Who owns Grubhub? The owner’s plan to restore profitability

Grubhub is a United States company famous for making food delivery easier for millions of Americans. It was there long before its main competitors – Uber Eats and DoorDash – launched their food delivery operations. 

However, despite having a significant head start in the market, Grubhub failed to maintain its stronghold as the market leader. Grubhub’s failures in New York, a city where it once dominated the food-delivery business, mirror its downfall across America. 

In 2019, Grubhub accounted for 72% of food deliveries in New York City; by October 2021, that number had fallen to 34%. DoorDash, a company launched nearly a decade after Grubhub, commanded a 36% market share. 

Nevertheless, Grubhub’s owners believe that the downturn in fortunes is only temporary – that the business will regain its profitability. 

Grubhub’s founders didn’t expect such tremendous growth in a few years

Mike Evans and Matt Maloney were working late nights at Apartments.com in 2004 when they grew tired of ordering the same meal from the same restaurant. 

They launched a website to help people find restaurants in the neighborhood. They started it as a cool business idea before realizing Grubhub had the potential to become a huge enterprise. 

Two years later, Evans and Maloney won the University of Chicago New Venture Challenger with their business plan for Grubhub. “What an ingenious idea,” Michael Alter, the president and owner of the Alter Group, said. “It’s so simple and absolutely useful, everyone should use Grubhub.com!”

The founders used the prize money to fund a national expansion. From Grubhub’s base in Chicago, Illinois, the business expanded to New York City, Boston, San Francisco, and Seattle. 

Over the next few years, Grubhub received millions of dollars in funding, fueling its growth via acquisitions of competitors. In September 2011, Grubhub acquired a New York competitor named Dotmenu. 

By February 2012, Grubhub had more than 200 employees and was struggling to find office space for the growing staff. Maloney told Business Insider:

“This is our fourth office and at every point we’ve said, ‘there’s no way we’re going to max out this office. Every time we’ve been wrong. Corporate real estate is the bane of my existence. In the startup world, life moves fast. In the corporate real estate world, life moves really slow.”

In August 2013, Grubhub merged with Seamless. The company was known as Grubhub Seamless Inc. for a brief period before reverting to Grubhub Inc. in 2014. 

The company continued its aggressive acquisitions, buying DiningIn, Restaurants on the Run, Delivered Dish, LAbite, Eat24, OrderUp, LevelUp, and Tapingo. In 2019, Grubhub took over SkipTheDishes’ operations after the company left the US market. 

Just Eat Takeaway acquired Grubhub as the food delivery business spiked

As restaurants closed down due to the coronavirus pandemic, orders for food delivery surged. Just Eat Takeaway saw it as the perfect time to acquire Grubhub. 

Uber was primed to purchase Grubhub, but antitrust issues hampered a potential acquisition. If Uber acquired Grubhub and combined it with Uber Eats, one company would command 55% of the food delivery business in the US. 

“During this pandemic, when millions are out of work and many small businesses are struggling to stay afloat, our country does not need another merger that could squelch competition,” Senator Amy Klobuchar of Minnesota said after Uber backed away from purchasing Grubhub.

Just Eat Takeaway and Delivery Hero threw their hats in the ring after Uber withdrew. Just Eat, a UK-based company, and Takeaway.com, a Dutch company, had completed their merger in early 2020. 

Despite having a much lower market capitalization than Delivery Hero, Just Eat Takeaway prevailed, acquiring Grubhub for $7.3 billion in stock. Just Eat Takeaway valued Grubhub at $75.15 per share. 

“I am excited that we can create the world’s largest food delivery business outside China,” Jitse Groen, the CEO of Just Eat Takeaway, said. 

Despite a sharp increase in food deliveries, Grubhub was still losing money. It had spent millions trying to lure customers away from Uber Eats and DoorDash. “Competition and pricing pressure will be fierce going forward,” Daniel Ives, an analyst, told The New York Times. 

Several months before Just Eat Takeaway announced the acquisition, Grubhub shares had lost more than 40% of their value. Market analysts speaking to CNBC said Grubhub has failed to stem the loss of customers to DoorDash and Uber Eats. CEO Matt Maloney said the company had a plan to regain profitability:

“We will be moving quickly, spending more and trying many different strategies over the next 12-18 months to increase restaurant supply aggressively while making our diner experience more sticky – effectively taking action to remove any reason for diners to look anywhere else.”

Just Eat Takeaway is looking to sell Grubhub following increasing pressure from investors

Grubhub’s strategies worked: In early 2021, the company had its highest daily orders, user base, and gross sales. A resurgence of the pandemic had forced the closure of restaurants and an increase in deliveries. 

CEO Matt Maloney sent a letter to shareholders saying order frequency remained higher than pre-pandemic levels. “We have incredibly strong momentum heading into our combination with JET,” Maloney said. 

However, despite the record business metrics, Grubhub still posted a loss of $75 million in Q1. 

Just Eat Takeaway completed the acquisition of Grubhub in June 2021. Four months later, some investors were already urging the company to let Grubhub go. 

Cat Rock Capital, Just Eat Takeaway’s biggest shareholder with a 6.5% stake, sent a letter to the board referring to Grubhub as ‘the root cause of the public market’s loss of confidence in JET.’ 

Alex Captain, Cat Rock’s founder, said Grubhub had slowed JET’s growth. “JET’s outperformance evaporated when it announced the Grubhub acquisition in June 2020, with the stock falling over 18 percent in the four trading days after the announcement,” Captain wrote. 

Captain suggested that Just Eat Takeaway spin-off or sell Grubhub to companies like Instacart, Walmart, or Amazon. Alex warned that inaction from the board before the end of 2021 would motivate Cat Rock and other investors to take ‘additional action.’ 

Just Eat Takeaway says it ‘continues to actively explore the partial or full sale of Grubhub.’ CEO Jitse Groen had initially stated that JET had no plans to sell Grubhub but has since reversed course following a 70% drop in JET shares in 2022. 

According to Yahoo Finance, Berenberg analysts questioned whether the company could dispose of Grubhub at anywhere near the 2020 acquisition price. “We estimate that the disposal of Grubhub could bring in a net $400 million … but this still means a need for over 500 million euros in new funding,” the analysts shared. 

European players in the food delivery business have also suffered in the stock market: the UK’s Deliveroo is down 56%, and Delivery Hero has fallen 73%.

Groen is optimistic, saying the company expects profitability to improve through 2022, reaching positive adjusted EBITDA in 2023. “Our priority for 2022 lies in enhancing profitability and strengthening our business,” Groen said. 

Adam DeWitt was promoted to CEO after Matt Maloney’s departure in late 2021

After the acquisition, Matt Maloney, Grubhub’s co-founder, remained as CEO and joined Just Eat Takeaway’s board. He would oversee the company’s business in North America. 

Four months after Just Eat Takeaway completed the acquisition, Matt Maloney announced he would leave the company in December 2021 to ‘pursue other opportunities.’ Jitse Groen praised Matt’s contribution to the business, saying:

“Great entrepreneurs like Matt start businesses that touch the lives of millions of people. He has built a magnificent company and helped create thousands of jobs across the US. We are sorry to see him leave the company and wish him the best in his future endeavors.”

Matt likely foresaw stormy weather on the horizon and decided to abandon the ship. The pandemic had caused a surge in deliveries, but increased competition and regulation still hampered profits. Maloney left at arguably the most challenging time in Grubhub’s history. 

JET promoted Adam DeWitt, who’d been with the company since 2011, to CEO. Analysts predicted that the change wouldn’t affect the company’s strategic direction as the appointment came from inside the company. 

Amazon could acquire 15% of Grubhub if the companies’ partnership bears fruit

In early July 2022, Amazon and Grubhub signed a deal to give Prime subscribers a one-year membership to Grubhub+. 

Grubhub+ is a membership service that costs $10 a month. It cancels delivery fees for orders over $12 before tips, taxes, and other fees. The over 200 million Prime members, including Grubhub+ members, will get a free year of the service. 

“The value of Prime membership continues to grow with this offer,” Jamil Ghani, vice president of Amazon Prime, said. 

JET said it doesn’t expect the partnership to increase earnings and cash flow in 2022, but it predicts expanded membership. It hopes the expanded customer base to translate to more earnings and cash flow for Grubhub from 2023. CEO Adam DeWitt said:

“I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants.”

“Amazon has redefined convenience with Prime and we’re confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers.”

It isn’t the first time Amazon has added food delivery perks to the Prime service. In September 2021, it partnered with Deliveroo to offer Deliveroo+ to customers in the UK and Ireland. The deal with Deliveroo gave Amazon a stake in the company. 

Amazon’s agreement with Grubhub gives Amazon a 2% stake in the food-delivery company. The stake will increase to 15% subject to the ‘satisfaction of certain performance conditions, principally the number of new consumers delivered through the commercial agreement.’

The deal should renew annually unless either party decides to terminate it.