Grubhub Business Model – How Does Grubhub Work and Make Money?

Grubhub Business Model
Source: Wikipedia

Grubhub is an American-based online mobile food delivery business which lets people order food from their favorite local restaurants. The company’s branding, which includes its logo, is critical to its success because a company’s logo is generally the first thing that a potential customer notices about it. Moreover, the Grubhub logo, like many others, has changed through time.

Furthermore, the company was founded by Matt Maloney, Roman Gaskill, and Mike Evans in 2004, Chicago, Illinois. The concept for Grubhub was conceived by Mike Evans, one of the company’s co-founders, when he was hungry in the middle of the night. Then, perhaps it was the most pleasing idea to establish one of the gigantic food delivery companies in the world.

What is Grubhub?

Just Eat Takeaway is a significant worldwide online food delivery platform, where people can find many food delivery companies there. Grubhub is collaborating to be one of the members. The company advances food ordering with new restaurant technology, straightforward interface platforms, and a better delivery experience that help engage more than 32 million people to order their favorite food from their chosen restaurants. In addition, this food delivery company has more than 300,000 restaurant partners in more than 4,000 cities across the United States, according to its website.

The company has gone through bittersweet moments. In 2004, two hungry web engineers in Chicago were scrolling through menus and came up with the Grubhub idea. From that moment on, the Grubhub company was raised. It was until June 2014 that Grubhub started providing delivery for restaurants that do not have their own delivery service. In the year, New York’s Stock Exchange started trading Grubhub’s stock, which is called GRUB.

By 2016, the firm had expanded to over 50 markets in the United States. Grubhub was rebranded in 2016 with a new logo, visual design, and branding. Then, the company added Apple Pay and Google Pay to the payment system so that people could pay for their food with them. In addition to the platform, restaurants and customers could rate and evaluate one other’s experiences using the company’s new ratings and reviews system.

Grubhub’s delivery service has reached 28 more US cities by the end of July 2018, expanding its ambitions to offer more restaurants reached out to more diners. The year prior to its expansion saw the company buy Eat24. Also, the company collaborated with Yelp, TripAdvisor, the InterContinental Hotels Group, and Amazon Alexa. As there was an increase in the number of chain restaurants that provide third-party delivery, Grubhub has swiftly expanded its capabilities in servicing hundreds of US regions to capitalize on this fast-growing trend. Furthermore, the company keeps announcing new collaborations and earning new customers as it extends its services.

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Other than that, Grubhub expanded its scope outside the food business in 2018 when it purchased LevelUp, a diner engagement and payment systems firm located in Boston. This online food delivery giant spent $390 million in cash for this transaction alone. Then in 2020, Just Eat Takeaway announced that it acquired Grubhub for $7.3 billion in shares. But Grubhub will keep its own name.

During the period of growth, the company has received a lot of funding. Series A investment brought in $1.1 million, while Series B brought in $2 million. Further, Grubhub got $31 million in two more rounds. The fundings helped this food delivery company to spread throughout the country, with over 115,000 eateries in 3,200 cities and all 50 states. The company reported 19.9 million users in 2019.

How Does Grubhub Work?  

4 Steps Model About How Grubhub Works

  1. Users can browse through the restaurant listings on the platform. Then, they can order everything that is listed on the menu. In addition, they can also use the ‘search’ button for more restaurants. For nearby restaurants, it will automatically feature on the app.
  1. Create an Order: Users have the option to create an order and complete the necessary transaction efficiently.
  1. The restaurant is responsible for preparing and packing the order. With the platform, Grubhub gets the order and sends it directly to the restaurant. When the restaurant receives the order, it can start processing the food straightaway.
  1. Lastly, Grubhub delivery person will deliver everything from the restaurants.

What is The Grubhub Business Model?

The business concept for Grubhub is fairly straightforward. For a complete view of the model, we now have to look closely at all of its major aspects. Here are the breakdown segments of Grubhub’s business.

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Customer Segments

For Customers:

  • Customers can purchase meals online, which saves them time and money
  • After they buy something, customers can see how their order is being delivered 24/7 Customer Service
  • Customers may choose a restaurant to order from
  • Grubhub also has quick delivery to your door, and they have good customer service
  • Tracking your food order in real-time
  • Offers and discounts are available to all users.

For Restaurants

  • The company offers a reliable delivery service to local restaurants
  • The food delivery company gives restaurants a more customer base
  • Grubhub equips restaurants with application that allows them to efficiently manage the delivery
  • Increased customer traffic at a low expense for every restaurant
  • Restaurant partners might request promotional services
  • Grubhub’s efficient strategy also improves the restaurant’s efficiency
  • Grubhub’s excellent insights may be very beneficial to those businesses.

Value Propositions:

Everyone enjoys excellent meals. And it is even better when it is delivered right to your door. Thus, the customer segments strategies are:

Users:

  • Individuals who like eating out yet lack time to do it
  • Individuals demanding meals delivered to their door
  • Companies that often order lunch in restaurants for their employees
  • People who are lazy to cook
  • People who are too busy to prepare food for themselves
  • Students with tight study schedules
  • People who do not have access to a kitchen
  • Individuals who are on vacation.

Restaurants:

  • Restaurants without delivery personnel to deliver the promised service at customers’ location
  • Local eateries that desire to serve their local customers
  • Restaurants that want to get more customers and be known on the internet.

Delivery Persons:

  • Those seeking part-time or full-time work in delivery
  • Those seeking a more flexible schedule
  • Those who are driven by additional rewards, such as tip money
  • People who do it to supplement other job options
  • Working hours may be arranged to suit your needs
  • All tips are given to the drivers
  • There is no work pressure like in many jobs
  • It is possible to make a decent living doing this full-time.

Channels:

Users can access the food delivery service via Grubhub’s website, Android, and IOS. 

Cost Structure:

In order to get a fully functional application that allows users and restaurant owners to utilize it conveniently, Grubhub has spent millions of dollars on this technological setup as well as human resources, including IT experts to build this smooth app. On top of that, human resources are also required to maintain the operations while the app is running. Other expenses, such as salary, fuel, and commission to delivery persons, are also considered in the company’s expenditure.

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How Does Grubhub Make Money?

Because Grubhub is a food delivery service, it does not own any restaurants. Therefore, there are no operational expenses regarding physical restaurants. Despite this, it serves a lot of food to people every day. Grubhub’s revenue strategy is straightforward and effective, so you can learn more about it. Grubhub’s two primary income streams are as follows:

Restaurants Commission Fee

Grubhub allows customers to order their favorite restaurant’s cuisine online and have it delivered right to their door. Then, the company charges a partner restaurant commission for every order delivered on the platform. The fee fluctuates from 5% to 15%, but it is averaging around 13.5% for an order.

Grubhub Earns By Running Ads

Aside from the commission fee system, Grubhub offers some forms of marketing and promotional programs for restaurants in which they place that specific restaurant at the top for a certain period. In other cases, the listing is also dependent on the commission structure; for example, if restaurant owners want to feature a restaurant at the top of the list, they will have to pay a higher proportion of orders placed via Grubhub.

Fees for Delivery

Customers are charged a delivery fee for each successful order placed via the platform. In most cases, this cost goes to the delivery drivers, but Grubhub keeps a tiny percentage of it to bolster its revenue.

Grubhub Subscription

Grubhub also makes income via its monthly subscription model. The subscription lasts for 10 months. These subscribed customers will get free delivery on $12 or more purchases. Orders are also eligible for a 10% cashback bonus.

Conclusion

One of the world’s first online food ordering platforms, Grubhub made life easier for millions of consumers and set the road for future food ordering websites. Throughout the years, the firm has developed flawless growth and marketing plans, which have resulted in consistent success. The success is in terms of user base expansion, revenue growth, and sales growth.

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