been unable to serve.
For Caviar, a DoorDash acquisition sounds like a best-case scenario after it’s spent years floundering at Square, which bought the company for $90 million in 2014 and used it to replace its failed online ordering and mobile wallet platform. It does not appear that DoorDash has plans to shut down Caviar any time soon, but it may integrate Caviar’s listings into the main DoorDash app.
“Today’s announcement is another important step forward on our mission to empower local economies. We have long-admired Caviar, which has a coveted brand, an exceptional portfolio of premium restaurants and leading technology,” DoorDash CEO Tony Xu said in a statement. “The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when they order through DoorDash. We look forward to welcoming the Caviar team to DoorDash and expanding our partnership with Square in the future.”
News of acquisition comes on the heels of a particularly high-profile DoorDash controversy over the company’s tipping policy, which saw customer tips go to the company and not the contract delivery drivers that form the backbone of DoorDash’s network. DoorDash has in the past defended the practice, saying the lack of transparency around the policy did not outweigh the fact that it typically paid drivers more per order than competing services. However, the backlash increased significantly after an investigation in The New York Times earlier this month put a spotlight on the chaotic, uncertain working environment of New York City bike messengers largely working for companies like DoorDash.
DoorDash quickly buckled, agreeing to change its tipping policy just a few days after the NYT investigation. The company claims it will now be made clear to both drivers and customers that any additional money offered through its app as a tip goes directly to the driver and is added on top of the base wage for any given delivery order.
Coincidentally, Caviar also had a tipping controversy of its own, and parent company Square was forced to settle a $2.2 million class action lawsuit last year over the issue. The lawsuit stemmed from a California Caviar driver who discovered that the platform’s 18 percent gratuity charge was not in any way shared with the driver. He sued the company, claiming it was misleading customers into thinking a portion of the cost per order was going to the driver.
Caviar settled the suit “to avoid the cost and distraction of litigation and provide direct benefit to our valued customers,” and it later changed the gratuity line item to a “service fee.” Caviar now has a tip option, whereas it did not prior to the lawsuit, but it is not mandatory for customers to tip drivers through the app.