DoorDash buys Square’s food delivery service Caviar for $410 million

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Yesterday, DoorDash, one of the leading last mile logistics platforms in the US announced that it has entered into a definitive agreement with Square, owned by Jack Dorsey, to acquire Caviar for $410 million in cash.

The deal has continued to build on the partnership between DoorDash and Square. DoorDash is currently integrated with Square for restaurants point of sale payments, which streamlines the acceptance of online and in-person orders for merchants.

DoorDash benefits from consolidated food delivery services

This acquisition is beneficial for DoorDash as it will help serve customers across various market segments. DoorDash competes directly with Uber’s food delivery arm, Uber Eats, and market leader GrubHub and other such apps. Caviar, however, is a far less accessible option, as it focuses mainly on high-end restaurants and commands a higher price per order than the standard food delivery platform. With Caviar joining DoorDash, it seems like the latter will be able to cover a broader chain of restaurants that its lower-cost existing platform has been unable to serve.

Tony Xu, CEO of DoorDash says, “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. 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.”

Additionally, DoorDash will also benefit from Caviar’s technology and its team, who are passionate about the restaurant delivery experience for merchants, couriers and customers. The Caviar team, including Caviar leader Gokul Rajaram, will join DoorDash once the acquisition which is expected to close this year itself, is completed.

Square to focus more on its products

According to TechCrunch, this deal for Square will allow it to focus more on its products, for businesses and individuals. Square is a financial services, merchant services aggregator, and mobile payment company based in San Francisco.

CEO of Square, Jack Dorsey says, “We are increasing our focus on and investment in our two large, growing ecosystems—one for businesses and one for individuals. This transaction furthers that effort, and we believe partnering with DoorDash provides valuable and strategic opportunities for Square.”

Caviar Lead, Gokul Rajaram says, “Caviar has built a trusted brand with customers and many of the best restaurants. DoorDash has national scale, complementary restaurant selection, a tremendous logistics platform, and a team that shares our passion and commitment to better serve restaurants, couriers, and customers. I’m incredibly excited to be joining, with the rest of the Caviar team, to help build the future of local commerce.”

It is worth noting that Square has been trying to sell Caviar since the past three years. In 2016, Bloomberg reported Square was wanting to sell Caviar for $100 million but couldn’t find buyer. At the time, Square was reportedly in talks with Uber, Grubhub and Yelp.

DoorDash and Caviar co-incidentally faced similar controversies

The Verge reports that recently DoorDash was under controversy over the company’s tipping policy. It saw thats customer tips go to the company and not to the contract delivery drivers. DoorDash in the past defended the practice, saying the lack of transparency around the policy did not look at the fact that it typically paid drivers more per order than competing services.

However, the backlash increased significantly after an investigation by The New York Times earlier this month highlighted the chaotic, uncertain working conditions of New York City bike messengers largely working for companies like DoorDash.

DoorDash then agreed to change its tipping policy just a few days after this 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. Coincidently, Caviar also had a tipping controversy of its own, and Square was forced to settle $2.2 million class action lawsuit last year over the issue.