5 Reasons Why Grubhub Lost a Whopping $6.67 Billion

Did you know that Grubhub once launched a "Free Lunch Promotion" in 2022, that resulted in 6000+ orders per minute, for 3 Hours, in New York City?

Founded in 2004 by a web developer, Matt Maloney & a Software Engineer, Mike Evans in Chicago, Grubhub was conceptualised by both the founders to solve the gap of a
centralised platform for food delivery.

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They created an online marketplace that connects hungry diners with local restaurants offering delivery and takeout options.​
​Grubhub provided restaurants with an online presence to reach more customers without the need for their own delivery infrastructure.

Target Value Proposition:

• For Consumers
  • Ease of Use: User-friendly website and mobile app to browse menus, place orders, and make payments.
  • Variety and Choice: Access to a wide range of restaurants and cuisines.
  • Transparency: Customer reviews, ratings, and estimated delivery times to inform decision-making.
• For Restaurants
  • Increased Visibility: Exposure to a larger customer base without significant marketing investment.
  • Order Management: Streamlined order processing through Grubhub's system.
  • Analytics and Insights: Access to data on customer preferences and ordering patterns.

Financial Journey

• Grew from Chicago to other major cities like New York and San Francisco and reached over 1 million active diners by 2010.
• By 2013, processed over 3 million orders per month, active user count surpassed 5 million, growing this volume to 10 million by 2015.
• Grubhub in 2018, reported over $1 billion in annual revenue and surpassed 17.7 million users.
• In the same year, crossed approximately 34% of the U.S. food delivery market.

It was a Great Product but At the Wrong Time

• Loss of Market Share: By 2020, Grubhub's market share declined by more than half, to around 16%, overtaken by DoorDash and Uber Eats.
• Late Adoption of Technology:Initially relied on restaurants to handle deliveries, lagging behind competitors who built their own delivery fleets.
• Compliance Missteps: In 2019, Grubhub began adding restaurants to its app without their permission. This also led to a class-action lawsuit in 2020.

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Did you know that Grubhub has been accused of charging restaurants for orders that were never orders at all?, they were just merely query calls from Grubhub's own bots.

Controversial Practices & a Lifeline

• It was alleged that Grubhub created websites for restaurants without consent to drive orders through their platform and collect commissions.
• Accused of charging restaurants for phone calls routed through Grubhub numbers, even if they didn't result in orders.
• Grubhub agreed to be acquired by Just Eat Takeaway, a European food delivery giant, for $7.3 billion, though this was a short-lived alliance.
• Just Eat Takeaway had to offload Grubhub this year in a short sale, with a loss of $6.67 Billion.

5 Lessons Startups Can Learn to Avoid Burning $6.67 Billion

1. Agility: Rapid adaptation is crucial in fast-evolving industries, Grubhub lagged in developing its own delivery network, allowing competitors to capture market share.
   ​Ideal Course: Startups must remain agile and responsive to industry shifts and competitor actions.
2. Prioritise User Experience: A seamless and user-friendly experience is vital for customer retention. We should avoid the mistake done by Grubhub founders who fell behind competitors with less intuitive app interfaces and user features.
   ​Ideal Course: Continuous investment in technology and UX can differentiate a brand in a crowded market.
3. Market Relations: Healthy relationships with partners are essential for sustainable growth. Grubhub's shadow practices were the biggest thorn in its partner relations.
   ​Ideal Course: Transparent and fair dealings with partners build trust and long-term collaboration.
4. Ethical Practices Ethical business practices are critical for brand reputation. Accusations of deceptive practices damaged its reputation among restaurants and consumers.
   ​Ideal Course: Upholding ethical standards fosters goodwill and mitigates legal risks,
5. Strategic GTM: Focused growth is often more sustainable than aggressive expansion without a solid foundation. Grubhub's team lost the plot there and tried expanding without adequately addressing core issues, which led to operational challenges.
   ​Ideal Course: Startups should balance growth ambitions with strategic planning and operational excellence.