GrubHub Will Dominate the Food Delivery Market by Cutting Out the Middleman

Online food ordering site GrubHub — which merged with Seamless in 2013 — wants to start their own delivery service. The company has seen an incredible about of financial success recently — the Chicago Tribune notes that they made $10.8 million in the last quarter alone — and now it plans to expand its offerings. Currently GrubHub-Seamless serves simply as an ordering platform, connecting users with local restaurants, who must take care of deliveries themselves. Now, according to Fortune, GrubHub wants to offer its own delivery service in tandem as well. GrubHub believes that using its own delivery drivers "will make the automation easier, and make the customer experience better."

GrubHub believes that using its own delivery drivers "will make the automation easier, and make the customer experience better."

The company has already been testing the service in San Francisco, Los Angeles, and Chicago and it recently acquired two delivery services — DiningIn and Restaurants on the Run — to expand its reach. With the acquisitions, GrubHub can now execute deliveries "for nearly 3,000 restaurants in around one dozen U.S. metro markets."

Companies that offer an ordering platform and their own delivery service — like Caviar and Deliveroo — already exist and have found much success. Where GrubHub could have a real advantage is its price point: The company plans to offer the delivery service at the same margin (14%) it currently charges restaurants for its ordering platform. This is drastically lower than the 20 to 30 percent many existing services currently charge restaurants. Plus, GrubHub "only plans to charge customers whatever nominal fee is needed to make the delivery break-even," and in some cases, nothing at all.

Another advantage: GrubHub is currently in business with a wider range of restaurants, unlike companies like Caviar that currently only work with higher end places that typically do not deliver. This could be good news for the nearly five million users of the site, but it might not bode well for delivery drivers employed by these restaurants.