The deal gives For Just Eat Takeway.com a foothold in the U.S. market; it already owns Canadian third-party delivery platform SkipTheDishes. Matt Maloney, CEO and founder of Grubhub, will join the Just Eat Takeaway.com Management Board and will lead the combined group’s businesses across North America.
The Amsterdam-based delivery platform will pay $75.15 per share for Grubhub in an all-stock deal.
If Uber had bought Grubhub and combined it with Uber Eats, the result would have been the largest food delivery service in the United States, with about a 55% market share, reports the New York Times.
Angela Diffly, Co-Founder & Director of Membership of Restaurant Technology Network (RTN), says this deal certainly puts more pressure on Uber Eats as they go head-to-head global markets.
Instead, Grubhub's consolidation with an international player does little to help it address U.S. market competitive issues, explains analyst Ygal Arounian, who covers GrubHub for Wedbush Securities.
“Ultimately, this doesn't change what has pressured Grubhub's profitability which has been driven by a cut-throat environment driving discounting and elevated marketing spend,” Arounian says. “There will still be four major national third-party delivery companies in the US, and we wouldn't expect Just Eat Takeaway to enter the U.S.. market without investing heavily in marketing and growth.
“Just Eat Takeaway and Grubhub expect to continue to be aggressive in the U.S. marketplace, which in our view means continued discounting and elevated marketing expense,” Arounian added.
The Path to Profitability?
This deal may be a harbinger. “While consolidation was inevitable and highly anticipated, this is just the tip of the iceberg,” says Diffly
"This won’t be the last of consolidation in the delivery space as the third parties are struggling to be profitable even for those that have large portions of market share," adds Dorothy Creamer, Senior Research Analyst, Hospitality & Travel Digital Transformation Strategies at IDC. "Subsequent mergers will have the same concerns that likely derailed Uber’s hopes to acquire GrubHub -- creating a company that government would consider having an unfair portion of the market."
Delivery has become a vital restaurant offering as dining rooms remain shuttered and consumers continue to seeking out convenience. Many restaurants have turned to third-party delivery platforms to reach new and existing customers. "The trend to embrace turnkey tech via third-party delivery companies when it comes to curbside, pick-up and delivery presents an attractive option for many restaurants struggling to keep pace with new and evolving off-prem business models," explains Diffly. "With more sophisticated tech stacks third-party delivery companies have more to offer, especially as they strive to maintain restaurant and consumer mind and market share."
Fees Under Fire
The deal comes as third-party delivery fees are increasingly under fire as more consumers are relying on delivery during the COVID-19 pandemic and restaurants, with dining rooms closed across the country, are struggling to survive. Chicago is requiring third-party delivery services to provide an itemized cost breakdown of each transaction including the commission or service fee paid by the restaurant to the third-party delivery company.
Other cities too are taking notice and setting caps on delivery fees while dining rooms remain closed. In San Francisco the mayor made an emergency order that temporarily limits the fee that delivery companies can charge to 15%. New York has a 20% cap during the pandemic, and Seattle too has capped fees at 15% and is requiring 100% of tips to be paid to the driver.
"As the world adjusts to the new COVID-19 normal and restaurants pivot to rely more heavily on their off-premises sales with reduced capacity for dine-in patrons, brands will be even more concerned with the prohibitive fees incurred with third-party partnerships," adds Creamer. "Relationships will likely shift as restaurants demand better terms or decide to make investments to keep delivery in-house ... This could precipitate the third-party delivery herd thinning out even more and necessitate an examination of business models and offerings to keep restaurants (and customers) loyal."
May restaurants are considering adding owned delivery, or native delivery, to their mix. To help troubleshoot those issues and codify best practices, Restaurant Technology Network (RTN) is hosting a Native Delivery Best Practices Work Group on June 25.
What does the future of delivery look like for your restaurant? We want to hear from you.