GrubHub: Bringing Order to the Takeout Experience

"Everything great about eating, combined with everything great about not talking to people"

Anyone hungry?

GrubHub Inc. (“GrubHub” or “the Company”) is a leading online food delivery platform that connects diners to the takeout restaurants around them. Through GrubHub’s website and mobile application, consumers can view nearby restaurants, browse menus, check prices, read reviews, and ultimately, order their meal of choice. Now providing 5 million hungry diners with a “direct line” into the kitchens of 35,000 takeout restaurants across the country, GrubHub has firmly cemented itself as the option for takeout convenience. The careful convergence of GrubHub’s business model with its asset-lite operating model has positioned the Company for continued explosive growth in a largely novel and untapped market. 


GrubHub was founded on a simple objective: make takeout better. The Company creates value by addressing key pain points at both ends of its digital marketplace. 


Traditional takeout is a dysfunctional experience: searching in the “menu drawer” for limited, often outdated menus, waiting on hold, being forced to speak to a distracted frontline employee, and ordering with minimal transparency on delivery time is frustrating and stressful. GrubHub comes to the rescue with a few key solutions for the diner:

Discovery: instead of relying solely on “top-of-mind” or “menu drawer” options, consumers now have real transparency into the full suite of restaurants available in close proximity to their homes.

Convenience: GrubHub provides diners with a simple, usable platform to seek out and order food. The annoyance of holding on the phone, interacting with less-than-amicable staff, and misheard or misunderstood orders is over.

Transparency: Through the GrubHub platform, consumers benefit from information on restaurant ratings, past reviews, and daily discounts.

Diners 1


Restaurants need effective customer outreach and broadened brand awareness to drive traffic and increase order volumes (both on-site and takeout). Many, however, struggle to effectively reach their target population. In addition, once the consumer is engaged, providing a quality, error-free takeout experience is oftentimes equally as challenging. GrubHub offers a distinctive value proposition to the restaurant business:

Targeted Reach: Local restaurants gain an online and mobile presence with immediate access to their most valuable customer set: closeby potential diners. No longer are restaurants forced to rely solely on inefficient advertising like paper menu distribution or local print marketing.

Automation: GrubHub automates the takeout process, eliminating error-prone manual inputs and freeing up capacity for staff on-site.

Margin Enhancement: Growth in takeout is margin accretive as restaurants can grow order volumes without the need for additional seating capacity or staffing.

Fair Economics: GrubHub monetizes its value creation in the takeout ecosystem through a revenue-share model with restaurants—only when an order is placed through the platform does the restaurant send cash out the door to GrubHub (GrubHub has chosen not to monetize the consumer side of the market).


GrubHub’s business strategy requires an operating model that uses assets to create a simple, transparent and efficient food ordering process for diners and restaurants. The Company has done an excellent job aligning its operations with the fundamental value proposition it offers to the takeout ecosystem.

Reliability of Network Infrastructure

The software and network infrastructure that enables GrubHub’s digital marketplace is its most crucial operating asset. As such, the Company goes to great lengths to ensure its reliability. On average from 2012-14, the Company spent 11.2% of revenue on technology-related expenses. Management comments, “We expect to continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products.” Any significant glitch in this core technology platform would detract from GrubHub’s strategy of eliminating hassle in the takeout experience.

Investment in Intellectual Property

GrubHub’s business model is one that benefits from huge network effects: the more restaurants that are on the platform, the more diners sign up, and vice versa. As such, the Company seeks to ensure that it has the most comprehensive restaurant data in the industry. GrubHub’s acquisition of both and MenuPages provided the Company with an aggregate database of approximately 310,000 menus from restaurants across all 50 U.S. states. GrubHub’s focus on proprietary menu and restaurant information feeds into its value proposition for the end-consumer.

Transparent Information Flow

Transparency is critical to the Company’s business philosophy—through GrubHub, the diner can expect better than a manual, error-prone, “hope for the best” takeout experience. I ordered sushi earlier tonight. See below for the witty progress updates sent by Seamless, a business that GrubHub acquired in 2013:

text screen 2

GrubHub (and Seamless) provide full transparency not only through restaurant menus, prices, reviews and ratings, but also in tracking an order once it has been placed, eliminating concern on the part of hungry diners. 

Pricing Model

GrubHub wants to be viewed as a strategic partner to restaurants, not an impersonal vendor. By avoiding a subscription fee and upfront cost, restaurants know that only when they are making money is GrubHub making money. Aligning with customer operations, avoiding the perception of a “cost center” and driving higher margin takeout business has contributed to the GrubHub platform’s rapid adoption and revenue growth (49% in 2014).


GrubHub has enormous first-mover advantage in a market that is likely still in the early innings of growth. The Company continues to grow revenue at a lightning pace and, as its settles into a more mature public business, will begin to generate massive incremental margin on each new user given its scalable fixed cost base and asset-lite operating model.

As I part ways with this TOM Challenge assignment, my stomach starts to grumble but the refrigerator is predictably empty. What to do, what to do.


  1. S-1:
  2. 2014 Annual Report


On Time, On Budget, Onshape


Chick-Fil-A: The Top-Performing Fast-Food Chain

Student comments on GrubHub: Bringing Order to the Takeout Experience

  1. Great post! Grubhub’s aquisition spree has certainly created an economic moat for them but I wonder if that’s a sustainable competitive advantage. I wonder how the company will react to competitive pressures from new entrants such as DoorDash, Yelp, Uber, Postmates, and even companies like Blue Apron that eat from the total takeout market share. These new entrants may offer lower take rates to restaurants which would put significant margin pressure on Grubhub. I guess the market is theirs to lose…

  2. Great post, Curtis! I am a big fan of Seamless and agree with you that their business model creates value for both diners and restaurants. Their first-mover advantage and numerous acquisitions were key for maintaining a leadership position. I also agree with Pia that new entrants like Eat24, Amazon and Uber could seriously challenge Grubhub’s position in the future. As soon as other players gain scale and register more restaurants, the pressure will be on Grubhub to deliver. They should pay special focus on improving their prices and delivery times in order to sustain their market shares across the country.

  3. Thank you guys for the thoughts! I agree that growing competition will likely be a major concern for GrubHub moving forward. The real question is has GrubHub built a substantial enough amount of brand equity as a first-mover to combat future competitive threats.

    To follow up on one point, given the nature of GrubHub’s business model, the Company does not currently have the ability to improve price or delivery time to the customer — these are elements entirely under the control of the restaurant. But I think it points to an important point in that perhaps GrubHub does need to find new ways to embed itself in the takeout system other than merely serving as an online marketplace connecting diners with restaurants.

Leave a comment