How Does Grubhub Make Money? | Full Business Model

When we talk about ordering food from online applications, there is one name that comes to the mouth of many and that’s GrubHub. Grubhub is a leading online and mobile food-ordering and delivery marketplace in the world. It has the largest and most comprehensive network of restaurant partners.

Just like other food delivery apps, GrubHub earns money by the fees they charge from the member restaurants for providing them the digital existence.

In this read, I will be giving you in detail how GrubHub makes money as well as a review of its full business model. But before then, let’s get a rundown of the online food delivery industry.

The online food delivery industry is one industry that has experienced rapid growth in the last decade.

The food industry has a worldwide revenue figure amounting to $122.740 billion, a growth rate of 7.5% with almost 1.1 billion users across the globe. Also, there is an expected Compound Annual Growth Rate of approximately 32% by 2022.

Interesting, right?

These figures reveal how big the industry is growing to the ever-increasing popularity of ordering food online. 

Now back to the online food delivery giant, GrubHub, here is what to expect:

About GrubHub

Established in 2004 by Mike Evans, Roman Gaskill, and Matt Maloney, Grubhub is an online and mobile platform for restaurant pick-up and delivery orders. Since its formation, Grubhub’s mission has been to connect hungry diners with great, local restaurants.

As of the time of this report, Grubhub features over 300,000 restaurants and is proud to partner with more than 225,000 of these restaurants in over 4,000 U.S. cities.

Here are other interesting Grubhub company statistics:

  • Provided nearly $6 billion in gross food sales to local takeout restaurants in 2019.
  • Processes more than 647,000 daily orders.
  • Serves nearly 28 million active diners.
  • Sent more than $3 billion in total tips to drivers.

It has also merged and formed lasting partnerships with notable brands. Let’s look at its portfolio of brands.

Grubhub Portfolio of Brands

In 2013, Grubhub merged with Seamless, another popular online food delivery company founded in 1999.  This in turn gave a huge mileage to the company.

In 2014, Grubhub Seamless went public and began trading on the New York Stock Exchange under the ticker, GRUB

Since then, Grubhub has been able to grow substantially following the merger with Seamless and aggressive acquisitions of other brands.

Here is the Grubhub portfolio of brands:

  • Grubhub
  • Seamless
  • LevelUp
  • AllMenus
  • MenuPages

How Does GrubHub Work? 

The GrubHub app is quite easy to operate. So, if you’re familiar with ordering food online through other platforms, using this won’t be a big deal for you.

Also, whether you’re picking up your food or having it delivered, you can learn to use its maiden use.

Here are four (4) simple steps with which you get to know how GrubHub makes money.

  • Sign Up
  • Browse and Place Order
  • Food Preparation
  • Delivery/Pickup

#1 Sign Up

Firstly, you have to create an account. You need to fill in your first and last names, your email, and a password unique to you. You can also use your Facebook or Google account to create your profile. Don’t forget to add your current location as you create your profile. 

#2 Browse and Place Order

To place the order of your choice, browse through the options nearby, or explore the restaurant options, or go through the menu. Then, make your selection.

#3 Food Preparation

Once your order is placed, you will get an estimation of how much time it will take for your food to be prepared and the minutes left for delivery.

#4 Delivery/Pickup

If you placed a delivery order, your food will be packaged and delivered to you by the assigned executive.

However, instead of waiting for your food to be delivered, you can go directly and pick it up from the restaurant.

The Value Proposition of GrubHub

GrubHub is a two-sided platform that offers value for two key partners – restaurants and diners. And as such, the company focuses on providing value to both restaurants and diners through its takeout marketplace.

Now, the value and ability to grow its business is however dependent on Grubhub’s ability to keep offering a compelling value proposition for these two key partners.

This proposition explains in detail how it creates value for its partners as well as customers. It also helps the brand’s clients and customers identify with the brand.

It’s simply a two-way communication process where the brand promises that value (advantages) will be delivered with the expectation that the same value will be experienced by the customer.

So to better understand this aspect of the GrubHub business plan, let’s look at the different value propositions for restaurants and diners. 

Value Proposition For Restaurants

Basically, Grubhub provides restaurants with more orders, helps them serve diners better, facilitates delivery logistics in many markets, and enables them to improve the efficiency of their takeout business.

In fact, restaurants here generate higher margin takeout orders at full menu prices.

Here are the key benefits restaurants enjoy from the value proposition:

  • More Orders: Through Grubhub, restaurants in the network get more orders at full menu prices.
  • Targeted Reach: Restaurants here gain an online and mobile presence with the ability to reach their most valuable target audience (that is hungry diners in their area).
  • Low Risk, High Return: Grubhub generates higher margin takeout orders for its restaurant partners by allowing them to leverage their existing fixed costs.
  • Efficiency: They can receive and handle a larger volume of takeout orders more accurately, increasing their operational efficiency while providing their takeout diners with a high-quality experience.
  • Insights: Restaurant partners get actionable insights based on the significant amount of order data Grubhub gathers, helping them to optimize their delivery footprints, menus, pricing, and online profiles.
  • Delivery: GrubHub provides its own delivery services. So, the restaurants here focus on making great food while Grubhub handles the complexity of operating the delivery networks.

Value Proposition For Diners

For diners, Grubhub makes takeout accessible, simple, and enjoyable, enabling them to discover new restaurants and accurately and easily place their orders anytime and from anywhere.

Grubhub’s value proposition provides diners with the following key benefits:

  • Discovery: Grubhub connects diners to a wide range of restaurants from where they can browse through the menus and deals.
  • Convenience: Using Grubhub, diners do not need to place their orders over the phone. Grubhub provides diners with an easy-to-use, intuitive, and personalized platform that makes ordering simple from any connected device.
  • Control and Transparency: Grubhub empowers diners with a “direct line” into the kitchen, without having to talk to a distracted order-taker in an already error-prone process.
  • Service: For diners, Grubhub’s role is similar to that of the waiter in a restaurant, providing a critical layer of customer care that is typically missing in takeout.

How Does Grubhub Make Money? | The GrubHub Business Model

Grubhub has an interesting business model as it lets you know how it makes money. Most of its earnings come through the Grubhub app version.

The company makes money by charging restaurants a per-order commission, which is primarily percentage-based. It also earns revenue when any diner places an order with the app. 

In the case of restaurants, they can choose their level of commission rate, at or above the base rate. A higher commission gives the restaurants better connectivity to diners on the platform. 

In some markets, Grubhub provides delivery services to restaurants on its platform. Now regarding its delivery fee, GrubHub charges diners additional charges on the food ordered. Even restaurants get to pay delivery charges.

Grubhub Growth Strategy

The company strives to make Grubhub an integral part of everyday life for restaurants and diners through the following growth strategies:

Grow the Takeout Marketplace

GrubHub intends to continue to grow the number of independent and national and regional chain restaurants on its Platform, in existing and new geographic markets by providing them with opportunities to generate more takeout orders and by offering delivery services.

Also, it intends to continue to grow the number of diners and orders placed on the Platform primarily through word-of-mouth referrals and marketing that encourages the adoption of the Company’s ordering Platform and increased order frequency.

Enhance the Platform

GrubHub plans to continue to invest in its websites and mobile products and its independent delivery network, develop new products, and better leverage the significant amount of order data that the Company collects.

Deliver Excellent Customer Care

Grubhub seeks to gain their loyalty and support for the Platform by meeting and exceeding the expectations of both restaurants and diners through customer service.

Pursue Strategic Acquisitions and Partnerships

The Company intends to explore further expansion opportunities in existing and new markets, as well as in core and adjacent categories through strategic acquisitions and partnerships that help accelerate the growth of the takeout marketplace.

Get more information about the GrubHub platform by visiting their official website below.

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