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In 2004, coworkers Matt Maloney and Mike Evans were uspet that there wasn’t a food delivery service, so they created their own in Chicago, Illinois. When they first created their business model, they were charging a subscription fee. Consumers didn’t particularly like it, so they changed it to a transactional model, where they charged a fee per transaction. Grubhub merged with Seamless in 2013 and are now a publicly traded company. Strengths - The strengths of Grubhub include: 1) Strong branding- Grubhub is known all over the United States as one of the leaders for the food delivery market. 2) Strong network of businesses- Grubhub is acquiring a lot of the small competitors in the market. 3) Grubhub hires and trains their own delivery drivers. 4) Since grubhub is mostly software and applications, there isn’t much for user to carry around, other than typical devices like smartphones and tablets. Weaknesses - Grubhub has a few weaknesses- 1) The commission rates could be too high for some. 2) Grubhub only has one service. 3) Easily accessible for consumer to check other delivery options. Opportunities - 1) Grubhub could expand into other product categories. 2) Grubhub could look to expand into other countries. Threats - 1) There may be a shortage of workers during peak times. 2) There are tons of competition in the market. 3) Lack of innovation for the industry. Financial Analysis - In 2017, the total revenue for Grubhub was $683 million, cost of revenue of $325.7 million, and a gross profit of $357.3 million. They had an operating income of $89.7 million and a net income of $98.9 million. Competitive Advantage - Grubhub does not have a competitive advantage. Current events - Grubhub acquired a few companies throughout 2018. They also released an article that predicts a $365 billion sales year in 2030.
What is Grubhub?
In 2004, a couple of web developers working for a company were upset that there weren’t many food delivery options available in their city of Chicago, Illinois. So, Matt Maloney and Mike Evans set out to create a site that would allow for customers to place an order at their favorite restaurants, then have it delivered to them. When Grubhub first began, they charged users a fee of $140 for six months for their delivery services. This model seemed to be criticized by the consumers and they wanted cheaper options. In 2006, Grubhub decided to change its model to where they received a commission for each order that was placed online. This change in the models seemed to be a great move for Grubhub. It allowed for restaurants to see an easier way to get the orders out and just add the “gratuity” to it. A few years before Grubhub was created, there was another food service that was available to the public. In 2005, Seamless was a local hit in New York City, allowing customers to track their orders. It also allowed restaurants to manage and track orders that were made. While Seamless was a popular hit in New York City, Grubhub wanted to branch out and be known in the smaller cities throughout the United States. In 2011, Seamless was able to acquire Menupages.com, which had more than 50,000 restaurant menus available for viewing. In the same year, Grubhub was able to acquire Allmenus.com, which had well over 250,000 restaurant menus available on their website. In 2013, Grubhub and Seamless merged and operate separately under one roof. Grubhub Inc. is now a publicly traded company.
Strengths and Weaknesses
There are a number of strengths that Grubhub has including: 1) Strong Branding- Grubhub processes almost 500,000 orders a day and serves over 16 billion customers in almost 2,000 cities in the United States and London. It is one of the top names in the online ordering category. 2) Strong network of businesses- Grubhub has over 95,000 restaurants that are spread all over the country. Throughout the years, Grubhub has a few brands under its belt, including Tapingo and LevelUp. Both are local food delivery apps. Tapingo markets to college campuses and Levelup was the leader in payment solutions for mobile dining. 3) Has its own delivery drivers- Restaurants do not have to worry about paying someone to deliver their food to the customers. Grubhub hires people to work for them, so they can go to whatever job is needed. They also train every person properly on how to do their jobs. 4) Easy distribution- Grubhub headquarters are located in Chicago, Illinois. They have sales representatives that travel to restaurants to try to sell this product to them. There is nothing heavy to lug around, so all that is distributed is the app for the customer, the app for the restaurant (Orderhub), and the app for the delivery person. Since most of the country has access to the internet, Grubhub should be able to market to restaurants in all 50 states. If a business wants to spend more in advertising and Grubhub is the leader in their area, they can pay more in commission and they will be rewarded.
The weaknesses of Grubhub include: 1) When a restaurant wants to use the services of Grubhub, it has to agree to the commission rates of Grubhub. If a restaurant in a large city utilizes the service, the rate will be close to 20% of the order cost. A smaller company may not want to pay the fees, so they opt out of the service. If there is a restaurant that wants to pay more of a commission per order, Grubhub will put them at the top of the list in the search bar. 2) Not many products offered- Grubhub only has one service-Delivery of takeout orders. There are other services, like Postmates, that deliver more than just food. They also deliver groceries, retail products, and alcohol. 3) Customer has the ability to use another service if wait time it too high- Even though Grubhub is an industry leader, it can still fall behind in some cities on delivery time. On their website, it gives a description of the approximate wait time. If a customer has multiple delivery service apps on their phone, it gives them the capability to check each one in a matter of seconds to compare the times, as well as the minimum charges.
Opportunities and Threats
There are a few opportunities for Grubhub. 1) One of the opportunities for Grubhub is to expand into other product categories. They could quite possibly create or acquire other services that deliver other products that are not foods. 2) Grubhub could look into other countries. Right now, it is in the United States and London, so it has plenty of room for expansion.
The threats for Grubhub include: 1) Shortage of employees can be a factor for Grubhub. If there are not enough employees working in a large city during peak times, there can be cause for concern. 2) Tons of competition in the market. Depending on the city where you live, there might be another delivery service app that could be the leader. In the Jackson, Mississippi area, it is the Waitr app. UberEats is now trying to take the lead, since it is already is established all over the world with its ride sharing business parent, Uber. 3) Not much can change with the innovation. How much more technological can Grubhub get from its current model? There isn’t much more that they can do to become more innovative in the industry, but they can attempt to find newer methods to reach potential clients.
According to Nasdaq.com, the annual income statements and balance sheets are provided. In 2017, Grubhub has a total revenue of $683 million, cost of revenue of $325.7 million, and a gross profit of $357.3 million. They had an operating income of $89.7 million and a net income of $98.9 million. This is a big jump from the numbers that Grubhub pulled in for 2014. In 2014, the total revenue was $235 million, cost of revenue of $87 million, and gross profit of $166 million. It did, however, double its operating expense from $44 million.
One of the things about the model of Grubhub is that it isn’t much different than any other delivery service in the world. Sure, they are one of the top leaders, but they don’t have anything that the competitors already have or have access to get. Grubhub could do a complete SWOT analysis and work on the TOWS matrix to develop ideas to stay a leader in the food delivery industry.
Grubhub released an article in February 2018 that showed the results of using a third-party food delivery service. It shows that the demand by the consumer for deliveries is rising, so they are going to try to stay ahead of the market to keep up with the increase in orders. The article in predicting that delivery sales could reach $365 billion by 2030. Grubhub acquires Tapingo for $150 million in 2018. Tapingo is a delivery service that is popular among college campuses. This will help generate sales with already established businesses like Taco Bell and Sodexo. Grubhub acquires LevelUp for $390 million in 2018. LevelUp is a leader in payment and mobile engagement. This purchase will enable Grubhub to boost its point of sales and will help restaurants with more advanced tools to help with sales. Grubhub and Yelp create a partnership in 2018. Yelp, who is a leader with introducing people to local businesses, has partnered with Grubhub to give users another option to use while using Yelp on mobile devices or online.
Gruhub is made itself one of the frontrunners in the food delivery service industry. There are plenty of factors that could cause harm for Grubhub, one being the competition. If the industry leader can stay in front of the other services, then there might not be a major issue. If Grubhub uses the SWOT analysis to create methods to adapt to the changing times of the food service industry, then they will be successful.
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