Summary
Highlights
Grubhub, a dominant force in American food delivery by 2016, originated in 2004 when two engineers in Chicago sought to streamline food ordering from paper menus. Initially an online directory, Grubhub pivoted in 2007 to a pay-per-performance model, earning a cut from each order. In 2013, it merged with Seamless, a company that previously managed corporate expense accounts for food. This merger resulted in a platform with 25,000 restaurants and nearly $800 million in annual gross marketplace value. Grubhub went public in 2014, showing profitability, a rare feat in the consumer internet space, suggesting they had figured out how to profit from the challenging restaurant industry.
In 2014, Grubhub co-founder Mike Evans resigned, citing the company becoming a 'Frankenstein's monster.' Meanwhile, DoorDash, founded by Stanford students in 2013, emerged with a different strategy. While Grubhub focused on mom-and-pop restaurants, DoorDash targeted chains for scalability and expanded into the Sunbelt states, which Grubhub had ignored. DoorDash viewed food delivery as a logistics problem rather than just a software marketplace, a fundamental difference in approach that would later prove crucial. By 2018, Grubhub held a 43% market share, but DoorDash's user-centric strategies began to erode this dominance.
By October 2019, Grubhub's CEO described consumers as 'promiscuous across apps,' highlighting a failure to build customer loyalty, unlike DoorDash, which introduced DashPass—a subscription service offering free deliveries, similar to Amazon Prime. This move by DoorDash secured customer loyalty, while Grubhub increased commissions from 10% to over 20%, burdening restaurants with already thin 5-10% profit margins. Grubhub also engaged in ethically questionable 'black hat' tactics, creating fake websites and phone numbers for restaurants, leading to lawsuits and a negative reputation among restaurateurs. By 2020, restaurants rated Grubhub as the most disliked delivery service.
The COVID-19 pandemic in March 2020 should have been Grubhub’s moment, but DoorDash significantly outpaced its growth due to earlier strategic decisions. DoorDash's focus on suburban markets and chain restaurants, combined with its private funding alleviating public shareholder pressure, allowed it to thrive amidst increased demand for home delivery. Grubhub, tied to urban centers and corporate clients, suffered as office buildings emptied. Between January 2018 and March 2019, Grubhub fell from first to fourth place in market share, overtaken by DoorDash, which fundamentally understood delivery as a logistics challenge, contrasting with Grubhub's view of it as a software marketplace.
In June 2020, Dutch company Just Eat Takeaway acquired Grubhub for $7.3 billion in an all-stock transaction, after a blocked attempt by Uber. Just Eat Takeaway aimed to replicate its European success in the US by running Grubhub with a cost-cutting, cash-focused strategy, but this clashed with DoorDash's aggressive market domination approach. By August 2022, Just Eat Takeaway acknowledged overpaying by 3 billion euros and reported a 5 billion euro loss in March 2023, largely due to Grubhub. Grubhub's user base plummeted from 33 million to 21 million between 2021 and 2023, coupled with a $25 million fine in 2024 for predatory practices.
Just Eat Takeaway sold Grubhub in 2024 to Marc Lore for $650 million, incurring a 91% loss on their initial investment. Marc Lore, known for successful e-commerce ventures like Diapers.com (sold to Amazon) and Jet.com (sold to Walmart), now leads Grubhub. He has initiated a 'mealtime thesis,' laying off 20% of staff to focus on efficiently delivering prepared meals to busy customers. The video concludes by emphasizing that understanding one's market deeply is crucial for success, a lesson Grubhub learned the hard way by misjudging the nature of the food delivery business compared to DoorDash.