Inside Grubhub's next act

The delivery marketplace that once came under fire for building restaurants dedicated ordering websites will now... officially build restaurants dedicated ordering websites

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Grubhub Direct interface for restaurants (courtesy of Grubhub)

Grubhub has a new product offering for its restaurant partners: templated direct ordering websites. The feature is called Grubhub Direct, announced today and poised to roll out to interested restaurants soon. Restaurants who sign on can customize their own ordering website and accept orders with no marketing commissions. It’s the latest direct ordering offer from a third-party delivery service, a trend that’s picked up speed since the start of the pandemic. 

The service will be available to existing Grubhub customers to start, according to Theresa Dold, Grubhub’s vice president of agency services & products for restaurants. “We do this as a relationship deepening tool, but a very fast follow will be to open this up to non-partnered restaurants in our marketplace,” she said in an interview on Tuesday.  

Nearly two years ago, The Counter published a report that Grubhub bought web addresses and built templated ordering pages on behalf of restaurants on its platform. Shortly after, the LA Times ran a piece citing an email sent by Grubhub CEO Matt Maloney to Grubhub employees that said that Grubhub’s ability to buy and build these websites was a clear part of the company’s contracts with restaurants — and also that the company discontinued the practice of automatically creating websites for restaurants in 2018. 

The new feature is different, of course, in that it’s an opt-in feature for restaurants looking to accept orders directly and with added functionality, like loyalty and data analytics. Customer data belongs to the restaurant, Dold said, and Grubhub will not use a restaurant’s customer data for marketing purposes. “That would run counter to the spirit of this offering,” she said. “Technically speaking, could Grubhub look at your your order history? I guess, sure, we have a license to that data. But we're really only viewing it as a means to understand order trends and things like that Not as a marketing vehicle for Grubhub.” 

Grubhub is offering these websites and direct ordering features for free* through next April. After that, restaurants pay a one-time setup fee of $99 and $49 monthly for website hosting. 

*Restaurants always pay a per-order transaction fee of 3.05% + 30 cents per order, sometimes called a “payment processing fee.”

Grubhub, once at the top of the U.S. third party delivery market, has recently lagged behind its younger competition. The company is nearly two decades old and has evolved amid the proliferation of online ordering though seems to have suffered from a series of perceived missteps (like the microsites) and, as the company’s CEO put it in October 2019, so-called “promiscuous diners'' who are not loyal to any one delivery app. This behavior slowed the company’s growth, he warned, and Grubhub’s stock dropped over 30 percent. 

This week, the San Francisco Chronicle analyzed a proposed lawsuit settlement by Grubhub that could have other implications: Restaurants might have a harder time suing Grubhub over trademark issues — that is, listing it on its platform without permission.

According to new California law, restaurants can’t be listed on third party services without explicit permission. But the only way to enforce that is through lawsuits. Grubhub is looking to settle a class action lawsuit in Colorado by, among other things, making it easier for restaurants to request their listings be removed from Grubhub and as part of that, according to a California lawyer who represents a restaurant now included in the class action suit, restaurants can no longer sue for trademark violations. It’s a complex story — and well-reported by the Chronicle, so worth a read. 

It’ll soon be a new day for Grubhub — the ink should soon be dry on Grubhub’s acquisition by Just Eat Takeaway, a European delivery company. The deal was announced nearly a year ago and is inching closer to being finalized with a virtual shareholder vote coming soon. 

Will it stick? Restaurant subscriptions are maybe the new loyalty

San Francisco restaurant Mister Jiu’s is launching a new subscription service. It starts at $88 per month for one of two options: weekly meal kits for recipes in chef Brandon Jew’s cookbook, “Mister Jiu’s in Chinatown,” or a selection of new and signature cocktails curated by the team behind the restaurant’s cocktail bar. Both monthly boxes are free for pickup or $15 for local delivery in San Francisco. 

The service is run through a company called Table22, recently created to “help customer dollars flow to restaurants and chefs through monthly consumer memberships and new revenue streams.” According to the company’s website, many restaurants on its platform generate six figures of subscription revenue. 

The restaurant subscription is an interesting concept. At its core, it provides predictable business and a diversified revenue stream, two elements that are critical to restaurant success in the Covid era. Tomer Molovinsky, co-founder and CEO of a recently launched subscription company called Per Diem. For now, he said, the company is taking a product-based approach to its subscriptions, i.e., weekly coffee or loaves of bread. But soon, he expects the company to move toward a house account model. 

“If you're going to get your coffee, you pretty much get your same coffee every day. If you're going to a bakery, you're cool with getting your favorite baguette or whatever it is once a week,” Molovinsky said. “Generally, if you're going to get a sushi subscription, maybe you want the spicy tuna every time. But the likelihood is every now and again, you're going to want to change that up a little bit. And and so I think that's what's yet to be solved within restaurant subscriptions.” 

Subscription plans have already made it into third party delivery services offerings, though in a different form — DoorDash’s Dash Pass, for example, offers consumers free delivery from restaurants who opt-in to participate in the program. But it’s not a stretch to think that these large companies are contemplating similar offerings for individual restaurants. 

Molovinsky, who spent time working at both OpenTable and Resy, says that a subscription-house account model with a recurring billing structure could really help restaurants. “There's an element to this that helps make the house accounts experience a little bit more viable. And less risky,” he said. 

Olo’s Q1 2021

Olo, the online ordering platform for enterprise restaurants, reported quarterly earnings on Tuesday, the company’s first since its IPO earlier this year. Its revenue more than doubled year over year totaling $36 million in the first three months of the year. Though it feels like we’ve lived in pandemic life forever, you’ll remember that Q1 2020 was as close to normal as we came last year; the huge uptick in Olo’s revenue came during heightened pandemic restrictions. Olo’s chief financial officer said the company has seen signs of slowing demand for digital orders as vaccination efforts ramp up in the U.S. 

That doesn’t spell certain doom for Olo. In fact, the pandemic has actually hastened consumer adoption of new technology in restaurants. Many people agree that QR codes and contactless menus are here to stay; Olo plans to take a slice of that (admittedly crowded) market. But for the kinds of large restaurant brands that already use Olo (and there are hundreds), instituting in-restaurant technology from a long-trusted partner could make more sense than trying something totally new. 

“We believe that Olo’s destiny is to touch every transaction, add value to every transaction, and derive revenue from every transaction in the restaurant industry,” Olo CEO Noah Glass said on the Tuesday call with investors. 

Glass also expressed excitement about the potential for ghost and virtual brands to boost the company’s bottom line. “These virtual brands demonstrate that Olo’s total addressable market is not bounded by the current number of restaurant locations, rather is tied to total restaurant industry transactions. And this number is not fixed, but expanding with population growth, and greater consumer preference for prepared food, off premise consumption and digital ordering,” he said. Olo started working with two notable, celeb-backed brands earlier this year, LA’s Goop Kitchen and Guy Fieri's Flavortown Kitchen. 

What else is happening? 

It’s third-party delivery’s world, we’re just living in it. Do delivery companies have diners eating out of the palms of their hands? Seems like it. Since the start of the pandemic takeout ordering has skyrocketed, resulting in huge revenue growth for these companies. At the same time, ordering food has gotten more expensive for the consumer. Restaurants, betting that people won’t readily be giving up pandemic-era conveniences, have been drastically raising delivery prices — Chipotle charges on average 17% more for delivery than in store. Additionally, in some markets, apps began charging fees in response to promised benefits for drivers and city-imposed price caps. The Wall Street Journal explains why in this interactive piece. 

- Danielle Hyams

Uber reported earnings last week. The company reported nearly $12.5 million in delivery gross bookings, still significantly higher than its rides bookings (and 166 percent higher than q1 2020.) “For the remainder of the year, I would remind you that delivery gross bookings year-over-year comparisons will become tougher as we continue to face significant forecasting uncertainty in predicting post-reopening consumer behavior,” said Nelson Chai, Uber’s chief financial officer, on an investor call. 

Yelp is… still going strong. Yelp also reported quarterly earnings last week, beating investors’ expectations. Now that restrictions are easing, more consumers are using Yelp’s app, which means more businesses are paying to advertise. Seated diners from Yelp’s reservations and waitlist products — that is, diners seated via its app — rose 20 percent from the three months at the end of 2020. 

Virtual Kitchen Co. is now All Day Kitchens. The San Francisco-based “satellite kitchen” company has raised $20 million in Series B funding to expand to locations in Chicago, Texas, and further into California. What’s a satellite kitchen? On Eater’s Digest podcast earlier this week, San Francisco-based George Chen, owner of the 30,000 square foot China Live who does about $3,000 in business per day as an All Day Kitchen partner, said, “They don’t like to be called a ghost kitchen, they like to be called a virtual kitchen. But I think they’re going to lose that battle.” All Day Kitchen was founded by two ex-Uber staffers and counts DoorDash CEO Tony Xu among its latest investors. 

Vox looks at the dichotomy between the U.S. stock market and everyday reality. Roughly 10% of U.S. restaurants have closed permanently since the start of the pandemic while many corporate chains thrive. Similarly, many Americans have struggled to scrape by over the past year while the stock market soared, further enriching a subset of the population. Why? The U.S. economy operates in a way that tends to benefit those with money — both people and corporations. In the case of restaurants, federal programs failed to help small and midsize businesses, while big companies got their coffers filled — remember when Shake Shack (worth more than $1 billion) was shamed into returning a $10 million PPP loan?

The government is somewhat attempting to right this with the $28 billion Restaurant Revitalization Fund. Unlike other grant opportunities, this is open to food trucks, stands and carts, and businesses that are owned more than 51% by women, veterans, and socially and economically disadvantaged individuals will be given priority for review in the first 21 days of applications. This pales in comparison to the more than $780 billion given out in the form of PPP loans — much of which went to big business.

- DH 

Chipotle’s raising worker wages as its CEO takes home his biggest company paycheck yet. You’ve probably heard: restaurants are struggling to find labor. And it’s vastly more complicated than a blanket statement that people “don’t want to work.” Chipotle, riding very high after another stellar quarterly report where it reported record-breaking digital sales, needs to hire about 20,000 workers. This week it announced it will increase starting pay for crew members to $11 to $18 per hour, resulting in a $15 average hourly wage by the end of June. While that might seem significant (federal minimum wage is just $7.25/hour), Chipotle’s CEO earned $38 million in total compensation last year. His bonuses alone amounted to 1,767 times more than the average company worker.

- DH

How do you prevent soggy fries? Three million dollars. Noted investor, NBA owner, and television Shark Mark Cuban has backed a delivery packaging startup that was actually called Soggy Food Sucks when it launched. It’s now called SavrPak and its founders say they secured Cuban’s $1 million investment with a cold email about the patented technology, literally developed by a rocket scientist, to keep delivery food from steaming itself in packaging. It’s “a peel-and-stick patch that traps condensation away from food” and looks a little like a silica gel pack stuck to a takeout container. DoorDash is also interested and has purchased some of the patches to offer restaurants in its online store. 

Salted, a virtual brand platform for healthy brands like Moonbowls and Cauliflower Pizza, raised $9 million in seed funding. According to its website, Salted operates brands in cities across the country. 

Lisbon-based food delivery startup Kitch raised a $4 million seed round. Similar to stateside trends, Kitch allows restaurants to accept orders directly from customers via an online store and interfaces with popular delivery services for fulfillment.