On-demand food service is no more obscure.
With the advancements and changing business trends, it comes as no surprise that online food delivery is set to supersize to a hefty $161.74 billion by 2023.
The traditional tiff between the restaurants has turned into a competition of faster online deliveries, which has only been possible due to the increasing number of online food aggregators.
More people prefer delivery from platform-to-consumer over restaurant-to-consumer.
(Source: Grand View Research)
Over the past few years, online food aggregators have played a major role in boosting the food industry.
Out of the multiple successful business models, the GrubHub business model was the one that grabbed most eyeballs, be it of investors or food joints.
So, what was so intriguing about the GrubHub business model? Let’s find out!
Founded in 2014 by Michael Evans & Matt Maloney, GrubHub originally started as an online marketplace to connect the customers with the restaurants.
Initially, GrubHub marketplace offered a seamless experience for the customers by listing the top restaurants on their website. Using this, the customers could check out the restaurant’s menu without calling them.
Eventually, GrubHub attracted various investors and saw steep growth in their revenue. That’s when they decided to expand further and merged with its competitors like Seamless and Eat24 in 2014 to start its own food delivery network.
Currently, the company is operative in 1,600 US cities connecting with over 80,000 restaurants. Well, this success could only be attributed to its versatile business model.
GrubHub started the food delivery business to connect the restaurants with their customers using the company’s delivery network.
Basically, the company does not have any ownership of the restaurants but of the delivery networks.
With the help of latest technology and mobile applications, GrubHub’s business model has taken a giant leap in the food delivery business.
However, major credit goes to its robust mobile app. Some of the most intriguing features, such as rapid communication, push notifications, order tracking, and feedback, have made it more popular over the years.
Grubhub makes the customer reach out process for the restaurants a breeze. GrubHub mobile application easily connects the restaurants, the delivery staff and users together. Using a single mobile app interface, all three of them can establish smooth and quick communication, which results in faster delivery.
GrubHub Business Model Explained
Here is a 4-step model for you to understand the working of GrubHub business model even better:
Step 1: Browse
GrubHub mobile app offers flexibility to the customers to browse and choose from the list of various restaurants available in the nearby section. They can search the restaurants by name or use filters such as cuisine type.
Step 2: Place Order
GrubHub lets the user add food items to the checkout cart, place orders, and make the transaction through a secured payment gateway.
Step 3: Preparing and Pick Up
After the order has been placed, the restaurant confirms the order of the food. Meanwhile, the GrubHub delivery person gets notified of the order pickup along with the location of the customer.
Step 4: Delivery
On the completion of food preparation, the restaurants pack the food and hand it over to the GrubHub delivery person. The delivery guys use the GrubHub app for drivers to deliver the food to the desired location.
After the food delivery, the customers can rate the food joint and the delivery person depending on the services through the app’s feedback system.
GrubHub business model serves as a two-way marketplace—for the restaurants and for the customers.
For both the segments, this on-demand delivery has provided a major value proposition.
GrubHub Value Proposition for the Customers:
GrubHub’s value proposition for the customers is the fact that the traditional way of takeaways has been replaced by food delivery at the doorstep.
Some other major GrubHub value propositions:
GrubHub Value Propositions for Restaurants:
GrubHub value proposition for restaurants is even more compelling because it saves the expense of hiring a delivery staff.
Well, GrubHub has a simple pricing model for revenue generation. The business model of GrubHub works on these sources:
GrubHub charges a commission from each restaurant with a fixed percentage.
So, what percentage does GrubHub take?
GrubHub takes a commission of 12.5% on each order from the restaurant. However, the commission percentage varies from 5% to 15%, depending on the restaurant’s needs.
If the restaurants wish to get more exposure with them, they will have to pay more commission than the standard 12.5%.
GrubHub also charges a delivery fee from its customers. Depending on the distance of the restaurant to the delivery destination, GrubHub delivery fees vary from 20% to 40%.
Well, this is slightly higher than what many online aggregators charge, but customers are more than happy to pay for the services they get.
GrubHub also has a pricing model for the restaurants willing to list at the top. GrubHub marketing and advertising plans also work on a commission basis. Depending on the hierarchy of ranking, the commission rate ranges from 2.5% to 17.5%.
GrubHub delivery persons are quite satisfied with their pay scale. Each delivery worker can earn upto $12-$13 per hour, plus 100% of the tip they receive.
However, the pay rate also depends on the mileage, peak hours of the order, and the waiting time for the drivers.
GrubHub business did not become an overnight success. It was after ten years that they came out in public as the food aggregators. What distinguishes GrubHub from others is their mobile application; it has every feature a customer, restaurant owner and a delivery boy would need.
Later, their acquisition with partners like Seamless, Eat24, MenuPages and AllPages further made it a success.
With this detailed guide, you must have gotten an idea of how a successful business like GrubHub works.
If you wish to expand your reach with such effective digital solutions, get in touch with our experts and find the brewing success of your brand.March 5, 2021