This article explains the Grubhub business model and its customer acquisition strategy. You will also get to know how it works, its revenue model, and its business side of things.
In this pandemic, as social distancing and public safety have become crucial for the public, they have inclined more towards on-demand services. And food delivery is one of the most sought after services among everyone. Looking at the massive influx of people ordering the food online, many startup aspirants across the world are considering starting their business in the food industry.
So for those wannabe entrepreneurs, this time, in our business model review series, we have decided to review and explain the most used and trusted food ordering app Grubhub. In the on-demand food delivery space, Grubhub is touted as a tried and true food ordering and delivery business. And Grubhub’s business model is considered to be the most efficient and sustainable among its peers.
As per the latest reports, among the United States’ leading food delivery giants, Grubhub has a total sales share of 23% of total market share. This has gotten the attention of many entrepreneurs and startups enthusiasts to look through the Grubhub business strategy.
In this article, we are going to understand the nitty-gritty of the business side of Grubhub. We will also dissect the revenue model and value proposition of Grubhub.
How Grubhub Works?
Before you know the details of the Grubhub Business model you ought to know how does Grubhub work?
Like other international food delivery apps, Grubhub also aggregates foodies to their nearby favorite restaurants through drivers.
Grubhub through its amazing online platform let restaurant owners put their menus in front of millions of people who crave delectable food.
On the other hand, food lovers who want to order their food on the go can order using Android and iOS app Grubhub’s app. All they have to do is just enter their area code or full address in the app and order from the shown menus of nearby restaurants.
As soon as a customer places an order, a nearby restaurant gets a notification. Once the restaurant accepts the order, it alerts the nearby Grubhub Driver who takes the food parcel from the restaurant and delivers it to the customer’s doorstep.
Grubhub also allows customers to choose a pickup option as well if they don’t want to pay for the delivery charges.
Grubhub Business Model Canvas
Here’s a complete analysis of Grubhub’s business plan. Know what is its key activities, resources, value propositions, partners, and revenue streams.
Grubhub Value Proposition
If you will look closely at the business model of unicorn companies, you will find one thing in common, which is how they provide value to their stakeholders. Grubhub is a three-sided online marketplace that provides value to its customers, restaurant partners, and Grubhub drivers. Let’s understand the Grubhub business strategy and value proposition of Grubhub at length.
What is There for Customers in Using Grubhub?
First of all, Grubhub allows its customers the convenience of ordering food through their mobile app or website. Secondly, it brings menus of innumerable local restaurants so that customers could find their favorite food in one place and savor them. Lastly, Grubhub ensures that the delivery the customers are getting is safe and contact-free (Especially during the Covid-19 time)
- Grubhub also has a food pick-up service for customers who don’t want to pay for the delivery charges. In the COVID-19, the company allows curbside pickup in which customers have to stay outside the restaurant and the staff member brings the food order to their car.
- Customers can schedule and plan ahead their orders two hours to four days before.
- Grubhub+ service is specifically made for customers who order the food frequently. By subscribing to this service food lovers can get unlimited free delivery on a certain amount of order from certain restaurants.
- The best part of Grubhub is that it also has a catering and delivery service for corporate companies. The food delivery company provides delivery to the company team or the whole office on their special orders.
- Grubhub provides 24/7 support service assuring that customers get the answers to all their queries. It also solves order-related disputes between customers and restaurants.
- Customers also have options for purchasing and giving Gift cards (eGift and Digital card) for birthdays, anniversaries, or any other special occasion.
How Grubhub Provides Value to Restaurant Partners?
Restaurant partners are one of the imperative parts of the business model of Grubhub. So, Grubhub provides local restaurant owners the needed exposure and accessibility.
- The food ordering company flaunts restaurant partners’ menu to millions of platform users.
- It provides marketing tools to help restaurants to promote their business. The owners can make a free restaurant website for better traction of their business.
- What is more important for restaurant owners is that they could leverage the benefit of Grubhub’s delivery platform and give their customers a unique food experience.
- Grubhub provides a complimentary tablet and panel that cater to owners to accept and manage the orders. It also gives insights into their daily sales and income.
- It also helps restaurants in providing effective customer service on behalf of restaurants.
See Also: How to Create a Restaurant App?
How Grubhub Provides Value to Their Drivers?
Grubhub drivers are the important pillar of its Grubhub business plan. So, the company has carried out an effective framework for those who want to join the platform and who have already registered in the platform.
- Grubhub allows anyone with the car or bike to earn extra money by registering on the platforms and delivering the food to the customers.
- Drivers are free to choose their suitable delivery hours as they work as an independent contractors on the Grubhub. So there is flexibility in their job.
- Grubhub provides an easy to use driver mobile app through which they can start getting orders and delivering it.
- Apart from the decided commission on the order, drivers get to keep the 100% tip given by customers.
GrubHub Revenue Model: How Grubhub Makes Money?
In 2019, the food delivery giant increased its revenue growth and earned a total of USD 1.31 Billion. Which is not possible without an effective revenue model and top-notch service.
So how does Grubhub make money?
Grubhub itself does not own any restaurants. It provides a complete ordering platform and delivery platform for restaurant owners and their customers. So, the major part of Grubhub’s annual revenue comes from the service it provides. Also, remember, Grubhub only earns when the restaurant gets the order.
Here is the breakdown of how Grubhub generates its revenue.
1. Per Order Fee Structure
- Base Commission Rate for Restaurant 20%: Restaurants can decide a higher or lower commission rate per order as per their requirement. More commission restaurants get more exposure.
- Delivery Platform Commission 10%: Grubhub charges this amount to the restaurants for using the delivery service it provides.
- Processing Fees: 3.05% + $0.30
Note: marketing commission and delivery commission applies to the product total. Which includes the food and beverage the diner has ordered. Whereas, the processing commission applies to the receipt total which includes an 8% sales tax on the product total.
2. Grubhub+ It also earns from its (GB+) subscription program. For $9.99/month, it provides unlimited free delivery on the minimum order of $12. It also provides other perks to its subscribers.
3. Gift Cards The company also generates revenue by issuing Gift cards for its customers. By purchasing it, customers can gift it to their friends or family on some special occasion.
Ubereats vs Doordash vs Grubhub Business Model
Doordash, Grubhub, and UberEats are the top food delivery players in the U.S market. So the comparison between their business models is bound to happen.
One of the biggest differences you will see among these three companies is that Ubereats and DoorDash business model operates in multiple countries and have more restaurants and drivers registered than Grubhub. Grubhub has targeted only the local market. But yes! As per the recent article, Grubhub has been acquired by Europe’s leading Food delivery leader JustEat. So, it will be expanding its operations in European cities as well.
Commission and delivery fees are the main sources of generating revenue for all three companies. They all offer Gift card options for their customers. Ubereats and Grubhub have both kinds of Gift card options (e-Card & physical card) available. Also, on a $9.99 monthly subscription, they provide free delivery on minimum order of- $12 in Grubhub, $15 in Ubereats (5% off), and $12 in Doordash.
Because of its sustainable business model, Grubhub’s market share has always been on the top in the US food delivery market for the past 16 years. During this time Grubhub has also acquired many big companies like LevelUp, OrderUp, and Seamless. In the coming time, It is going to operate as an independent entity from JustEat. It remains to be seen where Grubhub goes after it has been taken over.
If you want to start a food delivery business and are inspired by the Grubhub business model, you can purchase a readymade Grubhub clone and get started. It is generally considered the easiest option for getting into any app business.