By Heather Haddon 

DoorDash Inc. will start making deliveries from McDonald's Corp. restaurants in Houston later this month, a blow to Uber Technologies Inc. relationship with the burger giant, as the only company currently ferrying its food to customers in the U.S.

DoorDash and McDonald's said Tuesday that the fast-growing delivery company will pick up orders from 200 restaurants in the Houston area beginning July 29. McDonald's will also be added to DoorDash's subscription service, which has nearly a million members who pay a $9.99 monthly fee for free and low-cost deliveries of at least $12.

The partnership will likely expand nationally later this year if it succeeds in Houston, executives from both companies said. Both companies declined to discuss terms of the deal.

DoorDash's fleet of contract workers within delivery distance of around 80% of U.S. households helped it win the burger giant's business, said McDonald's Senior Vice President of Operations Bill Garrett.

"It was the reach that was really appealing to us," Mr. Garrett said in an interview.

Food delivery has become intensely competitive as investors pour money into the business of getting meals from restaurants to customers' homes and offices. DoorDash, most recently valued at $13 billion after a May funding round of $600 million, has vastly increased its deals with restaurants in the last year.

Some restaurants have also pushed back recently against high fees and other terms of delivery deals that they say can make those orders unprofitable. McDonald's last year negotiated down the commission it paid to Uber to handle its orders. Uber also agreed to spend more on marketing and promotions for the partnership as part of new terms the two companies reached recently.

McDonald's was one of the first big restaurant companies to sign up with Uber Eats when the company added meal delivery to its U.S. services in 2017. Uber Eats offers delivery from over 9,000 McDonald's restaurants in the U.S., more than half of the company's domestic locations.

McDonald's had more recently opened up discussions with other delivery providers, including Grubhub Inc. in addition to DoorDash, according to people familiar with the discussions. Grubhub's stock fell more than 2% Tuesday, while fellow delivery company Waitr Holdings Inc. was down nearly 6%.

Mr. Garrett said McDonald's wasn't closing the door on partnerships with other delivery services.

"We know customers are very loyal to particular apps. We want to provide that level of convenience," he said.

McDonald's and Uber executives said they believed DoorDash's deliveries of McDonald's food would be profitable for both companies.

"We are excited to make that entire equation work," DoorDash Chief Operating Officer Christopher Payne said.

Write to Heather Haddon at heather.haddon@wsj.com

 

(END) Dow Jones Newswires

July 16, 2019 14:28 ET (18:28 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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