Investigating the Success of GrubHub Business Model
GrubHub is a food delivery startup company founded in 2004 and went public in 2014. Currently, the company operates in over 1700 locations in the US. The company is also making a global mark after the acquisition of some businesses with similar model. The company recently announced commencement of operation in 34 more markets in addition to over 80 existing markets in the US.
Fresh entrepreneurs are often curious to learn more about the food delivery service with revenue of over $680 million. This article answers following frequently asked questions about GrubHub.
1. What is GrubHub business?
2. How does GrubHub work?
To understand Grubhub business model, it is essential to get a brief insight into the food delivery industry.
On-demand Food Industry Analysis
Being one of the fastest growing industries, food delivery is far from fulfilling the demand. The consumption of fast food restaurant is drastically growing after the advent of food delivery services. Despite the fact that each of the top five food delivery platforms has a market value of over $1 billion, the operations are still lagging behind the demand.
Surveys indicate that a considerable proportion of people will start acquiring services if service providers address their concerns. The primary concern in the US is unavailability of service. Over 18% of potential customers have no access to food delivery service. Long delivery time and inefficient customer service account for 17% and 5% respectively (McKinsey & Company). Filling these gaps will further increase the demand.
Although Grubhub business plan is only targeting the US markets, yet other continents have as much demand as the States. This is the reason behind impressive performance of businesses like FoodPanda. In the Netherlands, a staggering 20% of people regularly order food through apps. This percentage is up from 7% in 2012. British consumers spend over $13.6 billion annually which is almost $4 billion more than the spending a decade back (Statista).
While European and American markets are flourishing, Asian markets are goldmines for the investors. Asia is the biggest food consumption market. Over 40% of world’s population concentrated in 4 Asian countries. Major proportion of this population belongs to the middle socioeconomic class. Besides, most of the Asian countries are improving the ranking of ease of doing business.
Northern Asia and the Asia-Pacific regions are also growing swiftly. In Korea, 2.7 million people out of 51 million total population use app for food every month. Thus, the probability of success of on-demand food delivery in the continent is intensely high.
Unite and Conquer Marketing Strategy
GrubHub employs various strategies to ensure stability in markets and to expand its domains. The marketing strategies aim to tackle the challenges posed by competitors. Besides, they also allow the company to grow the outreach.
Industrial alliance is one of the primary factors that enabled GrubHub to grow to the current extent. Instead of in-house food production, the company delivers food items from a range of established food outlets. This way, it turns the potential competitors into catalysts of growth. Delivery services and food production units complement each other. The alliance between these two industries cuts the costs and boosts profits.
Before inaugurating the services in a new town, GrubHub attempts to make partnerships with local fast food outlets and restaurants. Similar to Doordash business model, this approach drastically reduces the chances of failures. For fledgling companies, collaboration enables them to start and consolidate the business as long as the consumers are largely unaware. Currently, over 80,000 restaurants are in collaboration with GrubHub, and each of them pays an undisclosed percentage of revenue with GrubHub.
Merger and Acquisition
After attaining financial stability, GrubHub went ahead to acquire its competitors. This strategy allowed the company to increase its market share. Some metropolitan cities in the US are too big to currently pose any threat of market saturation. The services in these cities are still insufficient to cope with the demand. However, the mergers and acquisitions in fiercely contested areas enabled the food delivery giant to ease on the business rivalries.
The merger with Seamless was a remarkable decision. Since Seamless is operating in the UK too, the two companies managed to expand their global outreach. Apart from Seamless, GrubHub also merged AllMenus, MenuPages, Eat24, LevelUp, and Tapingo over the years. The leadership plans more M&As around the world to keep growing.
Promotions and Bonuses
To attract more customers, the admins may offer promotions. Each promotion may provide a range of monetary benefits. Any business intending to replicate Grubhub case study should offer bonuses to loyal or highly rated customers. Delivery agents and admin staff also get conditional bonuses.
Swift and Steady Order Delivery
One of the primary success factors is the ability of GrubHub to save consumers’ time. The traditional approaches required the consumers to drive or walk through the outlet. Some restaurants introduced delivery services. However, these services were marred by poor communication mediums. Besides, maintaining delivery fleet and workforce caused management problems.
Using GrubHub, the consumers can search for the restaurant or fast food of their choice. An interface with impressive user experience allows the consumers to select the restaurant from an easy-to-use dropdown menu. Once selected, the screen shows the location of selected food outlet. There is also an option to see the complete food menu. The rating of restaurant is visible to all app users. After placing the order, the user can locate the delivery agent in real time along with estimated time of arrival.
GrubHub provides multiple payment options including credit card. After completing delivery and payment transaction, the customer can share feedback. Apart from customer panel, drivers and admins have customized panels too. The app encapsulates the relevant data to each panel so that none of the individuals can access unauthorized information.
GrubHub can serve as an appropriate case study for aspiring entrepreneurs. The industrial insight indicates that most of the markets have far higher demand than supply of services. GrubHub business model canvas can be the starting point for your entrepreneurship journey.
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