How Does Grubhub Make Money?

by Amanda Postma
Business Models - 8 months ago

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What is Grubhub

It’s possible you’ve used Grubhub before to order some, you guessed it, grub. But for those of you who haven’t used Grubhub yet, it’s one of the leading food delivery apps that’s used all around the world. Now that everyone is up-to-date, buckle up. You’re about to learn some stuff you didn’t know about Grubhub.

How Does Grubhub Make Money?

You may be starting to wonder about the Grubhub business model. After all, that is why you’re here. It’s a 3-step process. Starting with the commission fee, the majority of Grubhub’s income stems from the 5-15% fee. The commission comes directly from the restaurants. On average, the commission fee is 12.5%.

The delivery service also gets part of the delivery fee. Diners pay for a standard delivery charge, which is pretty normal especially when it comes to delivery. But this fee is only a small portion of the company’s income, as 80% of the fees are given straight to the people delivering the food.

The third step is called extra commission. This is where marketing comes into play. The company charges extra for sponsored listings. Depending on where the restaurant is listed on the company’s ranking, this extra commission ranges from 2.5% to 17.5%. Essentially, restaurants get to choose their level of commission rate as long as the rate is within Grubhub’s base range. But the less commission a restaurant pays, the lower they’ll appear on a search.

Tell Me More (Like Does it Have a Car?)

The well-known Chicago-based food delivery service has been connecting diners with local takeout restaurants since it was founded in 2004. Grubhub features more than 300,000 restaurants on its app for you to choose from and partners with over 155,000 of those restaurants. The delivery service is present in more than 3,200 United States cities and London.

Every day, 500,000 orders are processed and last year alone Grubhub was responsible for $6 billion in food sales to local restaurants. More than 22 million diners use Grubhub actively.
In actual, Grubhub brand is the amalgamation of Grubhub, MenuPages, Seamless, LevelUp, AllMenu and Tapingo.

Diners have a large selection of restaurants to choose from with a 24/7 hour service availability. Then after placing an order, they’re able to track it so they can know when their grub is getting close. The best part about Grubhub is that it’s cheap and easy to use, plus you can do it all while in the comfort of your PJs.

On the restaurant side of things, not only does Grubhub give them more visibility to people who may not be aware of their delicious food, but the delivery service also supplies its own delivery workforce. In addition, restaurants only have to serve the food once a customer orders online.

How Does Grubhub Operate?

Now, let’s order some food, or at least figure out how to. After downloading the app, or pulling up Grubhub’s website, you’ll start your search. After entering your zip code or address in the search bar, the app will automatically pull up a list of restaurants that are within that delivery area. You can swipe through the list of restaurants or narrow your search by picking a certain cuisine.

After deciding on a restaurant, you’ll place an order by typing in your address. Then you have to decide whether you want your grub delivered or if you would rather pick up your order. The transaction will be completed once you pay online or opt to pay cash for delivery. Once the order has been placed, Grubhub directs the order to the restaurant. The process is completed once the Grubhub delivery person picks up the order and delivers it to the customer.

How Much Do Grubhub Drivers Make?

When Grubhub was first starting out, one of its biggest competitors was another delivery service called Seamless. At the time, the 2 companies were the largest in the United States. In 2013, they merged with Grubhub becoming the parent company. Now, the companies are among the biggest delivery services. So you might expect that their drivers make bank. It may be better than working at minimum wage, but seriously you may want to reconsider quitting your day job with benefits.

Grubhub drivers typically made between $11-$12 an hour. Based on a 40-hour, 5-day workweek, that breaks down to just $22,894-$24,960 a year. And, of course, there’s the rough wear and tear on your car to think about as well. Fortunately, Grubhub does allow deliverers the choice of riding their bicycle, scooter or walking. Don’t forget the tips delivery drivers make as well. And, no we don’t mean the tip of putting one foot in front of the other. Rather, the cash money that’s handed to you at the door. Last year, Grubhub sorted out $2.5 billion in tips to drivers.

Grubhub vs. DoorDash: Which is Better?

Grubhub seems to clean up when it comes to comparing it to DoorDash. The other delivery service just doesn’t offer the restaurant availability that Grubhub does. Plus, it’s only offered in a few U.S. cities and Canada.

Grubhub is easier to use because it doesn’t require you to create an account before you browse restaurants like DoorDash. In addition, Grubhub is much cheaper. That’s because you’re only paying a delivery fee set by the restaurant. You don’t have to pay additional fees to Grubhub itself.

However, while we’re on this topic, more often than not Grubhub’s partner restaurants require a minimum order amount. If you were only wanting something that costs $4, but the minimum is $10 then you’re spending more than you would if you just went to the restaurant.

But when it comes to customer service, there’s no competition. Grubhub takes all. From the clearly marked customer support phone number on their website to the live chat button, Grubhub is there for you 24/7. This is more than we can say for DoorDash, which has a phone number and an FAQ page.

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