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Grubhub Idea Proposal (GRUB)

Grubhub Idea Proposal (GRUB)
 

Is Grubhub losing share to competitors?

Report Available: November 29, 2018

 

Blueshift’s initial research found GRUB putting up record revenue and delivery numbers, expanding aggressively with YUM’s KFC and Taco Bell locations, and increasing guidance. It is adding to its platform, acquiring a delivery company focused on college campuses, as well as bringing on a firm with expertise in payments and point-of-sale systems. But GRUB faces growing competition from the likes of UberEATS and DoorDash who are both primed to challenge for share. Also, GRUB’s dissolving of its Eat24 acquisition calls into question its ability to integrate acquisitions. The online food delivery market is growing rapidly, leading to the possibility that all companies may flourish, but GRUB’s leadership may still be tenuous given all the moves its competitors are making.

 

Observations

  1. GRUB’s Q3 beat earnings and revenue expectations, setting records along the way in what is typically the company’s weakest quarter seasonally. Revenue climbed 52% as gross food sales increase 40%. Active diners were up 67% to 16.4 million and Daily Average Grubs, a measure of the average number of orders in a day, grew 37%. GRUB increased its guidance for Q4 revenue. GRUB added more new restaurants to its platform in Q3 than any other quarter, including several thousand Taco Bell and KFC locations. GRUB noted that its advertising efforts have been particularly effective.
  2. GRUB announced its acquisition of Tapingo in September, adding a leading platform for food ordering on college campuses in a way that allows students to use meal plan money for their orders instead of personal credit cards. This gives GRUB access to over 500,000 students at 150 schools. This summer, GRUB also acquired LevelUp, a digital ordering, payments and loyalty company that helps GRUB with restaurants’ point-of-sale systems so they can take on more deliveries. At the same time, GRUB is sunsetting its Eat24 acquisition from a year ago, gradually shifting those diners over to GRUB over the next six months, calling into question GRUB’s ability to integrate and maintain a third brand in addition to Grubhub and Seamless.
  3. As the food delivery business has flourished, GRUB’s competitors have provided an increasing challenge to the market leader. A report shows GRUB leading the industry in July with 34% market share, followed closely by UberEATS at 28% and DoorDash at 18%. However, GRUB’s share fell from 42% at the end of 2017, while UberEATS (up from 25%) and DoorDash (up from 13%) saw their share grow. GRUB is most heavily concentrated East of the Mississippi, while DoorDash and UberEATS have a larger presence out West.
  4. UberEATS is taking full advantage of its delivery partnership with MCD, with over 5,000 restaurants using the delivery service. And that number is growing every day, including 42 new locations in New Jersey, 27 in Pennsylvania, and now in Ireland. MCD is also promoting the seasonal release of the McRib by telling customers they can get it via delivery through UberEATS. DoorDash raised an additional $250 million on the heels of its $535 million round, boosting its valuation to $4 billion. DoorDash boasts partnerships with BWLD, CMG, and WEN among others. Both challengers are making acquisitions of their own, focused on the back-end technology and processes to handle higher volumes, logistics, and provide insight into restaurant operations. Combined with Postmates’ efforts to raise funds through a public offering in 2019, GRUB faces a tall task in fighting off competitors.
  5. Blueshift’s Aug. 31, 2017 report said GRUB’s purchase of Eat24 would help it keep its competitors at bay, a reversal of sentiment toward the company from Blueshift Research’s April 5, 2017 and Nov. 16, 2016, reports. All seven source restaurants using GRUB were satisfied to very satisfied with the service, with five rating it highest among food delivery options. These sources represent large national chains with hundreds to thousands of locations. Two franchise owner sources said their companies are looking to establish standard agreements with GRUB for all locations. Sources’ concerns about GRUB apply to all food delivery services in the industry: uncertainty about the quality and professionalism of drivers and the resulting guest experience, as well as mediocre technology that still requires manual order entry as POS systems are not yet synced. UberEATS and DoorDash are sources’ most commonly used competitors. DoorDash is a steady performer and assertive partner. UberEATS drew more disparate opinions mostly because its higher fee matches its performance for some sources but not for others. All four sources not using GRUB are pleased with their food delivery providers, and only one of them is considering adding GRUB. Two use UberEATS, including a MCD franchise owner who said the service exceeded his expectations and that he is eager to expand usage to his other locations.

 

Which food delivery service is the market leader? What is the market share breakdown for restaurants using multiple providers? What are restaurants’ levels of satisfaction with the different food delivery companies? How is GRUB performing now compared to a year ago? What improvements in GRUB have restaurants noticed? How are GRUB’s competitors performing now compared to a year ago? What improvements have restaurants noticed from these competitors? How do the back-end technology and operational insight features compare? How much growth remains in the market? Which company is most likely to benefit from this growth? Is there room for everyone? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Restaurants using GRUB and competitors, Restaurants using only GRUB, Restaurants using only competitors.

 

Companies: Grubhub Inc. (GRUB)

 

Research Begins: November 12, 2018

 

 

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