How does Grubhub Work: Business Model & Revenue Model

Updated On: August 24, 2022

Updated By: appsrhino

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The changes in the food habits of society can be understood from the evolution of the food industry. Rapid advances in technology have changed the way people react to new experiments in the market. It is pretty visible in how the food industry is inculcating recent changes in the market. One of these changes has been how food used to be ordered and served or delivered. Fuelled by technology, there has been a drastic change in this very aspect. With the advent of online food delivery platforms, the whole experience has changed. There has been a tremendous boom in this domain, and it has become an industry in itself. As a result, online food delivery apps have gained a lot of popularity and followers quickly, leading to intense competition and more and more players entering this market.

One such notable player that has been active in the online food delivery market is GrubHub. It is one of the oldest and largest food delivery businesses in North America in terms of revenue generated. So how exactly do such businesses function and manage the challenges that come up on a day-to-day basis in such a dynamic and sensitive market space?

Let us delve deeper into how does Grubhub work, starting with some information about the market that it operates in:

MARKET SIZE

The US food delivery market is anticipated to increase by 79% in five years.

The food ordering and delivery business are contemplated to enlarge by $30 billion (from $43 billion in 2017 to $76 billion in 2022) at an annual growth rate of 12% over the next five years. The revenue of food delivery apps is bound to hit $30 billion by 2022.

Not only Millennials but online ordering and delivery is the preferred option among users aged 45-55.

The top five players in this sector have a cumulative valuation of $60 billion.

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ABOUT GRUBHUB

GrubHub is an online food delivery platform that serves people by delivering the food from a place of their choosing and, in the process, also helping restaurants in increasing their revenues. GrubHub began its journey in 2004, intending to become one of the top-listed services.

Here are some salient facts and figures about GrubHub and its journey:

GrubHub was founded by Michael Evans and Matt Maloney at the headquarters in Chicago. GrubHub has close to 5 million active subscribers and almost 31 million customers who have ordered at least once, with an average of delivering an astonishing 622,000 orders per day. GrubHub has made its service available in more than 4000 cities across the USA, partnering with more than 265,000 restaurants. GrubHub is one of those few start-ups that have gone public, and it has been listed on the NYSE since 2014. GrubHub owns and operates four different brands in the same field. They are- GrubHub, Seamless, MenuPages, and AllMenus Recently GrubHub was acquired by JustEat for 7.3 billion dollars, making it one of the highest valued firms in the online food delivery industry.

KEY FEATURES OF GrubHub

Key activities:
A customer places an order by accessing the GrubHub app online. GrubHub hires deliverymen to deliver the order to the customer. GrubHub manages logistics to process the orders. To maintain its position in the food-tech world, GrubHub keeps updating and adding new features that can fascinate its customers and attract more users.
Key resources:
GrubHub uses a technological platform to attract and retain customers, helping make the food ordering and delivery a seamless experience. GrubHub partners with restaurants that further helps in expanding the visibility of their services to customers.
Key partners:
GrubHub collaborates with two different parties that help it with the business. They are: Restaurants: GrubHub makes deals with restaurants to help them promote their brand and grow their business. Delivery men: GrubHub requires people to deliver the food from restaurants to the customers; it hires delivery men.

Key-Value Propositions:


1) Customers
A customer can order meals anytime. A user can go through the menus of various restaurants. 24/7 customer support. A customer can track his order.

2) Restaurants:
A restaurant can increase its customer base and increase brand visibility. This saves time and money in marketing expenses. The restaurants get an online platform to serve their customers better. The restaurants have to pay a commission for the orders processed by GrubHub.

3) Delivery Men:
Delivery Men get a source to earn money. These delivery boys also receive tips from the customers, which add to their income.

CHANNELS
The various ways through which a customer accesses the facilities provided by GrubHub is by its website or mobile app available for android and IOS.

GrubHub BUSINESS MODEL: How GrubHub works?

The food ordered through the GrubHub app goes through the following process before it reaches the doorstep of the customer:

Browse:

Users search through the menus of the restaurants in the app and order their meals. There are features like search and nearby restaurants in the app provided to the customers.

Order placing:

The customer can put his order once he goes through the menu and decides his day's meal. He can then pay online on the platform through third-party gateways or the GrubHub wallet option.

Preparing and packing the order:

After the customer places his order, the restaurant gets notified by the GrubHub app, and the restaurant starts preparing and packing the food for delivery.

Delivery:

Once the food is prepared, a delivery boy picks up the order from the respective restaurant and delivers the food to the customer.

GrubHub REVENUE MODEL: How GrubHub earns its revenue?

Commission: GrubHub, through its app, enables the restaurants to get online orders and deliver food to the customers. In return, GrubHub charges an average percentage of 11% to 13% of the price of orders from the restaurants.

Advertising and Marketing: Besides commission, GrubHub charges the restaurants for marketing and advertising on the GrubHub app. The restaurant's name can be featured in the list of top restaurants for a limited time.

THE REASON BEHIND GrubHub's SUCCESS

GrubHub has some great options that make it an excellent medium for online delivery services, some of them are mentioned below:

GrubHub tries to cover almost every restaurant in the city to make its online delivering services available to the customers The app provides discounts to customers on various restaurants depending on the restaurant's partnership. GrubHub allows users to rate the restaurant that helped other customers know the overall quality. Also, GrubHub tells the average pricing of the food for each restaurant. One of the unique options that GrubHub brought into force was the pickup option. Using this option, a customer can simply pick up the order once it is prepared and gets notified through the GrubHub app.

OTHER PLAYERS IN THE ONLINE FOOD DELIVERY INDUSTRY

UberEats:

Due to the strong support from its parent company Uber, UberEats gives tough competition to GrubHub. Within no time, UberEats has won the customers' hearts and spread across various continents. It has recently acquired Postmates for a whopping amount of $ 2.65 billion in 2020.


Postmates:

Postmates has a market share of 10% of US customers' meal delivery sales. It was acquired recently by UberEats. It has been able to maintain a constant market share more or less fending off any competition successfully since its inception.

DoorDash:

DoorDash makes more than half the sales in the two most extensive Texas metro areas, Dallas-Fort Worth and Houston. And it's approaching two-thirds of the market share in its Bay Area home turf. Currently, it is the latest food delivery service in the US with more than 40% market share. DoorDash has risen at a blazing speed in the last five years.

CONCLUSION

The online food delivery service is all about providing convenient services to the customer. This is done by leveraging technology and developing network linkages with various stakeholders (restaurants and delivery personnel).

Given the demand and future outlook, the industry is in a sweet spot and set for the long haul. We are bound to witness continuous improvements with further advances in technology. Rest assured the customers can sit back and trust the online food delivery industry to keep their food cravings at bay in the most efficient manner possible.

If you are also thinking of entering into the food industry and developing a food delivery app for your business, get in touch with AppsRhino. We would assist you in developing and designing the most appropriate, unique, and user-friendly app.

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