Grubhub Plays Catch Up

Once the leader in third-party delivery apps, the company now ranks third.

July 19, 2022

Grubhub Delivery Person Delivering Food

ALEXANDRIA, Va.—Grubhub is no longer the market leader in the U.S. online food delivery industry, with DoorDash and Uber Eats now ahead of the third-party delivery app, reports the Wall Street Journal. Just Eat Takeaway, the parent company of Grubhub, said that it expects negative margins on its earnings after expenses this year. Also, the company says that regulatory fee caps on food-delivery businesses in the U.S. have eaten away at profits by tens of millions of dollars.

In an attempt to grow its customer base, Grubhub has been trying different marketing tactics, such as partnering with Amazon to offer Prime Members free Grubhub+ for one year and offering New Yorkers free lunch. Grubhub also has struck deals with large restaurant chains to delivery their food, including Chili’s parent Brinker International Inc. and a global delivery deal with McDonald’s.

The free-lunch promotion that was offered to the people of New York prompted 200,000 new diners to download Grubhub’s app for the first time. However, there were as many as 6,000 takeout and delivery orders coming in each minute at the peak of the promotion, overwhelming the app. Grubhub said it processed 400,000 orders during the promotion.

Overall, delivery apps, which boomed during the pandemic, are still growing but expansion has slowed down. Analysts and restaurant operators say that order sizes tend to be larger, but there are less transactions.

Just Eat shares are down about 83% since it closed its $7.3 billion acquisition of Grubhub in June 2021. But DoorDash shares are down, too—they’ve fallen 52% this year. The Journal reports that Uber investors have questioned the CEO on how food delivery will fare in an economic downtown. Although DoorDash and Uber experienced increases in their delivery revenue in the latest quarter, their pace of growth is down sharply since last year.

Just Eat remains pressured to sell Grubhub. Its third-largest investor said that Grubhub strays from Just Eat’s core strategy of running market-leading delivery companies in European countries. Last April, Just Eat’s CEO said the company was exploring a strategic partner for Grubhub or a full or partial sale.

Included in Grubhub’s deal with Amazon is the option for the online retailer to take a 2% stake in Grubhub, and that stake could be more based on the number of orders and customers the partnership generates. So far, two million new users have signed up for Grubhub+ since the deal, reports the Journal, which is more than double the total number of Grubhub+ members last reported by the company.

Digital orders have risen to one-third of total convenience store and restaurant food orders, up from just 12% pre-pandemic, according to a Paytronix report. While in-store sales remain down by nearly half, digital orders have remained elevated at 113% of pre-pandemic levels.

According to the NACS “Last Mile Fulfillment in Convenience Retail” report, 61% of retailers are satisfied with their third-party delivery partners. Concerns include high fees, little access to consumer data, difficulties delivering age-restricted products and service and operational issues.

Here’s what c-stores are doing to make delivery work for their businesses.