• by Thom Forbes  @tforbes, August 2, 2019

DoorDash is acquiring Caviar -- the food ordering and delivery service for “premium” restaurants launched in 2012 and acquired by Square in 2014 for $90 million -- for $410 million, excluding any gratuity. 

“According to Square’s release, the cash-and-stock deal -- which is expected to close later this year -- builds on the existing partnership between DoorDash and Square for Restaurants. Square for Restaurants  is a software platform designed to help small businesses integrate online delivery orders with in-restaurant operations. The product was introduced last year,” writes Sara Ashley O’Brien for CNN Business.

“To many observers, the launch of Square for Restaurants helped justify Square’s acquisition of Caviar, which perplexed some when it was announced,” O’Brien continues. 

“Tony Xu, chief executive of DoorDash, said Caviar’s selection of higher-end restaurants in cities complemented DoorDash’s offerings, which skew more heavily toward chain restaurants in the suburbs. When Jack Dorsey, chief executive of Square, called him about a potential deal, he said, it was a ‘short conversation,’” Erin Griffith writes for The New York Times.

“Xu said he did not see competition as a hindrance in food delivery because only 7% of ‘non-pizza' food sold in the United States was delivered. ‘It’s early days in a market that’s highly dynamic,’ he said,” Griffith adds.

“The Caviar deal is a boost for DoorDash, already the most popular food delivery app in the U.S. The privately held company, which counts SoftBank Group Corp. as a major backer, is valued at more than $12 billion. DoorDash recently faced an outcry  over its handling of customers’ tips and said it would change the policy, which counts gratuity toward a driver’s base pay. A challenge it has yet to solve -- and one that eluded Square -- is finding a way to reliably turn a profit from food delivery,” writes   Julie Verhage for Bloomberg.

“The big players in the on-demand food delivery space are now DoorDash/Caviar, Postmates, UberEats and Grubhub/Seamless. In May, DoorDash raised a $400 million round valuing it at $12.6 billion. Postmates, easily now one of DoorDash’s prime competitors, is currently worth about $1.85 billion and confidentially filed to go public earlier this year. Though that IPO has yet to happen,” writes Megan Rose Dickey for TechCrunch.

Both Square and DoorDash are based in San Francisco. Caviar currently provides service in Brooklyn, Boston, Chicago, Dallas, Fort Worth, Manhattan, Los Angeles, Orange County, San Diego, Philadelphia, Queens, Sacramento, the San Francisco Bay Area, Seattle, Portland and Washington D.C.

“In his announcement about the Caviar acquisition, Xu wrote that Caviar, like DoorDash, ‘(works) hard to help local restaurants attract more customers, grow their sales and expand their reach,’” Tara Duggan reports for the San Francisco Chronicle.

“However, some Bay Area restaurateurs have complained about what they see is the steep price for the service,” she continues. 

“For example, Karen Heisler, co-owner of San Francisco’s Mission Pie, recently told  Mission Local that she was unwilling to pay a 25% to 30% service charge she said such services demand to get her pies delivered because it was much more than her profit margin. Not much later, Heisler announced that the cafe would close permanently.”

Xu sees it differently, of course. 

“Today’s announcement is another important step forward on our mission to empower local economies,” he says  in the release announcing the deal. “We have long admired Caviar, which has a coveted brand, an exceptional portfolio of premium restaurants and leading technology. The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when they order through DoorDash.” 

Meanwhile, the New York Daily News has the story of 38-year-old Manhattan restaurant manager and Queens resident Michael Garcia, who “ended up in the hospital after a DoorDash driver delivered a beating to his head, face and leg following a dispute over bringing his food order all the way to his door, according to a recent lawsuit filed in Manhattan Supreme Court.”

All he wanted as he settled in to watch “Game of Thrones” at 1 a.m.,  Trevor Boyer and Janon Fisher write, “was a couple of cheeseburgers, but what he got was a knuckle sandwich.”