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Grubhub to Stay Ahead of Competitors with Purchase of Eat24 (GRUB)

Research Question: Will Grubhub’s purchase of Eat24 be enough to hold off competitors?

Companies: AMZN, GRPN, GRUB, MCD, PNRA, SQ, YELP


By: Reverdy Johnson

Click here to download report (.pdf)

 

Summary of Findings

  • Grubhub Inc.’s (GRUB) purchase of Eat24 will help it keep its competitors at bay, a reversal of sentiment toward the company from Blueshift Research’s April 5 and 16, 2016, reports.
  • All seven source restaurants using Grubhub are 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.
  • Grubhub gets high marks for its name recognition, established leadership role, partnership abilities and responsiveness. Two franchise owner sources said their companies are looking to establish standard agreements with Grubhub for all locations.
  • The Eat24 acquisition will allow Grubhub to expand its coverage and reach a wider audience in a market that is quite fragmented and highly competitive and that has many regional and local options and preferences.
  • Sources’ concerns about Grubhub 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.
  • Uber Technologies Inc.’s 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 Grubhub are pleased with their food delivery providers, and only one of them is considering adding Grubhub. Two use UberEATS, including a McDonald’s Corp. (MCD) franchise owner who said the service has exceeded his expectations and that he is eager to expand usage to his other locations. Two sources represent higher-end restaurant groups and said UberEATS and Square Inc.’s (SQ) Caviar are more in line with their customer demographic than Grubhub.
  • com Inc.’s (AMZN) Amazon Restaurants service holds great potential to be an eventual industry leader, even within the next six to 12 months. Still, it has yet to have a major effect on restaurants to date.

 

Silo Summaries

1) Restaurants Using Grubhub and Competitors

All seven sources are pleased with their Grubhub partnership and said the acquisition of Eat24 will help the food delivery service expand its coverage and fend off competitors. Reach is an important indicator of success, especially to the larger national restaurant chains embracing third-party food delivery. Sources ranked Grubhub from a 6 to a 9.5 out of 10, including five who rated it higher than its competitors. Two sources said Grubhub gets them the most orders, and two others said it is No. 2 in deliveries. One executive for a chain with more than 1,000 locations nationally has rolled out Grubhub to 15 more stores since the source’s April interview, and two other national companies are looking into a standardized agreements with Grubhub for all of their franchises. DoorDash and UberEATS are the most commonly used competitors, with DoorDash a steady performer but UberEATS a polarizing option, mostly because of its performance does not always warrant its higher fee. Opinions on Amazon also varied: Some sources view it as a looming threat while others are confused by its strategy and worry that it will write its own rules.

2) Restaurants Using Only Competitors

All four non-Grubhub users are pleased with their choice of delivery service provider, and only one is considering adding Grubhub. Two sources work with UberEATS and would like to expand the number of their locations using the service; this includes a McDonald’s franchise owner who said UberEATS was exceeding expectations. Two sources represent higher-end restaurant groups and said UberEATS and Caviar are more in line with their customer demographic than Grubhub. Food delivery services have driven good results for sources, including as much as $1,000 on certain days at one McDonald’s location, a 2% to 5% sales increase for a fine dining group, and projections of an additional $1 million for an upscale dining group. Sources would like to see more reporting and analytics as well as more enterprise-level software that would allow restaurant groups to manage all their locations under the same umbrella. UberEATS charges the highest commission, but one source said it is where the market is headed. Also, Grubhub is more expensive when all of its marketing options are considered. Two sources said Grubhub’s Eat24 acquisition is a smart move and will attract a larger audience.

 

Background

Grubhub’s second-quarter earnings were in line with expectations while revenue slightly beat consensus, growing 32% year to year. Active diners climbed 25%, Daily Average Grubs grew 16%, and gross food sales increased 20%. Grubhub also announced plans to purchase Yelp Inc.’s (YELP) Eat24 for $287.5 million and allow readers of Yelp’s reviews to order food from restaurants using Grubhub. It also intends to take on 27 markets of Groupon Inc.’s (GRPN) OrderUp food ordering service. The Eat24 purchase gives Grubhub 75,000 unique restaurants and 48% share of transactions, making it roughly twice the size of UberEATS. Meanwhile, the deal with Groupon allows customers to order food delivery from Grubhub and the ability to redeem Groupon.

In the second quarter, Grubhub focused more on food delivery, including to Tier 2 and 3 markets, and developed partnerships with chain/franchise restaurants such as Jack in the Box, BJ’s Restaurants and Papa Murphy’s, while also gaining traction with Subway where it now delivers for more than 1,000 of its locations.

Not all is rosy for Grubhub, however. Daily Average Grubs were lower sequentially while EBITDA per order was down 3% because of increased advertising from the previous year. Operations expenses grew 55% year to year, a function of more delivery orders necessitating higher payments to drivers. Also, sales and marketing expenses climbed 37% year to year.

Meanwhile, UberEATS continues to grow aggressively, launching services in Tucson, Spokane, Tallahassee, Gainesville and Bristol in the United Kingdom—all since July 26. A side-by-side comparison in Melbourne, Australia, revealed UberEATS as the clear winner on service and delivery quality with a score of 82.5% compared with 62.5% for Delivery Hero AG’s (FWB:DHER) Foodora and 48% for Deliveroo. Also, UberEATS is now delivering McDonald’s.

Sources for Blueshift Research’s April 5 report said Grubhub faced mounting pressure from competitors and was finding it more difficult to fight them off. This was a continuation of our Nov. 16, 2016, findings. Thirteen of 19 restaurant sources using both Grubhub and other delivery services and all three sources who did not use Grubhub said the incumbent ranked below its competitors. Of note, four of the six repeat sources said their satisfaction with or the percentage of sales from Grubhub had declined since their prior interview. National chain sources were concerned about Grubhub’s ability to scale, especially compared with UberEATS and Amazon Restaurants. UberEATS was noted as Grubhub’s biggest competitor and had made significant strides since our November report.

 

 

Current Research

Blueshift Research assessed whether Grubhub’s purchase of Eat24 would be enough to hold off competitors. We employed our pattern mining approach to establish three independent silos, comprising 11 primary sources (including two repeat sources) and six secondary sources focused on Grubhub partnering with NCR to directly integrate delivery orders instead of using inefficient tablets; the dramatic rise of delivery as a percent of restaurant sales; inclusion of alcohol in delivery orders; UberEATS expanding to Seoul, South Korea; the importance of analytics in the restaurant business; and the possibility of Amazon buying Grubhub. Interviews were conducted August 14–28.

  • Restaurants using Grubhub and competitors (7)
  • Restaurants using only competitors (4)
  • Secondary sources (6)

 

 

Next Steps

Blueshift Research’s next report on the food delivery space will focus on Grubhub’s expanded coverage with its Eat24 acquisition. We also will get an update on large national chains developing standard agreements for their franchises as well as their efforts in syncing POS systems. We will continue to monitor UberEATS’ position and how much its higher price affects its business. Lastly, we will follow up on Amazon Restaurants’ progress.

 

 

Silos

1) Restaurants Using Grubhub and Competitors

All seven sources are pleased with their Grubhub partnership and said the acquisition of Eat24 will help the food delivery service expand its coverage and fend off competitors. Reach is an important indicator of success, especially to the larger national restaurant chains embracing third-party food delivery. Sources ranked Grubhub from a 6 to a 9.5 out of 10, including five who rated it higher than its competitors. Two sources said Grubhub gets them the most orders, and two others said it is No. 2 in deliveries. Grubhub received high marks for name recognition, a large following, responsiveness, partnerships and lower fees than many of its competitors. Its shortcomings are the same as those afflicting all players in the industry: uncertainty about quality and professionalism of drivers and the resulting guest experience, as well as mediocre technology that still requires manual order entry. One executive for a chain with more than 1,000 locations nationally has rolled out Grubhub to 15 more stores since the source’s April interview, and two other national companies are looking into a standardized agreements with Grubhub for all of their franchises. DoorDash and UberEATS are the most commonly used competitors, with DoorDash a steady performer but UberEATS a polarizing option, mostly because of its performance does not always warrant its higher fee. Opinions on Amazon also varied: Some sources view it as a looming threat while others are confused by its strategy and worry that it will write its own rules.

 

Key Silo Findings

Satisfaction with Grubhub

–    7 of 7 are satisfied to very satisfied with Grubhub.

–    Rankings ranged from 6 to 9.5 out of 10.

o    5 rated it 6 to 7.

o    1 rated it 7 to 8.

o    1 rated it 9 to 9.5.

–    5 ranked Grubhub higher than competitors, while 2 ranked competitors higher than Grubhub.

–    1 company has rolled out Grubhub to 15 new locations since the source’s interview in April, even though DoorDash takes more than 50% of deliveries.

–    2 credited Grubhub’s name recognition and large customer base.

–    1 said Grubhub is a good partner and responsive.

–    2 franchise owners said their companies are looking into standard agreements with Grubhub for all the franchises instead of the piecemeal individual deals they have now.

–    4 said Grubhub must improve central management, order taking, and consistency in delivery and customer service.

o    However, they said these problems afflict all providers in the industry.

–    1 large national company said Grubhub lacks coverage to work with all their locations.

Satisfaction with Competitors

–    4 also use DoorDash.

o    Rankings ranged from 6 to 7.

o    1 large national company has added DoorDash at 50 locations this year, said it is more assertive in expansion partnerships than Grubhub.

–    4 also use UberEATS.

o    Rankings ranged from 2 (not enough order volume) to 8 (best at handling logistics of order taking and delivery).

o    It is the most expensive of the competitors.

–    Amazon, Skip the Dishes, Postmates, ChowNow also are used.

o    Opinions of Amazon varied from soon becoming a major threat, turning down restaurants that want to work with the company, being too new, and being superior with logistics and able to make its own rules.

Eat24

–    All 7 said acquiring Eat24 will help Grubhub.

–    Expanded coverage gives it an advantage, helps fend of competition, increases brand recognition, access to more restaurants.

Sales

–    2 said Grubhub does most of their deliveries.

o    1 said 23% of orders are through Grubhub.

o    1 said it is the majority.

–    2 said Grubhub gets the second most orders.

–    1 said DoorDash gets the most orders, more than 50%.

–    1 said UberEATS is the biggest.

–    1 said ChowNow gets more than 25% of orders while Grubhub gets 25%.

–    1 said orders through Grubhub and DoorDash have increased through market expansion, not same-store growth.

–    1 wants Grubhub to be its No. 1 provider as it expands delivery service nationally, but Grubhub lacks a total national presence for now.

Costs

–    No source was keen on spending more if fees were raised.

–    UberEATS received the most complaints for charging the highest commission.

o    1 said the high rate is justified as UberEATS handles order taking and delivery.

–    Grubhub is on the lower end and reasonable by comparison.

o    1 said Grubhub pays the fastest, within the week.

–    1 said larger restaurants may move away from third-party services and develop their own, such as Panera Bread Co. (PNRA) has done.

1) Senior development executive with a restaurant chain that has more than 1,000 locations; repeat source

Grubhub’s Eat24 purchase will allow it to penetrate new markets and, by increasing its coverage, will help it become the largest solution provider. However, third-party delivery remains very fragmented. DoorDash continues to be more assertive than Grubhub in rolling out to certain markets and, therefore, handles more than 50% of the source’s delivery sales. Both Grubhub and DoorDash received a rating of 6.5 out of 10, providing the services that consumers want but lacking in driver availability and standards. The company no longer is considering UberEATS because it is too expensive, but is doing a pilot with Amazon in one market.

April 5 summary: Both Grubhub and DoorDash were good partners, but the latter was more assertive. About twice as many of this chain’s restaurants were using DoorDash than Grubhub. The source rated Grubhub a 6 or 7 and DoorDash a 7 out of 10. No third-party delivery service covered the entire country. The chain also was trialing Amazon and had talked to UberEATS. Grubhub must scale its infrastructure to address pressure from Amazon and UberEATS, which had the existing infrastructure even if they were not yet recognized brands in food delivery.

Satisfaction with Grubhub

  • “We’ve expanded our use of Grubhub to more restaurants. They’re in about 75 of our restaurants [vs. about 60 in the previous interview]. We’re expanding to a couple more soon, but they lack coverage around the U.S. and the opportunities to match up our restaurants with their drivers.”
  • “Grubhub get a rating of 6.5 out of 10, similar to last time.”

Satisfaction with Competitors

  • “[As in the last report] DoorDash is still aggressively trying to grow their reach by trying to get to the markets that mean the most to us. We opened another 50 restaurants with DoorDash since the beginning of the year. DoorDash is still more assertive in helping us roll out delivery in certain markets.”
  • “DoorDash get a rating of 6.5 out of 10, similar to last time.”
  • “It remains a hodgepodge of who’s available where. It’s hard for the national brands to get brand recognition and expand in some of the cities where there are a lot of local services. Sometimes we get into a market where we didn’t realize a local operator had a wider reach than a national player could get at that time. Favor is an example of that in Texas. Waiter is another example of a service expanding now.”
  • “Grubhub and DoorDash are growing, but they still don’t have the coverage that we need. As an example, in a city where we have more than 20 restaurants, 10 of them can’t even get drivers.”
  • “Drivers don’t always meet the standards you’d like. It becomes concerning to a company like ours. All the delivery solutions, whether delivering people or food, are dealing with this. I was in an Uber car recently that was filthy. It’s a worry that these cars are delivering the food.”
  • “The employee driver position has never been in stronger demand. Uber, Lyft, taxis and Amazon all use drivers [and there’s less availability for restaurant deliveries].”
  • “[We started exploring working with UberEATS last time we talked] but we stopped. They’re too expensive. They want too much of a service fee. There’s no company that’s going to be profitable when you take 30% off the dollar from an operator whose margins are in pennies.”
  • “Amazon believes they have the ability to grow. We started a pilot with them in one of our markets, and we’ll see what kind of reach they have and what kind of service they have.”
  • “Amazon said they were paying the drivers at a premium and running the business at a loss so they could get enough network in place and get enough sales to start generating income. Companies are addressing this in different ways but at the end of the day, either you have really good drivers or you have ones that just don’t represent the delivery company brand or our brand well.”
  • “The data we get from DoorDash is fairly robust. It’s an area of opportunity for us to look at that more. From both Grubhub and DoorDash, we look at the feedback on top product mixes and trends on what people are buying.”

Eat24

  • “If Grubhub’s purchase of Eat24 allows them to penetrate other markets, I think it will benefit them. They’re acquiring a delivery solution that has existing employees and services in place.”
  • “Grubhub will become stronger because of it. We need somebody stepping up and taking on more of this in a systemwide approach.”
  • “It puts Grubhub in a more competitive position. The most important thing is coverage. Whoever gets the most market coverage is going to get the most consumer confidence in their services. If Grubhub doubles in size, it will help them become the largest delivery solution out there.”

Sales

  • “DoorDash does delivery for the largest number of our restaurants, more than 50%. Grubhub is our second largest delivery provider.”
  • “We would still like to explore having Grubhub as our primary third-party delivery service if they had the coverage. Delivery is a solution that consumers want, and if we have a trusted ally with a third-party solution, it’s in our best interest to expand with them.”
  • “However, we sometimes don’t see with third-party solutions how we can drive better penetration in a market.”

Costs

  • “We might start seeing companies pulling out from these third-party services as they examine whether it makes sense. They get the sales, but the margins are very tight. If the business shifts more to delivery, people might start to do their own delivery solutions. For example, Panera now runs their own drivers. They claim they’re going to have 10,000 drivers and say they’re seeing upwards of $2,000 a day in delivery. Others too might shift away from third parties.”
  • “The marketing aspect that third parties deliver [is] a way to demand 20% to 25% commission.”
  • “Both Grubhub and DoorDash could have a more fluid and accurate system for the menus and ordering that could lead to a reduction in the commission fees. For both, ordering has to be hand-entered into their website for now. It’s very manually driven.”

2) Senior operations executive for a national QSR franchise chain

Grubhub’s Eat24 purchase will help it stay ahead of the game with greater capacity and market presence. The source’s chain uses many different third-party delivery services, and Grubhub gets nearly 25% of business, the largest share among third-party services. Still, the choice of delivery companies varies widely depending on region. The executive rates Grubhub a 6 out of 10 because its strong brand presence brings revenue activity to restaurants. To get to a 10, Grubhub must improve its delivery management and choice of drivers. UberEATS gets a 4 out of 10, with the same positives but lower marks for not being as business-friendly and for asking for set-up fees for each business in addition to its high commission rates. UberEATS’ execution is also below Grubhub’s. This executive is very optimistic about Amazon and expects it to set higher industry standards. Franchise owners would not be willing to accept higher fees. Paying 25% to 30% of an order already cuts into very thin margins. Consumers demand the convenience of delivery. Keeping staff on hand for that is not always financially reasonable, but the source expects third-party delivery services to execute their core business well for the high price they are collecting.

Satisfaction with Grubhub

  • “We’ve been using Grubhub for about 18 months.”
  • “I would give it a rating of 6 out of 10. The positive is that Grubhub has a strong brand presence in the channel. Guests are used to hearing their name. Being on their retail shelf brings positive revenue activity to the franchisees.”
  • “To get to a 10, they would have to improve the service after the sell—in other words, the ability to manage their delivery, control who their drivers are, and how the guest experience is upon delivery.”
  • “In some markets there are ample drivers, but they’re not all necessarily who you’d want to represent your brand.”
  • “Another part is that the industry is still trying to streamline how to resolve guest satisfaction issues like if the driver is late or the restaurant is late producing the food or if the order is wrong. Was it the restaurant who gave the wrong order, or did the driver make a mistake picking it up? There has to be a resolution that is correct for the guest and for the franchise owner.”
  • “These negative aspects are [felt across] the industry and not unique to Grubhub. What happens when the product leaves the restaurant is a major concern for the franchisees.”

Satisfaction with Competitors

  • “I’d give UberEATS a 4 out of 10. The positive is that they have significant brand recognition. However, the level of collaboration between their brand and our franchisees is much lower than Grubhub. Grubhub is friendly to do business with while UberEATS is very proud of their name, and they act like it. The execution of their service also rates below Grubhub because of the [availability] and quality of delivery personnel.”
  • “UberEATS charges one of the highest commission rates, and they also want to charge a set-up fee for each business. Most third parties don’t ask for an upfront capital investment, but UberEATS is trying to do that. They ask for a high number and can end up negotiating. [It] leaves a bad taste in people’s mouths. We’re not a big fan of UberEATS at this time.”
  • “We use many third-party services. Our franchise owners are at liberty to develop as many business relationships as they desire. There are more than 20 companies. The foremost ones are the big names, however, like UberEATS, DoorDash, Postmates and Amazon, which is just dipping their toes in the water.”
  • “I expect Amazon will become very big very quickly.”
  • “Nationally, Grubhub, UberEATS and Amazon are wielding the biggest sticks. Regionally though, it’s not always the case. For example, Favor is a very big player in Texas.”

Eat24

  • “Grubhub is trying to stay a step ahead of the game with greater capacity and market presence through this acquisition.”
  • “Grub’s purchase of Eat24 is going to expand their capacity and their footprint. I don’t think it’s going to change their business model, but it will make their brand name more visible with Yelp. That will play nicely for them, particularly in the markets where they haven’t been able to do as much business, and they’ll now be able to leverage the Yelp brand. My opinion is that it was a smart move on their part.”
  • “It’s also part of what’s happening in the industry. We’ll have a few big players continue to gobble up some of the small and medium-sized players. Ultimately, we’ll end up with three to five big companies across the nation.”

Sales

  • “We’ve only recently started wrapping our heads around the various companies we’re doing business with and how much volume is being driven by them. The volume varies greatly by geography. For example, in Texas, we do a lot of business with Favor, and in Southern California, we do a lot of business with UberEATS and Postmates.”
  • “Overall, I think Grubhub is providing the bulk with about 23% of our business in third-party deliveries going through their platform.”
  • “Many of the services are specific to certain geographic areas.”
  • “If I had to choose one, in Texas it would be Favor and DoorDash. In the rest of the country, I would choose Grubhub because they have greater capacity right now than everyone else.”
  • “In six months, I hope I’ll be able to say Amazon. In our initial conversations, they’re taking a more collaborative approach than UberEATS, which isn’t that business-friendly. Amazon is just entering the space so that might change, but with the success they’ve had over the years executing the home or business delivery model, they’re a standard for ordering from a mobile device. If they can leverage that background of success, when they get fully engaged in this channel, everyone else will have to catch up. I’m hoping to see that in the next six to 12 months.”

Costs

  • “I don’t think we’d be willing to spend more in this climate where our franchisees are already paying more than they probably ever imagined they would pay a third-party company to deliver their product. They’re not making the choice of paying 25% to 30% lightly. They’re seeing the consumer demanding this type of convenience and that it’s not always financially reasonable to keep staff on hand for delivery purposes. The business owners are looking at the fees they’re paying as exorbitant but necessary, and they expect these companies to execute at a professional level.”
  • “Just because they’re better at their core business, which is the taking and the delivery of an order, I don’t believe our operators would be willing to pay more for it to improve. They expect that is already what these companies are supposed to be doing. Twenty-fiver percent to 30% of an order cuts into margins that are already thin in our industry.”

3) Senior executive for an Asian-style food chain with more than 200 locations nationwide

Grubhub’s purchase of Eat24 will help Grubhub expand its reach and allow for more restaurant partnerships. The chain uses Grubhub and DoorDash and is looking at Amazon as it extends its national presence. The source would like to see better driver selection and training. He also would like to see more efficiency with the systems integrating directly with the POS instead of using tablets and rewriting orders. He rated Grubhub a 7 out of 10. The group’s business with both third-party delivery services has been growing but only through market expansion. Fees are already too high, and the chain would not be willing to pay a higher rate.

Satisfaction with Grubhub

  • “I would give Grubhub a 7 out of 10. Overall, Grubhub’s drivers are better, and they collect a lower commission rate than the other services.”
  • “If I had to choose one, it would be none of them. We’d rather do it ourselves. But if we really had to, it would be Grubhub.”
  • “Really, the biggest concern is putting our food into the hands of somebody who doesn’t work for us and giving the guest an experience that doesn’t reflect on us accurately.”

Satisfaction with Competitors

  • “The closest competitor is DoorDash. We’ve used both Grubhub and DoorDash for a year.”
  • “All these services need to do a better job of hiring and training drivers. They also need to lower their fees. It would also be helpful if their system would integrate directly with the POS instead of having the restaurants use tablets and rewriting orders.”
  • “We don’t use UberEATS. Amazon is slowly expanding, but for now they don’t have that much national presence. They are good in logistics, but they’re also the thousand-pound gorilla and will do things their way, probably without much flexibility.”

Eat24

  • “It’s hard to say if Grubhub will succeed in fending off the challenge from UberEATS and Amazon, but Grubhub’s purchase of Eat24 will help them.”
  • “The acquisition of Eat24 will give Grubhub more reach, more coverage and more restaurant partners for consumers to choose from. They’ll be able to get a bigger piece of the pie through that purchase.”

Sales

  • “I can’t share the percentage of sales that comes from each. But our business is growing year over year, both with Grubhub and DoorDash through market expansion, not through same-store sales.”
  • “The mix of orders we get through Grubhub is similar to that in individual restaurants. The biggest difference is that there’s very little beverage sales through delivery.”

Costs

  • “Grubhub’s fees are already too high.”

4) Catering executive at a Mexican restaurant chain with hundreds of locations, mostly franchises, in the United States

Grubhub’s purchase of Eat24 is a good move and shows that the company is trying to grow and add more markets. The delivery industry is still very fragmented, and the source considers a delivery partner’s scale to be very important. She rated Grubhub 7 or 8 out of 10 because it has been a good and responsive partner. Grubhub’s downside is that it is not present in all areas and it must improve its website. The chain is working on negotiating a standardized agreement with third parties. Franchisees currently are getting different deals by region. The chain has been working with Grubhub the longest but just started using UberEATS, which it finds too expensive. It is also starting a trial with DoorDash. Postmates has not been very successful so far in adding sales. Ideally, she would like to see the possibility of partnering with third-party delivery drivers through the chain’s own website.

Satisfaction with Grubhub

  • “I would rate Grubhub between a 7 and 8 out of 10. To get them to a 10, their website needs to improve with some enhancements. They’re also not in all the areas where we need them to be. But none line up perfectly.”
  • “Overall, Grubhub has been a good partner, and they’re very responsive. They’ve done a good job.”
  • “Grubhub has been around the longest. Some of our locations have been working with them for a long time, especially in urban areas. Those locations live and die by third-party services. In the rural areas, however, it’s more difficult.”

Satisfaction with Competitors

  • “The top 4 third parties we’ve looked at are Grubhub, UberEATS, DoorDash and Postmates.”
  • “We’ve been negotiating with third parties to come up with a standardized agreement for our franchisees because every franchisee out there seems to be getting a different deal.”
  • “The franchisees choose whichever vendors they want, and a lot of times it depends on whether the vendors are in their market. This makes the scale of the vendor really important. As the vendors expand into new markets, more franchisees are reaching out for their services. It’s on fire. The consumer wants it and we have to respond to it, but it’s still very fragmented.”
  • “UberEATS is very new, and we’ve just started working with them. It’s too early to say what we think of UberEATS, but their price is too high.”
  • “Postmates was very disappointing. We’ve been trying them for a while, but they’re just not getting that much business.”
  • “We’re just getting ready to do a test with DoorDash.”

Eat24

  • “I applaud Grubhub for buying Eat24. Years ago they also bought Seamless, and that added more market and was a good move.”
  • “They have a fair price and are consistent. Grubhub is trying to grow the right way, and for them that means acquiring other companies, which may be operating differently. They’ll be able to go out in new markets, but they could have some consistency issues at first.”

Sales

  • No comment.

Costs

  • “Each group asks for different percentages. Especially UberEATS is too high. This makes a lot of franchisees shy away because they can’t give away 30% of the bill. It’s a lot to ask because they run on very tight margins.”
  • “It’s surprising that UberEATS charges such a high premium because they have a critical mass of delivery driver pipeline. You’d think they’d be more aggressive in wanting to get that sale more quickly and bringing the cost down for everybody. Instead, it looks like they’re gouging everybody.”
  • “Grubhub has a fair price that’s consistent across the board.”
  • “Technology needs to take center stage in third-party deliveries. It would be possible on our website to have a list of the third-party companies that deliver for us and some of them would help us aggregate in some markets. This is where technology could help the process. This is something we’re looking at more.”

5) Senior executive for fast-growing health-oriented chain with more than 20 locations in three major U.S. cities

Grubhub’s purchase of Eat24 will help it acquire new customers shopping for restaurants on Yelp. Grubhub is establishing itself as the biggest menu aggregator, but it also must focus on building out the last mile of delivery to compete with UberEATS. This dining chain uses Grubhub, UberEATS, DoorDash and several other third-party services. The source rated UberEATS an 8 out of 10 because it handles the logistics of delivery and is responsive to issues. Grubhub was rated 6 or 7 because of its large customer base but also its lack of responsiveness. The chain recently added DoorDash, which has added incremental growth without taking away from Grubhub or UberEATS. All third-party platforms lag behind in terms of ease of central manageability and providing useful customer data analytics for chains. Still, the services provided offer an important benefit to restaurant companies. Grubhub is only an order aggregator, while UberEATS offers a full service solution, albeit at a very high cost.

Satisfaction with Grubhub

  • “I would give Grubhub a 6 or 7 out of 10.”
  • “The positive about Grubhub is that they have a large customer base of users who use their platform. A lot of customers go to Grubhub, or Seamless in New York, when they want to order for pickup or delivery. That makes them attractive.”
  • “The negatives are that it’s still difficult to manage centrally with things like updating our menu and getting data and analytics on what customers are ordering. The business reporting side is lacking. However, that’s not unique to Grubhub. All the major platforms have that issue.”
  • “Grubhub is less responsive than UberEATS and DoorDash in terms of client management. If I have a question, have to make a change or need help, the other services respond very quickly whereas Grubhub doesn’t, and sometimes not at all. It’s probably because Grubhub has a larger base of restaurants they’re dealing with.”
  • “We use Grubhub, UberEATS, DoorDash. We partner with about a half dozen delivery platforms. The Grubhub partnership goes back more than a year. More recently, we have added additional partnerships, with DoorDash as the most recent one. We’ve used UberEATS and the others a little longer.”
  • “A few of the locations in some markets only have access to services unique to those markets, but by and large it’s fairly consistent because we’re in urban centers. Almost all the big partners have some presence in each of our markets.”

Satisfaction with Competitors

  • “I would give UberEATS an 8 out of 10.”
  • “UberEATS is the closest competitor for the customer. In terms of restaurant operations, they have very different models.”
  • “You can’t compare them on the same basis. Grubhub is an order aggregator; they collect orders to pass on to restaurants. The restaurants fulfill the deliveries with their own delivery people. UberEATS and the other emerging companies in the space are effectively full-service companies. They take orders and also handle the logistics of the last mile of delivery.”
  • “Customers perceive them as similar, but realistically they’re doing different things so it’s not a straight comparison.”
  • “The plus side is that UberEATS handles the logistics for you—the management of the delivery driver and the delivery operations. It’s much more straightforward. The tradeoff is a higher commission rate, which can be difficult to swallow, even if it’s the cost of doing business.”
  • “UberEATS has the same drawbacks in terms of customer reporting/data analytics as Grubhub. However, they’re more responsive on issues that need resolution. They make things easier for the restaurant, but they also take a higher fee.”
  • “We haven’t used Grubhub’s drivers. They’ve been developing that more and more recently. Our Grubhub volume is artificially lower than it could be because we’re not leveraging them as much as we could [because we don’t use their drivers].”
  • “With DoorDash, since we launched our partnership with them, we’re seeing good incremental growth. When we added DoorDash, we didn’t lose our business on Grubhub or UberEATS. It’s clear that there are customers using these platforms specifically.”
  • “I would probably rate DoorDash a 6 or 7 out of 10.”
  • “All these emerging partners have been very focused on the customer side, on creating a great interface and on creating a great customer experience. However, on the restaurant partner side, there’s still a lot of room for them to grow, to build the infrastructure and things that allow companies like ours, that are growing, to manage their business effectively on their platform.”
  • “Their solutions are fine for mom-and-pop restaurants—making changes to the menu and getting high-level performance information. For a company like ours though, with more than a dozen locations, working to grow our brand and to leverage third-party delivery as a platform for growth, there’s room for growth.”
  • “For example, UberEATS provides individual log-ins for each store location. DoorDash doesn’t let you manage the menu directly in their merchant platform. None of them offer the analytics that we need to understand what items our customers are ordering, what demand patterns look like over the course of a day or a week, or how often customers come back—a lot of information that we don’t have visibility into that would be very helpful for us.”
  • “I don’t think that third parties are hesitant to share that information. They just haven’t invested the time and the money to build out those capabilities.”

Eat24

  • “We didn’t pursue Eat24 as a partner because they weren’t that well developed in all locations, and I haven’t encountered anyone who’s actually used it.”
  • “The partnership with Yelp will help [Grubhub] if, when you look at a restaurant on Yelp, you’ll be able to order directly through Grubhub from there. That could be a bigger driver than the Eat24 delivery brand, which I don’t believe was that big.”
  • “Grubhub is trying to be the biggest menu aggregator and wants to build out the last mile delivery on the back of a very successful aggregation platform.”
  • “They’ve had other acquisitions. I’m curious to see how Grubhub will be building out the last-mile logistics piece, the driver side. That will be a big part of what they need to compete with UberEATS and DoorDash.”

Sales

  • “I don’t have our percentage of delivery sales going through Grubhub. They’re not our largest partner, partly because we don’t have our own drivers and delivery staff and we haven’t leveraged their driver option. We use them because few of our stores have delivery staff, and we also allow customers to place orders through Grubhub for pickup.”
  • ‘We have about a half dozen partners and we use them all. UberEATS or Ritual [mobile pickup] are probably our largest partners. Grubhub definitely gets less than 50% of our orders.”

Costs

  • “If two third parties come to a restaurant company and one asks for a 15% to 20% commission for the orders and the restaurant has to continue to handle the deliveries themselves vs. UberEATS who handles the order but for 30% they handle the deliveries too, that’ll be an interesting tradeoff for a lot of companies.”
  • “Uber has put a lot of money behind building up its business like it did in the ride-sharing space.”
  • “We haven’t done an apples-to-apples comparison of Grubhub with delivery service to UberEATS. We may do that. A lot of the larger QSRs are starting to explore third-party delivery because it takes complexity out of the business and it takes away the logistical requirements of running a delivery fleet. There’s a big potential benefit to restaurant companies to not have to manage that and let the delivery companies be the experts in providing those services.”
  • “For us to start a delivery platform, we’d have to put it on our website, build an app, do a lot of work, and then people would have to find out about it. In the case of the third parties, Uber and DoorDash are also marketing their own platform. They’re communicating and subsidizing customers to join their platform and experiment with it. A lot of customers experience our brand for the first time through one of these platforms.”
  • “Some restaurants have concerns about using a third-party delivery service because you lose control and you can’t ensure the drivers will do exactly what they say they’re going to do. The risk, however, exists in the restaurant industry with your own employees as well. Also, I think customers are sophisticated enough to understand that if they have a bad delivery experience through UberEATS or DoorDash, they won’t blame the restaurant as much as the third ”

6) Owner of several frozen yogurt franchises in the Midwest

Grubhub is the leader in delivery business by a wide margin as it gets most of the source’s customer orders, outperforming UberEATS and Skip the Dishes. Grubhub was rated a 9 or 9.5, Skip the Dishes a 7, and Uber a 2 because of a lack of order volume through its service. Grubhub does more marketing, including a coupon offer, which distances it from competitors. The source is considering pursuing a companywide partnership with Grubhub, which is the least expensive option while UberEATS charges the most. Grubhub attracts new, rather than existing, customers to her stores. Keeping items frozen has not been an issue with any delivery service.

Satisfaction with Grubhub

  • “I give Grubhub a 9 or 9.5. The only thing I have an issue with is that the tablet they gave me is hard to hear so we miss some orders and rely on the follow-up call instead.”
  • “We’ve been with Grubhub for just about a year, maybe a little longer.”
  • “They contacted me about partnering.”
  • “I work with these delivery services independently. My company does not sign off on anything. Other franchise owners have had success with Grubhub too, so the company is pursuing negotiating a companywide agreement with them, but that’s kind of like closing the barn door after the horses have already left.”

Satisfaction with Competitors

  • “We also use Skip the Dishes, Postmates and UberEATS.”
  • “I give Skip a 7 and UberEATS a 2. We’re not seeing the volume of orders from Uber that we thought we would. It’s been disappointing, especially given the prevalence of their driving service.”
  • “Postmates hasn’t given us much. Skip was the first one we used. It took time to pick up as far as getting orders.”
  • “I reached out to UberEATS to add them, while the others all contacted me.”
  • “I also reached out to Amazon, and they weren’t interested. Maybe it’s because we’re frozen food. I really don’t know.”

Eat24

  • “I’ve seen Eat24 drivers around and heard that Grubhub bought them. I can only assume this helps Grubhub cover more area and serve more customers.”

Sales

  • “We get the majority of our orders from Grubhub. I don’t know the exact figures, but it’s more than the others.”
  • “I do a few hundred dollars a day in delivery orders. I don’t think it is replacement of in-store business. I’ve looked at the people ordering, and many of them are from further away, people who may not live close enough to want to drive to the store and can now have it delivered to them.”
  • “Grubhub does more marketing. We don’t have a sign on the door like some other businesses do, but Grubhub was the only one to do a coupon offer when they first started with us, offering customers $10 off their first order of $15 or more. It had an expiration date, and you had to be a first time Grubhub diner, but it was more than anyone else did. I am sure that had something to do with why I get more business from them than any other service.”

Costs

  • “Grubhub charges the lowest commission of any of the services I use. Definitely better than Uber, which charges the most.”
  • “And Grubhub pays more quickly, within a week. Skip the Dishes pays every two weeks.”
  • “Keeping things frozen was my biggest concern. But the Skip couriers have their own insulated bags, and I haven’t heard any complaints from any customers. The onus is on the delivery service to deliver the product. It seems to be working out.”
  • “We haven’t had any issues with drivers from any of the businesses.”

7) Pizza place manager in a Midwestern college town; repeat source

Grubhub remains a middle-of-the-pack performer but continues to account for about 25% of the restaurant’s online orders, even though the source still does not use Grubhub drivers. Grubhub’s acquisition of Eat24 will help expand its share of the market. ChowNow still is the source’s preferred provider, largely because of the lower commission rate and the fast response to issues. The service has grown in its importance to this business, now accounting for more than 25% of orders, up from 10% in April. The restaurant does not use Amazon or UberEATS.

April 5 summary: ChowNow provided more for this restaurant than Grubhub and got a higher satisfaction rating as well. The restaurant has its own delivery drivers, and preferred ChowNow’s platform. Grubhub could improve in handling contested orders and refund requests, and was more expensive than competitors with its 20% commission on each order. Still, the source had no plans to change providers as Grubhub contributed 25% of online orders and had the restaurant at the top of its list for pizza places. ChowNow was coming on fast with more than 10% after only two months. The restaurant had been approached by Amazon and UberEATS, but did not use either service.

Satisfaction with Grubhub

  • “They’re middle of the road for us, about a 6 or a 7 out of 10.”
  • “We do a lot of business with Grubhub. We get quite a few orders through them.”
  • “We don’t use their drivers, so we’re not completely using their services.”
  • “Grubhub can hold off competitors. They’re doing pretty well.”

Satisfaction with Competitors

  • “ChowNow is the best one we work with. They’re a 9. A little tweak here or there, and they’d be perfect for us.”
  • “Skip the Dishes gets a 4. They’re the worst deal for us.”
  • “We evaluate these guys all on the cut they take as well as the service they deliver—things like response time, ability to alter orders, or what happens when an order is incorrect.”
  • “ChowNow is quick, responsive. Grubhub is pretty good with that too. Skip is the worst.”
  • “We don’t work with UberEATS or Amazon.”

Eat24

  • “We also use Eat24. Grubhub buying them is probably good for both parties. Grubhub can probably improve the quality of Eat24, and Eat24 gives Grubhub more coverage.”

Sales

  • “We do about 25% of our deliveries through Grubhub. ChowNow is probably a little higher.”

Costs

  • “We’d have to really look at the numbers to evaluate whether we’d pay a higher fee. It depends how much Grubhub raised fees.”

 

 

2) Restaurants Using Only Competitors

All four non-Grubhub users are pleased with their choice of delivery service provider, and only one is considering adding Grubhub. Two sources work with UberEATS and would like to expand the number of their locations using the service; this includes a McDonald’s franchise owner who said UberEATS was exceeding expectations. Two sources represent higher-end restaurant groups and said UberEATS and Caviar are more in line with their customer demographic than Grubhub. Food delivery services have driven good results for sources, including as much as $1,000 on certain days at one McDonald’s location, a 2% to 5% sales increase for a fine dining group, and projections of an additional $1 million for an upscale dining group. Sources would like to see more reporting and analytics as well as more enterprise-level software that would allow restaurant groups to manage all their locations under the same umbrella. UberEATS charges the highest commission, but one source said it is where the market is headed. Also, Grubhub is more expensive when all of its marketing options are considered. Two sources said Grubhub’s Eat24 acquisition is a smart move and will attract a larger audience.

 

Key Silo Findings

Satisfaction with Competitors

–    4 of 4 sources are satisfied to varying degrees with their primary food delivery service.

o    A McDonald’s franchise owner using UberEATS at 1 location said the service is providing twice the business as expected and he is pleasantly surprised with how effective it has been.

o    A fine dining restaurant group rated UberEATS a 5 or 6 for the 32 locations using the service, saying its growth is appealing and the service fits the demographic of the group’s clients.

o    A fine dining group rated Caviar an 8 because it is a good partner and connects with the demographic more than UberEATS or Grubhub.

o    A source representing California locations for a national burger chain said the partnership with DoorDash has been small and unlikely to be expanded. He does not believe his business is conducive to any food delivery service because of fears it will damage the brand’s quality.

–    The McDonald’s franchise owner is eager to expand his UberEATS partnership to more stores. However, the service is focused primarily on cities, and his other locations are not in the delivery radius yet.

–    3 have not received customer complaints, and positively rated the drivers from various companies.

–    Sources would like to see more analytics as well as an enterprise-level integration with software so locations can be managed together. 1 restaurant group source has to manage accounts separately through UberEATS.

–    1 said clients tend to stick with what they know. If someone uses the Uber app, they’ll be an UberEATS customer, whereas a heavy Amazon Prime user will favor Amazon Restaurants.

o    He is considering adding Amazon Restaurants for this reason.

Grubhub

–    The McDonald’s source was unaware of why the company decided to partner with UberEATS and not Grubhub.

–    1 using UberEATS is thinking of joining Grubhub since it is the established leader with good enterprise systems.

–    2 not using UberEATS are considering it and are more likely to start with the service before partnering with Grubhub.

o    The California burger chain said Grubhub is not well known or utilized in his area.

o    The upscale dining source said restaurants using Grubhub are not on par with those in his group.

Eat24

–    2 said adding Eat24 is a smart move for Grubhub.

o    1 said Grubhub will acquire new users and attract a bigger audience, though Eat24 itself was not successful.

o    1 said it will force competitors to step up the quality of services, so restaurants and customers will also be beneficiaries.

Sales

–    The McDonald’s source said his store generates $1,000 in deliveries on certain days.

o    Gets 30 to 40 delivery orders between 10 p.m. and 3 a.m.

–    The fine dining source gets an additional 2% to 5% in sales at various locations, which is the goal and benchmark for other services and any new restaurants where services are expanded.

–    The upscale restaurant source expects an additional $1 million in revenue from food deliveries by year’s end.

–    The California burger chain source has delivery in only a handful of locations, which brings in a couple hundred dollars extra per week.

Costs

–    UberEATS charges the highest commission, though 1 source said it is where the market is going and is less than Grubhub when all its marketing capabilities are factored in.

–    1 wants fees to be on a sliding scale so they can be lowered when a certain number of sales is reached.

1) Franchise owner of more than 10 McDonald’s stores in the Northeast

UberEATS has been a tremendous success so far and has exceeded expectations. The source has only one store in a city where UberEATS delivers, and this location has seen several $1,000 delivery days as well as 30 to 40 orders regularly from 10 p.m. to 3 a.m. in the last six weeks, largely because of all the colleges in the area. As delivery service expands to other areas, he anticipates similar success as long as it is in well-populated cities, even if they are second or third tier. Menu items promoted nationally are not discounted when ordered through UberEATS so the store gets the full margin, and the fee to UberEATS does not appear onerous. Drivers have been consistent, speedy and plentiful. He did not have any insight in or comparison with Grubhub.

Satisfaction with Competitors

  • “We’ve had it for six weeks, maybe eight. It is giving us two times the business we expected. I wasn’t bowled over by the idea at first, but I did like having someone else take care of the delivery side of it. It’s been easier than expected.”
  • “We’ve only got one location using UberEATS right now since UberEATS is only in the cities here in the Northeast—places like Boston, Hartford, Springfield. It hasn’t reached the ‘burbs yet, and I’ve got most of my stores there. UberEATS will only deliver to people within a 1.5-mile radius of our store. If you’re 2.5 miles away from our store and you pull up the Uber app, McDonald’s won’t be an option for you.”
  • “The one store I do have within reach of UberEATS drivers is in a heavy college area, so we get a lot of business there.”
  • “I can’t wait to roll it out to other locations, including an area where I have a couple of my biggest, most successful stores. It should do really well there too.”
  • “This is very viable in cities, even smaller ones, as long as they aren’t in the middle of nowhere. I don’t see how it works outside cities. But there is definitely a huge growth model.”
  • “We’ve even started to see some UberEATS guys picking up orders on bikes.”
  • “Our management team is really buying into it. We were skeptical at first, thinking maybe it’s a money grab for McDonald’s. But it’s been great for us too.”
  • “All UberEATS drives have done a great job so far. I haven’t heard any complaints from customers or from my store staff. The drivers can choose two ways to pick up the orders: coming in to the counter or going through the drive-through. So that helps speed things up too. I don’t think there have been any issues with customer wait times. I’m not hearing about them. There are enough Uber drivers around here that it’s not a problem getting one to pick up an order. In fact, I get Uber drivers camping out in my parking lot late at night when they don’t have rides so they can get a food order to deliver. It’s a great way for drivers to supplement in the down times.”

Grubhub

  • “I was not part of the decision to choose UberEATS. I don’t know much about Grubhub, and am not connected to why we chose UberEATS over Grubhub or any others.”

Eat24

  • No comment.

Sales

  • “It’s been very, very successful. We’ve had days when we do $1,000 a day in delivery orders. That’s unbelievable. On any given day we get 30 to 40 orders between 10 p.m. and 3 a.m.”
  • “Nuggets are the hottest-selling item by far. College kids with their parents’ credit cards, mobile phones and the UberEATS app. We’re both paying a fee, but it’s been a great success so far.”
  • “We don’t do any of the national specials with the UberEATS orders, so the $1 any soda or the 2 for $2 breakfast burritos going on right now are not being offered with UberEATS orders. They pay full price, and we get full margin.”

Costs

  • No comment.

2) Executive in charge of programs for a fine food restaurant group with locations throughout the United States

The Eat24 purchase will help Grubhub grow its audience, but it is taking over a company that was unsuccessful. This restaurant group uses UberEATS exclusively because the service provides the right demographic. However, UberEATS lack the capability to do enterprise-level software integration, requiring a lot of time to enter information for each restaurant. The source rated UberEATS a 5 or 6 out of 10 as a result. The restaurant group uses UberEATS in 32 locations, having grown the locations slowly since March, and measures UberEATS’ success by if it can add a 2% to 5% lift in sales. The company would not be willing to pay a higher rate and also wants to renegotiate fees. At the same time, the group is examining other third-party delivery options, including Grubhub and Amazon. Grubhub’s holistic enterprise-wide portal management and reporting as well as its ownership of Seamless make it appealing. Amazon is intriguing because of the loyalty of its Prime members.

Satisfaction with Competitors

  • “I’d give UberEATS a rating of 5 or 6 out of 10.”
  • “We use UberEATS at 32 locations. We first launched with them in March, and we’ve been adding restaurants slowly.”
  • “They have the right market for us. Their client demographics are those we wanted to reach, where we thought there was opportunity to grow our customers. The scale and pace at which they’re growing is also appealing.”
  • “To reach 10, we’d like to see them make a couple of enterprise-level integrations into their software. For now, the restaurants have to manage everything independently. It’s a lot of work because of the complexity of our organization. To check financials or analytics or guest feedback, we have to log in to each restaurant’s portal. Until it’s available, we’ve put a few ‘Band-Aid’ processes in place, but it’s a big time cost for us.”
  • “They’re in the majority of our markets, with the exception of four cities.”
  • “Uber revolutionized the market by bringing in a community of drivers. The feedback from our guests has also been positive, and the drivers have all been courteous to our staff.”
  • “We’re still working with them on perfecting the radius of how far they can deliver and how far they can pick up to preserve the quality of the food so the guest doesn’t have to wait longer than about 45 minutes. Those are the only complaints I’ve heard about.”

Grubhub

  • “We are having conversations with about 10 third-party vendors, including Grubhub. Some of the other main ones are Seamless, Caviar, ChowNow and Amazon Restaurants.”
  • “We’re looking at adding on Grubhub because they’re the established marketplace leader. Even though Grubhub has lost ground to UberEATS, they have great capabilities in catering because of their acquisition of Seamless, which is focused on that, and we’re excited about that. They also have good enterprise systems; payment, reporting and portal management can all be done holistically under one umbrella vs. Uber, which is restaurant by restaurant for now. Those things make them appealing to partners.”
  • “As we research the marketplace, our biggest takeaway is that people are loyal to the apps or social media they use. A guest that uses UberEATS frequently isn’t necessarily using the other delivery partners and vice versa. For example, someone using Amazon Restaurants is a Prime member and they’re getting added value from it. They wouldn’t be using UberEATS. We’re currently looking at who the likely partners are that don’t have a lot of overlap. We’re also looking for differences in services to add a different value for our guests.”
  • “For Amazon Prime, we’re looking at them because they’re adding value for their guests. It’s a different kind of delivery, and guests use them more loyally than they would other apps. In addition, Amazon is constantly growing, and that will make a good partner for delivery.”

Eat24

  • “Grubhub’s purchase of Eat24 is positive and negative at the same time. It’s great for Grubhub because they’re going to be acquiring more different users. It gives Grubhub a bigger audience. But part of the reason why Eat24 was easy to acquire was because it wasn’t doing as well as Yelp had hoped it would.”
  • “We have a good relationship with Yelp and looked at Eat24 when we were looking at trying a third-party service. It was appealing, but because of their reach and some of the pricing, it just didn’t make sense for us, considering what we expected to get from it.”
  • “It will be interesting to see if Grubhub will run it more like a partnership or will just fully take it over from them and deliver through the Yelp platform.”
  • “In terms of competing against UberEATS and Amazon, Grubhub—even with Eat24—will still need to maintain a lot of loyalty. In the same way, people who are Amazon Prime members have a lot of loyalty to it. Also, people who use Uber are loyal to Uber. At the same time, people who have the Grubhub app use a lot of apps and are more willing to shop around.”

Sales

  • “The value that UberEATS has added for us varies by location. Our goal is to see a 2% to 5% lift in sales. That’s also how we’ll be measuring if and where to add additional partners.”
  • “It’s too early to say which one we would choose if we only had to choose one. Eventually, the goal is to get to a place where we can manage all this ourselves. That’s also where the market is going. Every day more tools are popping up that make it easier for restaurants to self-manage.”
  • “Even Grubhub is doing this, partnering with other apps and providing their drivers at a lower base cost. The restaurants will manage ordering and delivery [rather than through the apps and tools provided by third-party companies like Grubhub and UberEATS, who are providing the drivers].”
  • “We’ll be seeing a shift in the market where restaurants will be building their own apps because they will see value in having other offerings besides just delivery. They will work with companies like Grubhub, Uber and possibly Lyft where they provide drivers just for restaurants. Guests will feel the delivery is coming from the restaurant and won’t have to go through the third-party services. This is important for restaurant branding and would provide an opportunity to offer loyalty bonuses and points.”

Costs

  • “Our initial hesitation about partnering with Uber was that they were too expensive. However, we’ve now seen they’re in line with the market, or where it’s going. They actually quoted us lower than some of the other partners we’ve been vetting, like Grubhub, which is more expensive for certain marketing capabilities.”
  • “We’re still planning to renegotiate [with UberEATS] because they still have to change to a more enterprise-level market. It’s a matter of time until they see the value of having all of our restaurants. But the high commission fee is prohibitive to getting all our restaurants on there.”
  • “We were very selective as we started this trial. The menus at some of the restaurants are made only for in-restaurant dining. For example, you can’t have a filet travel. It would be a waste of money and a bad experience for the guest. At the same time, some of the menu items that do travel well have a high cost. The rate we’ve negotiated with UberEATS is the highest we will go. To charge more than that, they’d have to show us very specific added value and specific revenue that we can expect and would have to be tied to that cost.”

3) Senior executive with an upscale dining group in U.S. cities

Grubhub’s purchase of Eat24 will create more positive competition in the third-party delivery space and may drive the services to improve the value they bring to their guests. This upscale restaurant group decided to use Caviar a little less than a year ago because the restaurants on the site were in the same peer set. Restaurants on Grubhub were not of the same quality, and UberEATS charges too high of a commission. The source rated Caviar an 8 out of 10, praising the business relationship but wanting to see more analytics that would help the group increase its sales and service. He also would like to see a better fee scale in which commission rates would decrease with higher sales. He expects combined delivery sales for the six restaurants using Caviar to be at around $1 million by the end of the year.

Satisfaction with Competitors

  • “We use Caviar only. We started using them almost a year ago, and we’re now using them in about six restaurants.”
  • “I’d give them a rating of 8 out of 10. They’re doing a very good job in terms of the working relationship. To get them up to 10, we’d like more of an idea from them in terms of how we’re doing compared to our competitors or for example, to find ways to retarget meal periods. It’s still early in our relationship, but we went into this to understand how to increase our sales.”
  • “We’d like to have more analytics. In restaurants, we like to look at analytics like average checks, turn times, knowing who our guests are, how often they dine with us. The more analytics we can have to understand this new revenue stream and what’s resonating with our guests, not just with us, it would help us better shape our business to give our guests different ways to engage with us.”
  • “In terms of guest experience, we haven’t had any complaints. It would be better though to get more feedback from guests, and we’re pushing for that feedback. We send a survey the next day to people who had reservations in our restaurants. It would be great to be able to do the same thing with the delivery service.”

Grubhub

  • “We also looked at UberEATS and Grubhub. The quality of the restaurants that are on Grubhub are not necessarily of the same quality as those that are in our peer set. Caviar was more our peer set. UberEATS does have restaurants from our peer set, but their commission percentages were much higher. They also didn’t have the capability to do large party catering at the time.”
  • “We’re not going to be looking at other services in the short term. We want to give it some time to be up and running before we shop it more. It’s still new, and people are still trying to get market share. We want to learn for now how to maximize it, and we want to learn to listen to our guests. We’re not going to be hopping around to try different ones.”

Eat24

  • “As with the restaurant reservations space, a lot of people get into this space. Some make it, and others get bought up. Some competition is good. Hopefully, Grubhub’s acquisition will make everyone up their game in terms of their offerings—not just the service but in terms of bringing more value for the guests.”

Sales

  • “We’ve increased delivery sales with Caviar. I expect that by the end of the year, we’ll do a combined $1 million in delivery sales that we didn’t have before at the restaurants where we’re using them.”

Costs

  • “Because the volume across our businesses is very different for each one, it would be nice to see a sliding scale for the commission to decrease as we approach a certain threshold. We could reward the service by doing more sales and push more revenue to them. There should be some efficiencies in that.”
  • “The ideal food delivery service would be able to satisfy pickups, deliveries, large party catering, with flexibility to the commission structure and delivery fees based on different variables [such as size of the order or time of day], and would accurately target customers. And added to that, improved analytics.”

4) Area manager in California for a large national burger chain

This source uses DoorDash in just a few of the restaurants in his area, and said it brings in only a few hundred dollars of extra sales per week. Delivering hamburgers and fries is difficult given the loss of freshness. He does not deem the extra income as worth jeopardizing the chain’s reputation. California’s driving culture, as well as long driving times, also makes delivery less desirable than more compact urban locations. However, the chain is considering using third-party delivery services more companywide, including UberEATS.

Satisfaction with Competitors

  • “We use DoorDash in just a handful of our locations.”
  • “The problem with delivering hamburgers and fries is that the food doesn’t taste very good or fresh even after a half hour of traveling. Pizzas and Asian food are OK with delivery most of the time, but not burgers. Delivery probably works better for more compact markets.”
  • “Our headquarters is just starting to look at these third-party delivery services, including UberEATS. In this area, using delivery services just doesn’t bring in enough sales to compensate for the risk that it could harm the integrity of our chain if the food arrives cold.”
  • “Another issue here in California is that consumers spend a lot of time in their car anyway, and also widely use drive-ins so they are not very interested in delivery.”
  • “Postmates uses us. Their drivers come in and pick up the food and pay us, and they collect their commission from their customers when they deliver. We don’t have any kind of agreement with them. We had an issue recently when they ran a special promotion for our chain and it created a lot of traffic that we were unprepared for. We talked to them so we could coordinate it better next time, but they weren’t very responsive.”

Grubhub

  • “We just haven’t encountered them for our restaurants in this area.”

Eat24

  • No comment.

Sales

  • “We use DoorDash in only a handful of the more than two dozen restaurants in this area.”
  • “It’s very minor though and only brings in a few hundred dollars a week.”

Costs

  • No comment.

 

 

Secondary Sources

These six secondary sources focused on Grubhub and DoorDash partnering with NCR Corp. (NCR) to directly integrate delivery orders; the dramatic rise of delivery as a percentage of restaurant sales; inclusion of alcohol in delivery orders; UberEATS’ expansion into Seoul; the importance of analytics in the restaurant business; and the possibility of Amazon buying Grubhub.

 

Aug. 11 Franchise Times article

NCR is teaming with Grubhub and DoorDash to directly integrate delivery orders into existing POS systems in an effort to create more efficiencies and eliminate the need for multiple order-taking tablets.

  • “A new partnership between point-of-sale giant NCR and delivery providers DoorDash and Grubhub aims to eliminate the separate tablets that have become a necessary evil for restaurants looking to add revenue through third-party delivery.”
  • “For restaurants using Duluth, Georgia-based NCR’s Aloha point-of-sale system, the new partnerships allows restaurants using DoorDash or Grubhub to ditch the separate tablets and, instead, have delivery orders directly integrated into their existing computers. In addition to less valuable back-of-the-house space dedicated to delivery tablets, NCR also claims the new partnership will help restaurants more efficiently use their staff, save time on menu updates, consolidate financials and reduce the potential for order mistakes.”
  • “Speculating on the future of third-party delivery providers, which have consolidated as larger players buy smaller, regional players, Lawrence said he doesn’t expect there to be one dominant delivery channel for the coming years. These partnerships, he said, will reduce the burden for restaurants choosing to deliver through multiple providers.”
  • “Sandra Glading, director of public relations at Grubhub, said the NCR deal is one of several partnerships intended to lower the barrier for restaurants looking to add third-party delivery.”
  • “‘This is Grubhub’s fourth POS collaboration,’ she said. ‘Grubhub also recently rolled out POS integrations with Oracle’s Micros system, Breadcrumb and Toast, which combined with NCR’s Aloha system, make it easier than ever for restaurant operators to capitalize on the potential from delivery.’”
  • “Lawrence said NCR’s research has shown that many restaurants using third-party delivery have to shut their delivery operation down at peak times, as restaurant staff is focused on taking care of customers inside the restaurant.”
  • “On the customer side of the equation, integrated delivery can also improve customer perceptions when certain menu items become unavailable. Now, those items can immediately be removed from delivery portals, reducing the opportunity for disappointed customers who would be contacted after placing online orders.”
  • “NCR said the formal integration with each company will happen ‘over the next several months.’ Terms of the partnerships with either delivery provider were not released.”

 

Aug. 16 Restaurant Business article

Food delivery is expected to reach 40% of a restaurant’s business by 2020.

  • “The portion of restaurants’ sales coming from delivery could top 40% by 2020, roughly a sevenfold increase from current levels, according to a recent study from Morgan Stanley.”
  • “Demand for off-premise transactions is surging most sharply for coffee and burger chains, the financial company found in a survey of 6,000 consumers. Almost half the respondent base (45%) had ordered delivery in the prior six months, and 85% had visited restaurants.”
  • “Not all of the news was good for the restaurant chains that have charged into delivery in the last year. (The report’s author, Morgan Stanley restaurant analyst John Glass, said 80% of the public chains he tracks are now in that market.) The report found that 43% of delivery patrons opted for at-home or at-office service instead of going to a restaurant, up from 38% in 2016.”
  • “However, the traditional leaders in delivery aren’t suffering from the surge in restaurants that now provide the service. Pizza chains seem ‘immune’ from the competition, suggesting patrons are more compelled by a desire for a hot pie than they are for the convenience of having the food brought to them. ‘Our work suggests the overwhelming reason consumers purchase delivery pizza is that they are craving pizza,’ Glass says.”
  • “Nevertheless, the findings suggest that pizza chains like Domino’s have kept their patrons in part because they’ve been early adopters of new digital ordering methods. The survey found that 18% of delivery customers now place their orders online or via apps instead of calling a number, up from 15% in 2016.”
  • “The findings come to light as more chains test or fully charge into delivery, hunting for new transactions at a time of declining traffic for the industry as a whole. Included are 19 of the top 25 restaurant brands.”

 

Aug. 24 Restaurant Business article

Casual dining chain restaurants are delving into including alcoholic beverages as part of their food delivery services, gaining back some of the margins lost when customers order food only for delivery.

  • “After embracing delivery as a brake on the segment’s traffic decline, several casual-dining chains are eyeing the sale of alcoholic beverages for off-premise consumption as a potential big win.”
  • BJ’s Restaurants announced this week that certain restaurants in California will now include six-packs of beer or bottles of wine in customer’s DoorDash delivery orders. The beer choice is limited to five varieties, and only canned versions. The wine options extend to 25 types.”
  • “Its plunge into alcohol delivery follows Buffalo Wild Wings’ disclosure in late July that it will begin delivery beer in areas of Ohio and Wisconsin where the option is legal. It also revealed that it was starting to test takeout sales of beer. No details were provided on either initiative.”
  • “The two casual powerhouses join a number of smaller chains that offer delivery through third-party services. The 22-unit Gus’s World Famous Fried Chicken chain, for instance, offers 16 types of beer through delivery in Chicago. The brew is sold in standard-sized cans and 40-ounce containers, at prices ranging from $4 to $8.”
  • “Meanwhile, Amazon’s restaurant delivery service, Amazon Prime Now, has started testing delivery of alcohol in Portland, Ore. Customers are promised their beer or wine will be at the door within two hours.”
  • “The alcoholic beverages appear to come from Amazon warehouses rather than the restaurants participating in the service. However, patrons can double up orders and request both a restaurant meal and the drinks.”
  • “A spread of the service would help casual chains offset the margin hit of losing an alcoholic beverage sale for delivery orders.”
  • “But widespread additions of the service will be difficult because of regulatory complications. In some regions, state and local laws severely limit what types of businesses can sell alcoholic beverages, and the transport of beer and wine carries its own set of restrictions.”
  • “Still, ‘we do think there is an opportunity for additional beer sales with both takeout [and] delivery to the extent it’s available,’ Buffalo Wild Wings CFO Jim Schmidt told investors.”

 

Aug. 10 Tech in Asia article

UberEATS has rolled out its delivery service in Seoul, now making it available in nine Asian cities.

  • “Uber has launched its UberEats service in Seoul, home to a booming online food delivery industry.”
  • “This takes the service to more than 112 cities across 28 countries, where it has 60,000 restaurant partners, the company said in a statement. … In Asia, it first made a foray in Singapore last year. Now it’s available in seven other cities—Bangkok, Tokyo, Hong Kong, Taipei, New Delhi, Mumbai, and Dubai.”
  • “Indeed, South Korea is a lucrative market. Revenue in its food delivery sector amounts to US$1.22 billion as of this year and is tipped to grow by an annual rate of 23 percent to hit US$2.8 billion in 2021, latest data from Statista The majority of this is accounted for by online takeaways, at US$1.14 billion.”
  • “UberEats faces several players in the country, where the likes of Woowa Brothers and Delivery Hero—both heavily funded—have been competing for quite some time. In fact, rivalry between the two had grown so strong that it forced the companies to resort to TV commercials to grab more customers, apart from the usual marketing promos.”
  • “One of Korea’s most valuable startups, Goldman Sachs-backed Woowa owns food delivery app Baedal Minjeok, which is leading in app rankings for both App Store and Google Play in South Korea, according to data we gathered from analytics firm App Annie. Woowa has raised US$98 million in total funding to date.”

 

Aug. 25 New York Times article

Data mining and analytics are becoming important tools in increasing the level of service in restaurants.

  • “Both start-ups and established companies are scrambling to deliver up-to-the-minute data on sales, customers, staff performance or competitors by merging the information that restaurants already have with all sorts of data from outside sources: social media, tracking apps, reservation systems, review sites, even weather reports.”
  • “A 2016 National Restaurant Association survey reported that four out of five restaurateurs believed that business would improve if they embraced technology, and a third worried that they were lagging in those efforts.”
  • “‘The goal,’ [Erik Oberholtzer, a founder and the chief executive of Tender Greens] said, ‘is to leverage the technology to do what we would do if we had one little restaurant and we were there all the time and knew every customer by name.’”

 

June 19 MarketWatch article

Grubhub could be Amazon’s next takeover target.

  • “Analyst Aaron Turner said he believes an Amazon-Grubhub deal would be a ‘win-win’ for the two companies, as there are already ‘similar ingredients’ to Amazon’s strategy for Whole Foods that could lead to significant synergies for both companies.”
  • “The Amazon restaurants service ‘was met with much sizzle, but lacked spice,’ Turner said, as it has been unable to capture any significant user traction, and restaurant acquisition has been lackluster. While Amazon struggled, Grubhub has been able to expand into new markets, reaccelerate user and revenue growth and upscale its delivery infrastructure, Turner said.
  • “‘If [Amazon] wants to truly dominate food delivery the choice is clear—gobble up Grubhub,’ Turner wrote in a research note to clients.”
  • “Whole Foods has large store footprints in most of Grubhub’s key geographies, Turner said, including California, Massachusetts, Illinois and New York. In addition, he believes there is overlap, he said, between Whole Foods’ more affluent customer demographic and Grubhub’s user base.”
  • “The table may have already been set for an acquisition, as Grubhub’s service has been ‘fully baked into’ Amazon’s Alexa. And there appears to be additional opportunities for Grubhub to become more embedded in Amazon’s products and services, including “dash buttons” for diners’ favorite restaurants, Turner said.”
  • “For Grubhub, the company would get instant access to tens of millions of Prime members, while Amazon would get a relatively high-margin business as a bonus.”

Additional research by Eva Cahen.