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McDonalds Deal With DoorDash Gives Blow To Uber Eats



DoorDash Inc. will start delivering

McDonalds
Corp.


MCD -0.21%

restaurants in Houston later this month, a blow to

Uber Technologies


UBER -0.73%

relation to the burglar giant, as the only company currently shipping food to US customers

The move comes as companies jockey to share in fast-growing business to deliver food to customers' homes and offices. Investors have raised money for start-up, including DoorDash and PostMates Inc., a rival service that filed earlier this year to list their shares publicly.

DoorDash, recently valued at $ 1

3 billion after a $ 600 million funding round in May, has increased its dealings with restaurants in the past year.

On Tuesday, DoorDash and McDonald said the delivery company will pick up orders from 200 Houston restaurants starting July 29. McDonald's will also be added to the DoorDash subscription service, which has nearly one million members paying a $ 9.99 monthly fee for free shipping and lower service charge on orders of at least $ 12.

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

DoorDash's fleet of contract workers in the delivery distance of about 80% of US households helped win the burgher giant's business, said McDonald's Senior Vice President of Operations Bill Garrett.

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

Some restaurants have also pushed back recently against high fees and other terms of delivery that they say might make these orders unprofitable. McDonald's last year Negotiated the commission it paid to Uber to handle its orders, Uber also agreed to spend more on marketing and campaigns for the partnership as part of new conditions recently reached by the two companies.

America's love for withdrawal is a ghost at a boom in the start-up of food deliveries, but what is convenient for the customers may not be good for restaurants.

McDonald's was one of the first major restaurant companies to sign up with Uber Eats when the company added meal production to its US services in 2017. Uber Eats offers delivery from over 9,000 McDonald's restaurants in the United States, more than half of the company's homely places.

McDonalds had recently opened discussions with other vendors including

GrubHub
Inc.

in addition to DoorDash, according to people familiar with the discussions. Grubhub's stock fell more than 2% on Tuesday, while fellow student supplier

Waitr Holdings
Inc.

was down to almost 6%.

Mr. Garrett said McDonald's didn't close the door to collaborate with other delivery services.

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"We know that customers are very loyal to certain apps. We want to make it simple," he said.

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

"We are happy to have this whole equation work," Door Dash Chief Operating Officer Christopher Payne said.

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

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