Delivery

5 things to know about Grubhub's new owner

The acquisition of Grubhub by Just Eat and its entrance into the US market as a result of this acquisition should not go unwatched by all the players involved. Here's what you should know.

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June 15, 2020 by Nabeel Alamgir — CEO and Co-founder, Lunchbox.io

Most of us have heard by now that European food delivery giant, Just Eat, had made a deal to acquire Grubhub for $7.3 billion. This merger, expected to be completed in the first quarter of 2021, will make Just Eat the world's largest third-party delivery service outside of China. Before we delve into the who, what, where, why, and how,  I want to share a personal experience that I had with the Just Eat platform. Back in December 2019, while on a trip to Ireland, I used the Just Eat platform to order delivery from a local pizza joint. I can say with confidence that the service was far superior to anything I've experienced when ordering from Grubhub here in the US. The drivers were prompt, the ordering was easy to navigate, and they showcased quality throughout the entire last-mile delivery journey.

The acquisition of Grubhub by Just Eat and its entrance into the US market as a result of this acquisition should not go unwatched by all the players involved.

Here's a five-point breakdown of exactly who Just Eat is and what this all means for the restaurant industry as a whole..

1. Who is Just Eat

Just Eat is one of the world's largest and most wide-reaching third-party delivery and takeout services. Based in London, England, Just Eat was founded in Denmark in 2000 by five Danish entrepreneurs. They recently had an aggressive focus on the growth of its business and the expansion of its markets. In April of this year, Just Eat finalized the latest in a long line of acquisitions and mergers, merging with another large player in the European space, Takeaway.com. With that merger valued at $7.8 billion, it seems clear that they are "Just Eating "up all of the competition!

2. What Services do Just Eat Provide and Where

Just Eat provides the small, independent businesses they service with exposure in their virtual marketplace, alongside larger, multi-national corporations, where members of the public can choose a dining option, review their offerings, and order through the platform for either takeout or delivery.

Today, Just Eat services over 12 European countries alongside Australia, New Zealand, Canada, Mexico and Brazil; with over 155,000 restaurants using their services. Europe is Just Eat's major market and here their biggest competitor is Deliveroo, a much younger, private company that operates on the same principles as Just Eat and offers a similar product. While this currently is Just Eat's biggest competitor they can expect much more heated competition in the aggressive US market. 

3. Why buy Grubhub?

Grubhub is the name we're all most familiar within this story. The Chicago-based company operates solely in the US, servicing nearly 300,000 restaurants in over 4,000 US cities and their surrounding areas. That's almost double the number of locations that Just Eat already services in over a dozen different markets! Just Eat swept in out of nowhere and conducted this acquisition right under the nose of Uber Technologies Inc, the parent company of Uber Eats, who had been trying to broker a deal to purchase Grubhub.

From these facts, it is clear that the US is one of the biggest, and therefore most lucrative, markets for a third-party takeout and delivery service to operate in. Acquiring Grubhub gives Just Eat turnkey access to this market by leveraging the resources and customer base of the large and established player that it just acquired.

What Happens to Grubhub's other acquisitions?

Over the years of its operation, Grubhub has done some acquiring itself, and it's portfolio includes the brands: Grubhub, Seamless, LevelUp, AllMenus, and MenuPages. LevelUp is a first-party service provider, much like us here at Lunchbox, that was recently acquired by Grubhub for $400 million. This service is going to be included in the acquisition and eventual merger of Grubhub with Just Eat and it is going to be interesting to see how Just Eat leverages the acquisition of a first-party service provider when it has traditionally operated in the third-party market.

Just Eat and GrubHub may have just recently cemented their relationship, but an investor of GrubHub's past is not ready to move on quite yet. YUM Brands out of Louisville is suing GrubHub for breaching its five-year contract, which made GrubHub the sole third-party provider for all of YUM Brands concepts (Pizza Hut, Taco Bell, and KFC). The filed suit mentions how the deal will increase consumer fees by nearly 40%.

What this means for the U.S. market

Many will see this move as a good sign of growth and forward movement in the third-party takeout and delivery space, whereas others will see it as consolidation of the market, creating the first real mega-corporation in this rapidly evolving space. To some, this will outline the need for more customer-focused first-party delivery services, such as Lunchbox, Olo, and Chownow, to allow smaller businesses and brands to stay in contact with their guests and to keep the restaurant experience alive.

This acquisition shows how in the future small businesses may have fewer options to choose from when it comes to selecting a takeout and delivery partner. This reduced competition in the market, allows these bigger companies to dictate the price of using a third-party provider for takeout and delivery services, potentially putting a business-crushing squeeze on small businesses and their margins. We highlighted this the other week in our blog when we compared a third-party supplier's cannibalization of a small restaurant's profit margins to the relatively small cost of using a first-party delivery service.

Overall, it can be seen as a sign that those at the top of this business envision that the delivery and takeout service segment of a restaurant's offering is going to continue to expand, making up a larger and larger percentage of restaurant's orders over the coming years. Everyone in this space should continue to be forward-looking and strive every day to improve their services. 

About Nabeel Alamgir

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