How Does Grubhub Make Money? Grubhub Business Model Explained

Key Takeaways:

Grubhub is an American online food ordering platform that delivers food locally to the doorstep of customers who, for some reason, cannot buy it themselves. They collaborate with restaurants all across the U.S. along with independent delivery workers to create a delivery network.

They take some commission from the order and, in turn, help the restaurant to become more visible in the competitive market and increase their sales. The delivery fleet gets hourly pay and can be hired quickly if they have a proper reliable vehicle, clean record, and driver’s license.

The platform can be accessed through the desktop website and the mobile app. They generate revenue mainly from the commission generated by each order. The monthly subscription fee from the customer base on the apps starts from 2020 by providing unlimited free food delivery.

The revenue generated by Grubhub is $1.8 billion in 2020, with a net worth of $7.1 billion. Its active customer base is around 31.4 million, with 622700 orders recorded per day. Up to 2020, they have partnered with 265,000 restaurants and operating across 4000 cities approximately.

Company Profile:

Company NameGrubhub Inc. © (Formerly GrubHub Seamless Inc. (2013–2014))
Websitegrubhub.com
Founded- In:2004
Headquarters:Chicago, Illinois, United States
FounderMatt Maloney, Mike Evans
Key PeopleMatt Maloney (CEO), Adam DeWitt, (President and CFO), Sam Hall (Chief Product Officer), Maggie Drucker (Chief Legal Officer), Kelley Berlin (Chief Human Resources Officer), Seth Priebatsch (Chief Revenue Officer), Eric Ferguson (Chief Operations Officer), Greg Russell (Chief Technology Officer), Devry Boughner Vorwerk (Chief Corporate Affairs Officer)
Business ModelOnline food ordering
Product/ServicesFood delivery
Competitive AdvantageApplication software, online food ordering, delivery
Revenue$1.8 billion as of 2020
CompetitorsUberEats, Takeaway.com, DOORDASH, deliveroo, Just Eat
SubsidiariesBiteGrabber, Eat24, LevelUp, Seamless, Tapingo

What is Grubhub?

Grubhub is an online food ordering platform that delivers food locally to the doorstep of customers who, for some reason, cannot go buy it themselves. They collaborate with restaurants all across the U.S. along with independent delivery workers to create a delivery network.

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They take some commission from the order and, in turn, help the restaurant to become more visible in the competitive market and increase their sales. The delivery fleet gets hourly pay and can be hired easily if they have a proper reliable vehicle, clean record, and driver’s license.

The platform can be accessed through the desktop website and the mobile app.

A Short History Of Grubhub:

The founders, Mike Evans and Matt Maloney launched Grubhub in2004 to provide an alternative to the generally used paper menu. They did this because there were no good options available for local food delivery at that time. Both of them were web developers and often worked late at Apartments.com, so getting food delivered to them was a hassle.

The business was successful, and it expanded pretty quickly. This venture was so successful that the founding pair won first place in the University Of Chicago Booth School Of Business’s Edward L. Kaplan New Venture Challenge in 2006. A year later, Grubhub expanded to San Francisco and New York.

The critical factor in its success was that it always kept itself up to date with the news regarding its competitors and latest market trends. After partnering with Seamless, they launched a mobile app for food delivery when they sensed the shift toward mobile phones.

In 2011, Grubhub acquired MenuPages and soon started the merger process with Seamless. In 2014, the business had expanded to the point where they provided their services across 50 cities in the United States. Another change that occurred was that they started to offer their services to restaurants that did not have local food delivery capability, which increased their revenue by a large margin.

Its success can be understood because it was grossing at a run rate of 200 million per year in 2015. This was just the beginning for them, though, as they started to acquire more businesses. In 2016, Grubhub acquired a Los Angeles-based restaurant delivery service called LAbite; later, in 2017, it acquired Eat24.

Finally, in 2018, it took over a San Francisco-based platform for campus food ordering known as Tapingo. Grubhub has also acquired Delivered Dish, a restaurant delivery service operated in 7 markets, and a Boston-based diner engagement and payment solutions platform known as LevelUp.

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In 2020, the Grubhub platform made some changes in its mobile app. It started a new monthly subscription program that would offer the customers free unlimited food delivery from partner restaurants for a set amount of fee per month.

According to recent news and announcement, Uber expressed their intent to offer a takeover to Grubhub on May 12, 2020. But just one month later, Just Eat Takeaway announced that they would purchase Grubhub for 7.3 billion dollars for an all stocks deal.

If this acquisition goes through, it will create the most significant online food ordering and delivery service in the United States outside of China. The leadership will change, but the headquarter will stay in Chicago.

What is the Business Model of Grubhub?

Grubhub is an online food order and delivery service created to provide an alternative to the paper menu. The business offers delivery services all over America for people who either do not have time to go buy cooked food or, for some reason, incapable of doing so.

The competitive advantage of Grubhub is that they allow the users to order food from the local restaurants instead of big restaurants or food chains that exist all over the country. This brings large profits to Grubhub and helps the restaurants appear more visible in the competitive market and increase their sales.

The platform is easy to access through their mobile app, including both the android and ios versions. Grubhub can also be accessed through their desktop website. As the business operates due to the giant client base, many features and 24-hour customer support are given. A customer can register an account where after which they can browse through menus and order. They are also able to track their order online.

The delivery system of Grubhub is fascinating. Although they do not own independent vehicles for delivery, they work with independent delivery partners with a reliable vehicle, clean driving record, car insurance, and valid driver’s license.

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These independent delivery workers get paid wages depending on the working hours. This is good, considering that Grubhub receives to operate in smaller cities and towns instead of just providing in bid cities only. This collaboration profits not only companies but other individuals too.

Essential resources of Grubhub include its online delivery platform (both the app and the website), IT infrastructure, a network of delivery personnel, and restaurant partners.

How Does Grubhub Make Money?

First of all, the key resources of Grubhub are restaurants, the delivery network, and the online platform. The most significant revenue source is the commission it makes on every order, which is reported to be around 13.5 %.

Although it provides the option to its partners to choose a commission of their own choice, the restaurants that pay higher commission will turn up more at the top in search.

Not only this, but the partners that choose the services of Grubhub also have to pay some additional commission. The platform also gives its delivery services to the restaurants and diners themselves, so when a diner places an order on the platform, it gets some profit. Grubhub actually collaborates with both restaurants and diners. This increases the options for the customers to choose their order from.

In 2020, Grubhub started a monthly subscription program for its users. According to the information given on official websites, they will offer the customer free unlimited food delivery in return for a fixed subscription fee every month. Obviously, this is another source of revenue for the business.

The beauty of Grubhub is that its design; it reduced all the aggravating factors that come with ordering takeaways. It does not compel the restaurants to provide some discount, nor do they force them to pay some subscription fee.

Grubhub Funding, Valuation & Revenue:

Grubhub has acquired funding numerous times in history. The first time was in November 2007, when they received around $1.1 million from Amicus Capital and Origin Ventures for expansion purposes. 2 years later, they got $2 million in Series B funding, which Origin Ventures and Leo Capital led, and soon acquired another round of funding in Series C by Benchmark Capital.

At last, in 2011, they further acquired $20 million in Series D funding by DAG Ventures. In the same year, they got $50 million in Series E funding, which they used to acquire other companies.

As of 2020, Grubhub has generated revenue of $1.8 billion, with the profit amounting to $155 million and 31.4 million users. In 2020, around 622,700 orders were recorded per day and were operating in around 4000 cities. As of 2020, its net worth is about $7.1 billion, which is staggeringly less than the $12.3 billion valuations in 2018.

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