Grubhub Thrives on Order Ahead and Pay

by Raymond Pucci 0

Hungry consumers are expanding their use of online and mobile order ahead and pay with Grubhub being a prime beneficiary. As the following article reports, Grubhub is expanding their market coverage beyond the larger cities, and signing up additional restaurants and new customers as a result.

Grubhub shares shot up more than 18 percent Thursday morning on news that the company beat analyst estimates on earnings per share and revenue for the first quarter. CEO Matt Maloney ⇒praised the company’s performance — particularly what he called its highest-ever year-over-year rise in active users and restaurant partners. He pointed to the online platform Grubhub revamped last year and increased marketing and advertising as factors. The Chicago-based online food ordering and delivery marketplace posted revenue of about $156 million, up 39 percent from about $112 million in the first quarter of 2016. The consensus analyst estimate for the quarter was about $153 million.

Active diners were also up compared to the first quarter of 2016, with nearly 9 million users placing an order in the past 12 month. A year ago, Grubhub said it had nearly 8 million active diners. Gross food sales grew 26 percent to $898 million compared to the year-ago quarter, it said.

He said Grubhub is seeing strong growth in smaller markets, which he sees as another area the company has a leg up on competitors, most of whom are more focused on the largest metro areas. Grubhub is expanding into the suburbs of Indianapolis, Maloney said as an example.

Maloney also noted that some chain partners that piloted using Grubhub’s delivery services have expanded their relationship. Today, Grubhub offers delivery for about 750 Subway, 50 Red Robin Gourmet Burgers, more than 100 Buffalo Wild Wings and more than 125 Denny’s locations, he said.

Grubhub is riding the wave of order ahead and pay, especially on the mobile platform. They are executing a winning strategy by expanding their restaurant network to over 1,000 cities. Also, by signing up local, independent restaurants as well as the national chains, they get the flexibility of not having too narrow a market focus within this vertical. Their payment options are varied and seamless, and the mobile app is highly user friendly. But food order and delivery has become a crowded space. Expect competition to intensify as Amazon, Yelp’s Eat24 and others are looking for more market share as well.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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