The online food delivery market is growing by leaps and bounds. Earlier, ordering food online was a novel concept for many people but now it has become a norm. As a result, more and more entrepreneurs enter the market and come up with innovative solutions that allow people to browse restaurants and get food delivered to their preferred locations.
The global food delivery market is booming and is predicted to reach $1.22 trillion before 2024 ends. Yes, the number is huge and there are many key players in the market including Zomato, Doordash, GrubHub, Talabat, and many more. All are dominating in their respective region but GrubHub holds major market share across the USA.
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Now you must be wondering, what is GrubHub, how does GrubHub work? What business model does it follow? Hold on. In this detailed blog, we have come up with a detailed explanation of GrubHub’s business model along with its major revenue streams explanation. Let’s get started.
What is GrubHub?
Introduced in 2004, GrubHub is one of the popular on-demand food delivery applications that allow customers to browse restaurants, place orders online, and get them delivered to their preferred location. The GurbHub business model has made it possible for restaurants to expand their reach and enable people to check the restaurant’s info before placing an order.
In the year 2018, the company is expected to connect with more than 95,000 restaurants across the UK and around 1700 US cities. In this way, GrubHub’s business model has not only made the process of online food ordering eBay but also helped new restaurants and cafes reach a broad audience.
Without any ado, let’s discuss how GrubHub works, what business model it operates, and the value proposition offered by the company. But before that, check out the most interesting facts about GrubHub.
Facts to Checkout About GrubHub
Legal Name: GrubHub Seamless Inc.
Company type: Subsidiary
Founded: 2004
Industry: Online food ordering
Founders: Matt Maloney, Mike Evans
Headquarters: Chicago, USA
Area Served: USA and UK
Website: https://www.grubhub.com/
- GrubHub boasts more than 5.6 million active diners in the last 12 months.
- GrubHub processes an average of 234, 700 orders on a daily basis.
- Presently, the company serves across 900 locations in the USA.
- It has collaboration with more than 35,000 restaurants.
Four distinct brands in the same industry are owned and managed by GrubHub. They are AllMenus, MenuPages, Seamless, and GrubHub.
GrubHub Funding Timeline
- In order to grow into the San Francisco and New York markets, Grubhub raised $1.1 million in Series A funding in November 2007 from investors led by Amicus Capital and Origin Ventures.
- Grubhub secured $2 million in Series B fundraising in March 2009, spearheaded by Origin Ventures and Leo Capital.
- In November 2010, the company secured $11 million in Series C funding, spearheaded by Benchmark Capital.
- DAG Ventures led a $20 million Series D fundraising deal in March 2011.
- In September 2011, Grubhub purchased parent business Dotmenu, situated in New York and the source of Allmenus and Campusfood, after securing $50 million in Series E funding.
- In April 2014, Grubhub went public at a price of $26 per share. It used the ticker “GRUB” to trade on the New York Stock Exchange (NYSE) when it was a stand-alone business.
Source:
WikipediaHow Does GrubHub Work?
An app like GrubHub makes it extremely easy for people to enjoy lip-smacking food at their homes or workplaces. People only need to perform a couple of tasks on their smartphone and they are done. Let’s take a look and learn how an app similar to GrubHub works:
- Browse: Users can browse all the restaurants and check their related info like name, menu, ratings, and much more
- Place Orders: Users can place their food orders online, add items to the cart, and make payment from the options given
- Restaurant Prepares the Orders: The restaurant confirms the online order request, prepares the same and assigns a nearby delivery provider
- Doorstep delivery by GrubHub person: Once the order gets ready to dispatch, an assigned GrubHub delivery provider picks up the order and delivers the same to its users.
GrubHub Business Model | Value Proposition, Customer Segments, and Much More
GrubHub’s commendable success can be attributed to its successful marketing strategies as a restaurant menu aggregator and its commitment to providing exceptional customer service and encouraging repeat business from its partner restaurants.
GrubHub has a significant advantage in this market thanks to the distinctive possibilities it offers its clients.
The GrubHub business model functions as a mutually beneficial marketplace for both customers and restaurants. This on-demand offering has offered a significant value proposition for both categories.
GrubHub Value Proposition for the Customers
GrubHub offers customers a value proposition that includes food delivery right to their door, taking the place of the conventional takeout method.
Some other major GrubHub value propositions for customers include:
- They can use mobile apps to check restaurant info
- Based on the delivery provider’s availability and the restaurant’s operation status, they can place orders anytime, anywhere.
- Help customers to check previous customer’s reviews to make informed decisions
GrubHub Value Proposition for Restaurants
As discussed earlier, like customers, GrubHub also adds value to restaurants and allows them to expand their reach while saving huge costs on hiring delivery personnel.
- If a restaurant lacks an online platform, GrubHub helps them to come online with quick delivery services
- Restaurants can boost profit margins.
- Moreover, they don’t need to spend huge money on IT setup and all, GrubHub gives them a system to manage online orders
GrubHub Value Proposition for Delivery Providers
GrubHub’s business model creates a a win-win situation for all the stakeholders and delivery providers also get benefits in certain ways:
- They can make extra income by working flexibly
- Delivery providers can also make extra cash from the TIP amount received from happy customers
- Moreover, they are free to choose their suitable delivery hours. So there is nothing like rigidity in working hours.
- Delivery providers are given easy-to-use mobile applications through which they can manage online orders, earnings, and much more with ease.
Revenue Model of GrubHub| How Does GrubHub Make Money?
Restaurants are not owned by Grubhub itself. For restaurant operators and their customers, it offers a comprehensive ordering and delivery platform. Therefore, Grubhub’s service generates the majority of its yearly earnings. Remember that Grubhub only gets paid when the restaurant receives the order.
This is an explanation of how Grubhub makes money.
Commission Fee
Grubhub charges a 12.5% standard commission for each transaction. For Grubhub, this 10% is a significant source of revenue. While the commission fee percentage might vary from 5% to 15%, the normal rate is 12.5%. In order for Grubhub and the restaurants to benefit from one another, this sum is split between them.
GrubHub+ Subscription
It makes money from its (GB+) membership service as well. With a $12 minimum order, it offers unlimited free delivery for $9.99/month. It offers its subscribers additional benefits as well.
Delivery Fees
Customers may be charged delivery fees by GrubHub for specific orders, particularly if they choose to use third-party delivery partners or the delivery driver’s vehicle. Their revenue streams are bolstered by these charges.
Sponsored Listing
GrubHub is an excellent platform for restaurants looking to grow their customer base and market presence. For a brief period, the restaurants are highlighted at the top of the search results thanks to the company’s well-defined marketing and advertising strategies, which increase traffic.
For these postings, the firm charges a certain amount of fees.
These are the different revenue sources of GrubHub. It was observed that in the year due to the sudden coronavirus outbreak, GrubHub’s revenue increased by $508 million.
How Much Does It Cost to Develop an App like GrubHub?
With no question, Grubhub has a giant impact on the food delivery market and has earned a household name almost everywhere in the USA. Its success story in this regard is seen as a source of inspiration to many entrepreneurs looking to exploit the vibrant market of online food delivery services.
It is now clear that the winning strategy of Grubhub and its pervasive presence have made it more and more welcoming for the people who wanted the rest of the success and hence they decided to use its business model.
When there is a need to choose between custom development and a ready-made or white-label solution for the individuals seeking to enter into this competitive niche, the options are usually between those that are custom-made from scratch and those that are bought or white-labeled.
Customized applications may seem like a better option for those who want to be different and unique with features and branding, but it entail huge development costs as well as a lot of time to develop.
On the other side, though, a turnkey or readymade online food delivery system like GrubHub could be quicker and cheaper as an option for entering the market. These solutions perform all the basic functions from day one, which enables budding entrepreneurs to initiate food delivery at a fast pace and rapidly.
If you are thinking about entering the online food delivery business and think you would like to replicate Grubhub’s success, choosing a GrubHub clone might be the perfect solution for you. Such solutions enable you to reduce your expenses on development and accelerate your roll-out, which in turn makes it possible for you to pay more attention to your branding and customer acquisition.
At White Label Fox, we focus on highly-customized ready-made solutions that fit your unique business operations as well as give you the opportunity to decide and determine what will be your choice of technology systems that are best fit for your business. If you want to incorporate into the food delivery business or an existing business with the name to expand your business, we’re ready to help you actualize your dream.
Contact us today and grab the opportunity to work on that soon-to-be buzz in food delivery.
Frequently Ask Questions
- Customer Order: Users select food from a restaurant’s menu and place an order.
- Restaurant Confirmation: The restaurant receives the order and prepares the meal.
- Delivery: A GrubHub driver picks up and delivers the food to the customer’s location.
- Payment: The customer pays for the order through the app using various payment methods.
- Restaurant Search: Allows users to search for restaurants based on cuisine, location, and ratings.
- Real-Time Tracking: Users can track their order from restaurant to delivery.
- Customization: Customers can customize their orders based on preferences or dietary needs.
- Reviews and Ratings: Users can rate and review restaurants, helping future customers make informed decisions.
- Payment Integration: GrubHub supports multiple payment methods, including credit/debit cards, PayPal, and gift cards.
- Subscription Service: GrubHub offers a subscription model called GrubHub+ with benefits like free delivery on orders above a certain amount.
- Commission Fees: GrubHub charges restaurants a commission fee on each order, usually between 10% and 30% depending on the agreement.
- Delivery Fees: GrubHub charges customers a delivery fee, which can vary based on the distance and restaurant.
- Service Fees: A service fee is also added to each order to cover the cost of processing payments and maintaining the platform.
- Subscription Model: With GrubHub+, customers can subscribe for a monthly fee to access benefits like free delivery.
- Restaurant Commission: A percentage of the total order value is charged to restaurants for each order processed through the platform.
- Delivery Fees: Charges customers a fee for the delivery service.
- Service Fees: Fees added to customers’ orders to cover operational costs.
- GrubHub+: A subscription model that provides users with perks such as free delivery for a monthly fee.
- Advertising: GrubHub offers paid promotions to restaurants, helping them increase visibility on the platform.
- Convenience: Easy access to a variety of restaurants from a single platform.
- Wide Selection: Access to a diverse range of food choices, including local restaurants and national chains.
- Order Tracking: Customers can track their orders in real-time.
- Payment Options: Multiple payment methods for added convenience.
- Customer Support: Offers 24/7 customer support to handle issues with orders.
- Restaurant Visibility: Restaurants gain exposure to a broader customer base.
- Uber Eats: A global competitor that also allows users to order food from local restaurants.
- DoorDash: Another major player in food delivery, known for its quick delivery times.
- Postmates: Focuses on a broader delivery service, including food, groceries, and other essentials.
- Seamless: A sister platform to GrubHub, focusing on food delivery with a similar business model.
- Delivery Fee: The delivery fee can range from $1.99 to $9.99, depending on the restaurant and delivery distance.
- Service Fee: GrubHub adds a service fee (typically around 2–3% of the order total) to cover operational costs.
- Restaurant Prices: Menu prices may be slightly higher on GrubHub compared to dining in directly at a restaurant.
- GrubHub+ Subscription: The subscription costs around $9.99/month and provides benefits like free delivery on orders above $12.
- High Fees for Restaurants: Some restaurants complain about the commission fees charged by GrubHub, which can reduce their profits.
- Delivery Charges: Delivery fees can add up, especially for smaller orders or longer distances.
- Menu Prices: Some restaurants increase prices on GrubHub to cover the platform's commission fees.
- Customer Support Issues: While GrubHub offers customer support, some users have reported difficulties reaching resolution for issues.
- Research the Market: Understand the demand, target customers, and competitor landscape in your region.
- Build the Platform: Develop a user-friendly app and website for both customers and restaurants.
- Partner with Restaurants: Establish partnerships with local restaurants and get them onboard the platform.
- Set Pricing and Fees: Define how you will charge restaurants and customers (e.g., commission, delivery fees).
- Marketing and Growth: Use marketing strategies to attract users and restaurants to your platform.
- Payment Integration: Ensure a seamless payment gateway for customers and restaurants.
- Customer Support: Provide excellent customer service to address concerns or issues.
Deep Faldu – CTO
Author
As the Chief Technology Officer, Deep Faldu spearheads innovation at White Label Fox, ensuring seamless, scalable, and high-performance app solutions. His technical expertise, problem-solving skills, and commitment to excellence help businesses thrive in the competitive digital landscape. He continuously explores new technologies to enhance product efficiency and user experience.
