UBER Uber Technologies Inc

By Heather Haddon 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 17, 2019).

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

The move comes as companies including Uber's Uber Eats jockey for share in the fast-growing business to deliver food to customers' homes and offices. Investors have poured money into startups including DoorDash and a rival, Postmates Inc., which filed earlier this year to list its shares publicly.

DoorDash, most recently valued at $13 billion after a $600 million funding round in May, has vastly increased its deals with restaurants in the past year.

DoorDash and McDonald's said Tuesday that the delivery company would pick up orders from 200 Houston-area restaurants starting July 29. DoorDash will add McDonald's to its subscription service, with nearly a million members paying $9.99 a month for free delivery and lower services fees on orders of at least $12.

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

DoorDash's army of contract workers, within delivery distance of about 80% of U.S. households, helped win over the burger giant, McDonald's Senior Vice President of Operations Bill Garrett said. "It was the reach that was really appealing to us," he said.

Some restaurants have pushed back recently against high fees and other delivery- deal terms they say can make delivery 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 chains to sign up when Uber added meal delivery to its U.S. services in 2017. Uber Eats offers delivery from more than 9,000 McDonald's U.S. restaurants, more than half its domestic locations.

McDonald's has opened up discussions with other delivery providers, including Grubhub Inc., people familiar with the discussions said. Mr. Garrett said McDonald's wouldn't close 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," Mr. Garrett said.

Grubhub's stock fell 1.9% Tuesday, while fellow delivery company Waitr Holdings Inc. was down 5.57%. Uber closed down 0.9%.

McDonald's and DoorDash 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 17, 2019 02:47 ET (06:47 GMT)

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