Doordash has been paying less for driving further on deliveries, even though gas prices have skyrocketed.
I tracked long distance-deliveries in June 2022 and compared them to delivery fees from a tracking study I did in late February and March of 2022. The numbers clearly show Doordash has been paying a significantly lower base pay on deliveries that go five miles or longer.
All of this is happening while Doordash sends out press releases trumpeting that they're extending their gas rewards program (even though the bulk of that program was discontinued in April).
Why is Doordash saying they're helping Dashers out with the cost of gas while cutting base pay? That's a question only Doordash can answer.
Read on as we dive into this question. We'll examine their promises to pay more for longer trips and then dive into the numbers. We'll talk about:
How Doordash calculates base pay for Dashers
To understand how Doordash has cut delivery fees, you must first understand how Doordash pay works.
Doordash delivery drivers are independent contractors. This means they provide delivery services for Doordash as a business, not as an employee. There is no salary or hourly wage. Payment is delivery by delivery.
There are three parts to pay that Door Dash drivers (also known as Dashers) receive. Pay is made up of:
- Base pay (the delivery fee that Doordash themselves pays the Dasher)
- Customer tips
- Peak pay (an added pay per delivery offered during periods of high demand) or promotions.
Peak pay is not constant. At times it's rare. It's an extra pay-per-delivery incentive that Doordash offers to encourage drivers to get out when they expect high demand for deliveries. There are other promotions but Peak Pay is by far the most common.
Most deliveries come down to simply base pay plus the customer's tip. It's the base pay, the part that Doordash pays Dashers directly, that we're looking at here.
How is base pay calculated?
Doordash doesn't make their base pay formula public. It's not transparent at all.
Base pay is DoorDash’s base contribution for each order. This will range from $2-10+ depending on the estimated time, distance, and desirability of the order. Deliveries that require Dashers to travel a longer distance, that are expected to take more time, and that are less popular with Dashers will have a higher base pay. Base pay will not change based on the customer tip amount.Doordash explanation of how base pay is calculated.
Doordash tells us that the estimated time it takes to complete a delivery and the distance traveled will mean higher base pay. They do not explain at what point they start paying more.
They also add a factor called desirability. Suppose it's unlikely a delivery offer would be accepted by Dashers. In that case, Doordash will increase the base pay to make it more desirable.
Doordash's promise to pay more for longer deliveries
Even though Doordash promised they would pay more for longer-distance deliveries, they weren't doing so consistently. In fact, they admitted as much when they announced a change in pay in June 2021
We believe every order should be worth your time, but up to this point, you were paid similarly for both long distance orders and shorter trips.Doordash in app notice sent to drivers on June 15, 2021
Prior to this, Doordash paid a minimum of $3.00 base pay for single deliveries. With this announcement, they dropped the minimum to $2.50 ($2.25 in some markets) with the following explanation.
They said they'd start paying 16 to 20 percent more for long-distance deliveries in exchange for the minimum base pay.
Even though their pay model already promised better pay for longer trips. How many times do they have to promise this?
The example in the announcement was a 7-mile trip, stating it might have paid $3.50 in the past. Now it would pay $4.75. My experience after that announcement was that deliveries that long were still paying closer to the original $3.50.
Either way, Doordash promised multiple times to pay more for longer distances. The announcement made it look like that would be a noticeable difference.
Since then, Doordash has never stated they were stopping this practice. Even if they were to expire this change, wouldn't they at least restore the $3.00 minimum?
Instead, at some point after gas prices started taking off, they simply quit paying more on a lot of longer trips and less on the remainder. We'll look at the numbers that show that shortly.
A timeline of Doordash's gas rewards program
The other factor here is the food delivery company's response to rising gas prices. By March of 2022, the national average for gas reached $4.00 per gallon for the first time since 2008.
On March 15, Doordash declared they were helping Dashers with this increase.
The central part of the gas rewards program was a weekly extra based on miles driven on deliveries. For 100 miles driven, Doordash would offer $5.00 more. Another 75 miles would get an extra $5, and a final 50 miles would bring in $5 more.
At most, it would give Dashers $15 extra per week. It wasn't much, but it at least made up for much, if not all, of the gas price increases at the time.
A secondary part of the announcement was to increase cash back for fuel purchases using the DasherDirect debit card. That was an optional debit card that Doordash provides for payment of delivery fees. The original cash back payment was two percent, and Doordash increased it to 10%.
The way Doordash announced it, it was more like an add-on to their gas rewards program, like, “oh, by the way, we're also doing this.”
Doordash said they would evaluate the situation at the end of April.
Doordash trumpeted at the end of April they were extending the gas rewards program until the end of August. What they didn't say was that they actually discontinued the main part of the program, the weekly bonus payment. Only the cash-back program was extended.
The only thing Doordash said about it all was this little tidbit that was buried in an FAQ:
How my trip data shows that Doordash has cut base pay on longer trips
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I started noticing more long-distance delivery offers offering only a minimum of $2.50. I also saw a significant number of social media posts pointing out similar offers.
That's when I decided to take a few days and only accept deliveries over five miles. I could then compare the delivery fees to several longer trips from an earlier personal experiment.
From late February through March, I did an experiment where I accepted every Doordash offer for 200 straight deliveries. At that time, I was looking to compare deliveries and see if Doordash actually offered better offers once I achieved Top Dasher status. (TL;Dr: They didn't.)
In that earlier study, I tracked every detail of each trip, including distance, the time it took, and the breakdown of Doordash base pay, tips, and peak pay.
As I did this latest experiment, I tracked all the same things. That let me compare pay for long-distance deliveries.
Of the original 200 trips, 57 were single trips of five miles or longer. It's not a big enough sample for a proper scientific study, but it was enough to see a pattern.
What the long-distance deliveries were like in February and March.
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I sorted those original 57 deliveries by distance. That allowed me to see what the pay was by distance. I calculated the average and median base pay per mile. Trips between 5 and six miles were averaged up, 6-7 miles, and so on. Finally, I averaged all deliveries that went ten miles or longer.
- 5-6 Miles: $3.39 average, $3.13 median, 62¢ per mile.
- 6-7 Miles: $3.20 average, $3.00 median, 51¢ per mile.
- 7-8 Miles: $3.98 average, $3.75 median, 53¢ per mile.
- 8-9 Miles: $4.81 average, $4.50 median, 57¢ per mile.
- 9-10 Miles: $5.05 average, $5.00 median, 53¢ per mile.
- 10 Miles plus: $5.75 average, $5.75 median, 49¢ per mile.
You can see a steady increase in pay per mile. Almost every distance level paid close to the overall average pay of 54 cents per mile.
Shorter distance deliveries (5-6 miles) were the biggest outlier, thanks to an average of $4.00 per delivery on orders that didn't have a tip (even though Doordash says they won't change base pay based on the tip amount).
Only one of those 57 deliveries had the minimum base pay of $2.50. Overall the average pay per delivery was $4.07.
What longer deliveries were like in June.
My June deliveries had a smaller sample size: 18 deliveries. Again, not enough to draw a definitive conclusion, but also enough to see some clear patterns.
- 5-6 Miles: $2.50 average. $2.50 median. 47¢ per mile
- 6-7 Miles: $3.13 average, $3.13 median, 50¢ per mile
- 7-8 Miles: $3.94 average, $3.63 median, 53¢ per mile
- 8-9 Miles: $2.63 average, $2.63 median, 31¢ per mile.
- 9-10 Miles: $4.08 average, $4.50 median, 43¢ per mile.
- 10+ Miles: $3.94 average, $3.88 median, 36¢ per mile.
With fewer deliveries, especially with only two or three for each distance, one higher paying base fee (typically one without a tip) can throw off the averages for each distance. However, overall there's still a pretty clear pattern.
Eight of the eighteen deliveries in June paid only the $2.50 minimum. Compared to only one out of 57 earlier in the year, that's a stark contrast.
Another visible trend is the drop in pay per mile as the distances grew longer. Overall, the average base pay per mile dropped from 54¢ in February/March to 42¢ in June. The average pay per delivery was $3.49 in June, compared to $4.07 earlier.
The difference became even greater when you account for higher gas prices.
According to the US Energy Information Administration, the average gas price in the United States for the time I delivered in February and March was $4.005 per gallon. The average price during my test in June was $4.875/gal.
So while Doordash paid 22.3% less per mile in June, gas cost 21% higher.
That's not a good combination.
Using those averages, I calculated the gas cost for both sets of deliveries, using the national average fuel economy of 25 miles per gallon as a basis.
The 429.5 miles driven in the earlier deliveries would have used 17.18 gallons of gas. At $4.005 per gallon, that's $68.81 of gas for deliveries with $232.25 base pay. The gas price alone was 30% of the base pay from Doordash.
In June, the 147.9 miles driven at $4.875 cost $28.84. Base pay was $62.75. That's 46% of the base pay just for gas.
The thing about using your car is that it costs more than just gas to run your car. Each mile gets you closer to the next oil change, major repair, or tire or timing belt replacement. Every mile driven also tends to drop the blue book value of newer cars by 10 cents or more.
I factored in the cost of wear, tear, maintenance, and lost value. For that, I used what I believe is a conservative 15 cents per mile. Adding that to fuel expenses, the total cost of driving in the earlier part of 2022 was 57% of base pay. In June, the total cost of driving was 81% of base pay.
Profit per mile (what was left after the total cost of driving) was 23¢/mile in February/March. In June, it was 8¢.
It's clear Doordash has cut driver pay even when gas prices are higher. Why?
Your guess is good as mine.
There are a few things at play here.
Doordash stock sold for $245.97 a share in November 2021. At the close of business on June 14, that value dropped to $58.46.
Delivery companies are under more and more pressure to be profitable. Rising interest rates require companies to be more cash flow positive.
How can Doordash do that? Either raise their charges or cut costs. I'm not sure there's much more they can do to increase fees, as customers and restaurants are already unhappy with the current charges.
The alternative is to reduce expenses. And guess what their highest cost is?
I believe that Doordash felt pressure to provide fuel relief from a public relations perspective. But how do you do that? Especially when they announced they weren't going to add any surcharge on the customer side.
I think this is partly why they ended the bulk of the gas rewards program after April. In fact, Uber Eats is completing its program as of June 15, 2022.
In the past, Doordash has framed its pay changes as being revenue neutral. For example, the announcement above from June 2021, “on average, Dashers in your region will make the same earnings per hour on delivery as before.” They said something similar when they changed the pay model in the fall of 2019.
This makes me think that Doordash budgets a certain percentage of revenue for Dasher pay.
If so, paying extra for gas (the 10% cash back program) presents a problem. That extra money has to be paid for.
And where will they get that money if they aren't charging customers more?
In other words, Doordash is cutting delivery fees on one side so they can pay for this added benefit on the other.
Of course, the pay cut is far more than what I get for cash back from the program. For the June deliveries, I used $28.84 in gas. Ten percent of that is three bucks. By my calculation, I probably received $18 less than I would have earlier in the year.
Strategies Dashers can use when Doordash has cut pay
What does this mean for Dashers? Is it time to call it quits when Doordash is making it harder to stay profitable for longer-distance deliveries?
Costs are going up, and Doordash is paying less. What do you do with that? It's especially a double whammy when the further you drive, the more Doordash cuts your pay.
My June study's overall profit per mile was only 8 cents. On trips over ten miles, it was only a penny. More than half of the deliveries over eight miles cost more than what Doordash paid. The further you drive, the more you rely entirely on customer tips just to get anything for your time.
It's that kind of thing that brings a lot of drivers to a stopping point.
Personally, it doesn't bring me to a stopping point. I still see value in delivering. But to continue to profit and do well, you may need to make some adjustments. The good news is, as an independent contractor, you have the right to make whatever changes are required to be profitable.
At the same time, we face the same reality as every small business owner: The market may get to where it no longer is a sustainable business.
Here are some strategies that may help you adjust when Doordash cuts delivery fees on you:
Become more selective
These changes in my regular delivery routine don't impact me that much. When I'm not doing these crazy experiments, I generally don't accept longer-distance deliveries. They take more time and cost more money to complete.
Longer deliveries have to pay extremely well to be worth taking. Especially considering that taking one often means you end up out of your delivery zone. Either you have to end your dash and start a new Dash in that zone, or you have to make a return trip.
All of my numbers above only include miles related to the delivery. Several times, I had to make return trips that were not added to these numbers.
In other words, the overall profit was even worse than these numbers.
You may have to accept fewer of them to avoid being hurt by the pay cut on these longer-distance trips. Pay more attention to the overall time it will take and the cost of deliveries, and less attention to the dollar amount.
If fewer delivery offers are paying enough, it may mean accepting fewer deliveries overall.
Work in the parts of your market that have shorter deliveries.
This is especially useful in larger markets where you have multiple zones to choose from. Sometimes you have less flexibility in a small market with just a single zone.
However, even in those markets, there may be certain parts of town where the trips tend to be shorter and faster.
By working in the Denver area, I find that central parts of town are far more profitable than out in the suburbs. Even though parking is a pain, the deliveries are far shorter and faster. In contrast, suburban trips tend to be much longer distances and take more time.
One of the best things you can do for yourself is to track what deliveries are like in different parts of your market. Get to know where you can avoid longer trips and where you're more likely to get shorter, more profitable deliveries.
Look for the opportunities
There is a possibility that delivering can become more profitable because of all this.
We just asked if all this means it's time to hang it up. Higher costs and lower pay work together to force many drivers to ask the same question.
And many are. That can be an opportunity.
That's because as more drivers quit, there's less saturation of drivers.
I don't think the cost of gas makes profitability the most difficult. It's because there are too many drivers for the number of orders.
When too many competing Dashers compete for available deliveries, that creates longer wait times between offers. If you have to wait 20 minutes after rejecting an offer, you're more tempted to accept a bad one.
Fewer drivers mean more orders available for the ones who remain. That lets you be even more selective. Driver shortages also can lead to more Peak Pay opportunities.
It can also force Doordash to increase base pay. Desirability is part of how they determine the base pay. If a delivery request is less likely to be accepted, they increase the payment accordingly.
A reduction in drivers can actually lead to greater profitability for the ones who remain.
If one customer is offering too little, open the door for other customers.
I look at delivery offers from Doordash as a bid for my services. In fact, the Doordash contract actually encourages that viewpoint.
But here's the thing about being an independent contractor. It means that Doordash is asking me to provide services as a business, not as an employee.
If I'm running a business, who's my customer? The one that's paying for my services: Doordash.
As a business owner, you must adjust your thinking away from Doordash as your employer. Become less reliant on Doordash and shift towards thinking of them as your customer.
And if your customer is no longer offering enough for your services, someone else may be.
If you're not signed up for as many platforms as possible, you should be. Look into Uber Eats, Grubhub, and any others available in your area.
Don't burn the bridge.
While I recommend getting set up with other platforms, that does not mean quitting Doordash.
That's an employee move. You're not an employee.
The idea here is you don't want to limit yourself to just one customer.
While Doordash doesn't pay enough on most orders, they can still give you frequent gems. Nothing about the relationship with Doordash says you need to burn the bridge with them if you're trying out another food delivery service, package delivery service, rideshare, or some other gig. You can go back and forth.
I've actually had several times since starting delivery in 2018 when different food delivery services have moved into the lead role. At one point, Uber Eats seems better. Then Grubhub takes over. Back to Uber Eats, then over to Doordash.
You can take on other customers without firing Doordash as your customer.
Let the bidding begin.
If getting a good offer from any delivery app is getting harder and harder, turn them all on and let them bid against one another. As soon as one comes up with a reasonable offer, pause the others.
Some will go so far as to try to stack deliveries from different companies simultaneously. It's not impossible to find some trips going in the same direction from the same restaurants or restaurants close to one another.
However, that should be done with caution. You make a commitment with every delivery you accept to provide a prompt and quality delivery. If one is made late because you're waiting for another, you go against that commitment. Sometimes the delivery app can see that as a contract violation.
But taking an offer from Doordash, the next one from Grubhub, and so on is not a violation of any contract. All the gig economy delivery contracts are on a delivery-by-delivery basis. The contract really only goes into effect the moment you accept a delivery and no longer holds once you've completed it.
Have an exit plan
I wrote back in 2019 that there may be a time when it's time to move on.
The reality of the gig economy is there's a ceiling. Any time you trade tasks that take up time for money, there's going to be an upper limit to what you can make. While I believe the potential is often much higher than many think, there's still a limit.
That ceiling drops when costs go up, or delivery fees go down. It drops further if customers are less likely to tip either because of excessive delivery fees or because they just can't afford as much as they once could.
There are also outside influences that could change the gig economy. There's a lot of political pressure to force companies like Doordash into an employee model. There's no guarantee any of them can stay in business. In the time I've been doing this, we went from five national players to three, with Postmates and Caviar being bought out. And now Grubhub may be for sale again.
Always look at your business as something that can come to an end. If that happens, what will you do?
Know the answer to that now. If you don't know, start looking. Be prepared for the possibility.
Look for how delivering has prepared you for other career opportunities. You have to be strategic. Customer service skills are critical. How can you use this in future careers?
Maybe you've found you prefer the independent contractor lifestyle. There are aspects of delivery for Doordash that can prepare you for life as an entrepreneur. What are the opportunities you can look into?
I've been able to use my delivery experience to launch this website. It took a lot of work for a long time with no money coming in on the site. But it built a foundation.
Use your time on delivery to start learning. Audiobooks and podcasts can help you along. Start building whatever's next for you.
The day may come when this no longer makes sense. What will you do then? Start working on that exit plan.
Final thoughts on Doordash cutting delivery fees.
Doordash doesn't owe me anything.
If I ran a restaurant, I couldn't force you to be my customer. Neither could I charge whatever I wanted and expect everyone to be willing to pay that price.
Doordash is my customer. They can offer as little as they want to offer.
And I can say no. I have the right to set my price by the deliveries I accept or reject.
All that to say, my frustration with Doordash cutting pay on long-distance deliveries is nothing to do with any sense of entitlement. They don't have to keep prices up.
My frustration has to do with them firing off press releases saying they're taking care of Dashers by adding fuel subsidies while paying for those subsidies with reduced Dasher payments.
It's the hypocrisy that bothers me here.
But here's the reality whenever you run a business. The nature of running a business seems to be that the customer will try to screw you. They'll always try to get away with getting more from you for less.
That's just the reality.
Running a business is something we Dashers agreed we are doing. Running a business means adapting to the nature of the business, the market, and its customers.
It's times like that where we really get to find out just what kind of business owners we can be.
Could this help someone else? Please share it.