Grubhub Business Model and Revenue Sources: {Full Explanation}
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Grubhub Business Model and Revenue Sources: {Full Explanation}

Dileep Gupta
By Dileep Gupta| Monday, September 17, 2018 12:56 PM |5 min read
Grubhub Business Strategies and Revenue Sources

The name ‘Grubhub’ has been around for a long time now. Most people don’t know what it is and how it works and so this article was written for the same purpose. To understand what is Grubhub, how does Grubhub work and how much does Grubhub cost, keep reading further.

What is Grubhub?

Grubhub is an online food delivery service platform that allows users to order food from any place in the city. They have a massive user base of 14 million and collaborations with 80,000 restaurants. The business is active in 1,600 cities across USA and UK. The Grubhub revenue, as of 2017, comes to 68.32 crores USD. Grubhub is a startup that has succeeded in becoming an IPO.

The Grubhub business model works on serving two segments: Customers and Restaurants. Grubhub for business would be a beneficial idea since the business models have proven to be highly successful so far.

Grubhub Funders and founders

Why does Grubhub standout?

Any company stands out because if its striking features and exceptional quality of work and that is the case with Grubhub online food delivery service. Even after the competition rose when big names like Amazon and Uber entered the market, Grubhub was able to maintain a good position in the market.

Grubhub has an outstanding mobile application which has been the strongest factor for its success. The application has every feature that any restaurant app development agency includes in their top applications. The performance of app made the delivery process glitch free.

[See: Why Restaurant Need Well-Executed Mobile App]

The features that make Grubhub business model stand out are:

Grubhub USPs

  • On a regular day they process 2,34,700 orders on an average.
  • The business is spread across more than 900 cities in the USA alone.
  • Its global presence is in more than 1600 cities in US and UK.
  • Grubhub has partnered with 35,000 restaurants in the USA and a total of 80,000 including USA.
  • It has experience of managing 4 different brand name- Seamless, Grubhub, MenuPages and AllMenus.

Grubhub Successful Funding Timeline

When the founders Matt and Michael decided to turn Grubhub for business, they didn’t know that one day they will lead it to an IPO. In the beginning, Grubhub faced difficulties in getting a ‘yes’ from investors and most of them took a really long time to say anything. That is when the founders decided to take control of the situation.

They went down to the restaurants in San Francisco and explained each of them what does Grubhub do and how does Grubhub make money. Eventually the restaurants agreed and orders started to flood in. This grabbed the investors’ attention and they joined in.

The funding timeline below shows when and how much did Grubhub receive throughout the years:

Grubhub Successful Timeline

Value Propositions

The value proposition explains what does Grubhub do for the segments they serve in. As mentioned before, Grubhub serves two segments- customers and restaurants. Following are the value propositions provided to each one of them:

Users:

  • Customers save time and energy by ordering food online from a wide range of restaurants.
  • Users can even select their choice of restaurants to order from.
  • Grubhub provides 24 hours service, 7 days in a week.
  • Once the order is placed, customers can track the delivery.

Restaurants:

  • For delivery, Grubhub has its own delivery workers.
  • The restaurants get an extended customer base through Grubhub.
  • They can serve their regular customers when the customers select them while ordering.
  • To manage the deliveries and orders, a software is provided by Grubhub.

[Extra: Know how much does it cost to make an app]

Grubhub’s Customer Segments

Grubhub likes to keep it simple and hence deals with only two customer segments. The plan may change in the future depending on how does Grubhub work with this model but for now they only focus on picking food from one location and delivering it to the other location. These two locations are restaurant’s and customer’s.

Users:

  • Users who love to dine out but don’t get time to go out.
  • Users who work and often forget to pack lunch.
  • People who don’t know how to cook or don’t want to cook.
  • Corporates who want to have lunch but don’t have time to go out.
  • People who want food to be delivered at their doorstep.

Restaurants:

  • Restaurants with good food that lack customers.
  • The ones that don’t have any delivery guys to deliver.
  • That don’t have any marketing or branding strategies.
  • Restaurants that want to expand and reach people in every corner.

The Grubhub Business Model

The main goal of Grubhub is to make food ordering and food delivery easy. They are basically connecting the food joints in the city with the customers to make online food ordering an option for users. They are doing this by the help of latest technology in mobile applications.

Applications like Grubhub must have a lot of bold features to compliment them with the food images and icons. For this reason Android app development companies like Appinventiv are taking food app developments to a whole new level. Rapid communication, push notifications, in-app ordering and feedbacks are some factors to include in your restaurant app development.

The below chart shows a summary of the Grubhub business model:

Revenue Model:

Many questions have come around asking ‘how does Grubhub make money?’ and ‘how much does Grubhub cost?’. Both of these questions will be answered now.

Grubhub is an online food delivery service provider and has competitors like Amazon, Uber, etc. In the food delivery market generating large revenue become quite difficult. But the CEO of Grubhub, Matt Maloney, has said that the market is so huge that it can fit multiple players at the same time.

Grubhub’s revenue generation model has three sources of income:

Delivery fee: The delivery fee is taken from the customers and how much does Grubhub charge for delivery? 20-40%. The customers are more than happy to pay this percentage for the quality of service that Grubhub provides. Also, this fee is given by users to get food without stepping out of the door which they don’t mind at all.

Grubhub pays majority of this delivery fee to its delivery workers for their service and keeps a small sum from it.

Commission fee: Grubhub takes a basic commission of 12.5% on each deal. This percentage is a major source of income for Grubhub. Although the percentage of commission fee can range between 5% to 15% yet 12.5% is the standard pricing. This amount is shared between Grubhub and the restaurants so that both the parties can earn profit from each other.

Extra commission: This extra commission is charged for ranking restaurants its same category. The percentage of extra commission can range from 2.5%, 7.5%, 17.5% depending on the hierarchy of rankings. Extra commission is only taken for featuring restaurants on demand and the customers have to do nothing with this.

How does Grubhub Operate?

Now that we have seen the business model and the revenue model, let’s talk about how Grubhub works. Grubhub has an application that connects the restaurants, the delivery guys and the users. All of these together makes it easier to operate. Timely notification is sent whenever an order is placed, an order is ready and packed and when it is out for delivery. Once it has been delivered, the process is complete. All these key factors have to be taken care of by the restaurant app development company so that the process runs smoothly.

The operation of Grubhub is explained in three four steps:

Grubhub is explained in three simple steps

Step 1: Browse

Customers get a wide range of restaurants to choose their next meal from. They will browse through the Grubhub application with features like ‘nearby’ or ‘search’ and order food. The application also allows users to order from their choice of place by selecting it manually.

Step 2: Place order

While placing the order, users can put various settings and preferences regarding the delivery and payment options.

Step 3: Prepare and pack

The restaurants that the users choose receive the order and then prepares the food. After properly packing it, they inform the delivery guys to pick it up.

Step 4: Delivered

Once the package is ready it will be delivered by Grubhub’s delivery guys.

Why did Grubhub Succeed?

For Grubhub, success came from many factors and not just one. Of course the business model and revenue generation strategy worked its charm but there were other factors too.

When the company wasn’t receiving any funding from investors, the founders of Grubhub decided to go to San Francisco and gather menus from all the restaurants. Gradually they started listing each and every restaurant in their mobile application.

Apart from the dedication of Matt and Michael, these factors helped Grubhub gather more customers:

  • As a deal with restaurants, Grubhub offered discount coupons for customers, occasionally.
  • Users were given an option to rate the restaurants which brought the best quality restaurants at the top.
  • The application lets the users know the average amount they will need to eat at a particular restaurant. This was one of the most useful features.
  • Once a user sets the location and the restaurant, the result shows how much does Grubhub charge for delivery.
  • Both delivery and picking up services are available.

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Continue exploring the landscape of product design with these helpful resources: grubhub business modelgrubhub revenuehow does grubhub make moneyhow does grubhub workWhat is Grubhub?
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Dileep Gupta
About The Author

Dileep Gupta, the Chief Delivery Office at Appinventiv is someone who having worked with hundreds of clients worldwide, knows what they need in terms of product and service delivery. Having acknowledged himself with both the human and technical side of an app, Dileep is someone who gets things done to make an app reach its people and then the world, on time and above par met expectations.

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