How Does Grubhub Work? A Technical and Business Guide
You have plenty of options when you go to order food online. More and more restaurants are building digital platforms to allow you to place delivery orders from your web browser, and if you are more of a mobile person, there are a slew of apps that allow you to place orders from your smartphone and have your favorite dishes brought right to your door.
One of the most popular apps right now is Grubhub. In this article we’ll look at the Chicago-based company, detail how the app works, discuss its business model, and compare how it works to the models and operating practices of some of its biggest competitors. This is your chance to look under the hood of food delivery.
How Grubhub Works
Grubhub is an app and website that allows people to order food from popular local restaurants and have it delivered to their door.
The app functions as a middleman, not only between a restaurant and customer, but also between a delivery courier. In that way the app functions as a logistics service, it must not only provide a menu of items for a user to review and order from, but must seamlessly connect a delivery driver to the food once it’s ready and then get the food to the customer before it gets cold.
The first way that Grubhub works is to use your smartphone or computer’s geolocating feature to figure out where you are. You do have the option to not allow Grubhub to access this, or, if you have that feature disabled on your device, you can always manually enter an address to send food to.
Once Grubhub has ascertained your location, it runs a quick scan of local restaurants in the area. It cross references by what is open, who is currently offering delivery, if any restaurants in the area are offering specials, and then provides a list of restaurants sorted not only by price but user rating, and estimated time of delivery.
Mere moments after loading the app, the user should have a full list of food nearby, completely searchable, which allows them to review not only cuisine type but quality, cost, and time to delivery.
It looks like this:
Once a user has selected a restaurant, they can review menu items, select what they want, provide special instructions to the restaurant about order augmentations or possible allergies, and then place orders quickly from within the app or Grubhub.com.
The app is clean and efficient and gives users options to modify food within the app.
Once they order food, users can then provide special instructions regarding delivery service, like whether or not a doorbell should be rung or if the apartment is tricky to find. The app allows users to do this when checking out and providing an address. What’s nice is if the user saves that address as a recurring place (home or work), those special instructions will be saved for any time they order delivery in the future from Grubhub.
Once the order is set, instructions are given to the delivery driver, and the customer is sure about the order, payment can be processed quickly via a stored credit card in the app. Grubhub also allows users to set up business accounts and personal accounts for ease of keeping track of receipts and accounting purposes.
The order is now in. At that point the work for the user is done. For Grubhub, it’s just getting started. At that point they need to effectively communicate digitally with the restaurant, not only to provide order updates to the customer (they provide real-time order status updates for customers who want to look on or see what is happening with their food), but so that they can guarantee a courier is there as soon as possible once the food is ready.
Once the courier picks up the food, it provides them map support to get the delivery order to the customer, then allows them to reach out to the customer directly to hand the food off. The app functions as a secure way to accept payment, connects a person with a business, and provides logistical support to make sure the food gets to where it needs to go.
And if anything goes wrong, they have a customer care team to provide support.
How Much Does GrubHub Cost?
GrubHub doesn’t charge users any fees. If there are any delivery fees associated with your order, they are being collected on behalf of the restaurant and go towards the cost of delivery supplies and maintaining the delivery staff.
These fees will apply whether you order directly with the restaurant on the phone, through GrubHub.com, or on the GrubHub app.
By choosing to use GrubHub instead of ordering directly with the restaurant, you can avoid having to speak to someone on the phone while being able to see your order total prior to confirming.
While you may have an idea of what your food items cost, seeing the order total and the breakdown of costs prior to confirming your order can be helpful if you’re on a budget or need to ensure you have enough cash on hand for your delivery order.
How to Use GrubHub
GrubHub gained popularity as a local restaurant menu resource site and consolidated its position as a premier food delivery service when it merged with Seamless.
While some people continue to use GrubHub simply as a database of local restaurant menus, and choose to call the restaurant directly to place a takeaway or delivery order, most people use GrubHub to browse the menu of their favorite restaurants and then place their food delivery order.
It’s easy to use GrubHub.com to browse menus and place a food order directly with the restaurant on the phone. However, many GrubHub customers choose to order directly from the GrubHub’s mobile app to avoid speaking to anyone.
Many users also enjoy the ability to place website and app orders as much as 72 hours in advance for either takeaway or delivery.
You’ll need to set up an account in order to use GrubHub, but doing so is easy. You can sign up on either GrubHub.com or on the mobile app once you’ve chosen your food and are ready to check out.
In order to browse local restaurant menus on GrubHub, you’ll need to enter your address. GrubHub will then show you the nearby restaurants from which you can order delivery or takeaway. If a restaurant only offers takeaway to your address or charges extra for delivering to you, GrubHub will show you those conditions.
You can filter your search by price, cuisine, rating, delivery time, and features like new, open now, free delivery, order tracking, and coupons or special offers. If you are picking up your order, you can filter your search by distance instead of delivery time.
GrubHub will also allow you to place large catering orders at nearby restaurants that have indicated to the platform that they accept them. In the event you need a catering order, it’s wise to place that order in advance as preparing large quantities of food takes time.
GrubHub also encourages users to leave restaurant reviews, which you can use to determine which dishes are best at a restaurant and what the overall rating of the restaurant is. You can choose to pay for your order with a GrubHub gift card, on your credit card, or even with cash for certain restaurants.
The Grubhub Company
Grubhub was founded by Matt Maloney and Michael Evans in 2004 and their headquarters are based in Chicago. It started as an app that was meant to help restaurants replace paper menus, but quickly pivoted to become a delivery company.
The company merged with Seamless in 2013, and quickly began a rapid and aggressive expansion across the United States. The company Grubhub Seamless went public in 2014, and is a public company traded on the NYSE as GRUB. It has also acquired several other companies, including Eat24, LevelUp, and LAbite.
The company currently boasts a large workforce, with the bulk of the corporate coworkers all in the Chicago headquarters.
Grubhub pays its delivery drivers as independent contractors. Couriers are allowed to pick their hours and work as often as they’d like. The requirements to work as a Grubhub driver are:
- At least 19 years of age (21 in Chicago)
- 2 or more years driving experience
- Own an iPhone with iOS 10 or higher, or an Android with 4.0 or higher (with data plan)
- Drivers must have a valid driver’s license and auto insurance
- Bikers must have a valid state ID
- Checking account for direct deposit
- Pass a background check
Drivers are paid on a commission percentage per order. Grubhub strongly encourages its users to tip, and drivers keep 100 percent of all tips.
How Does Grubhub Make Money?
An online platform for food ordering, Grubhub makes their money on each transaction through a commission from each order process. These fees can be paid by the restaurant or shared by the user in the form of a delivery fee, and these commissions make up the majority of Grubhub’s revenue.
The amount of commission per order is listed by Grubhub as a $0.30 surcharge and 3.05 percent of the order, which can sometimes be small, especially if the restaurant has a low order minimum. But a recent report showed that Grubhub was processing over 230,000 delivery orders per day, so sheer amount of orders can result in serious revenue for the company. On days like the Super Bowl, that number gets much, much higher.
The Grubhub business model also has other avenues to bring in revenue, including offering restaurants marketing services and allowing partners to purchase prime placement in search results for people who are using the apps. People can also order gift cards through the app, which can take a small service fee for the company.
Does Grubhub Work Differently Than Competitors?
Grubhub works similarly to several apps in the space, including DoorDash and Seamless. It actually works the exact same as Seamless, since the two companies merged and share partnerships and the same platform, and aside from branding are functionally the same company.
Uber Eats operates in a slightly different way in that Uber is primarily a transportation company, and functions like one, even in the food delivery space. Instead of focusing on partnerships with restaurants, Uber allows users to connect with drivers who go and pick up food from restaurants.
It’s a small difference, but one that is mostly seen in the way the payment is processed. With Seamless and Grubhub, restaurants pay a commission and can share that cost with the customer. With Uber Eats, customers pay a delivery driver to go grab them food.
Postmates goes a step farther, allowing users to ask couriers to pick up just about anything. That could be a meal, but could also be a hammer and nails from the hardware store. Postmates gives drivers a prepaid credit card which allows them to go to stores and buy whatever a user needs, and then passes that charge on to the customer (while taking a commission for providing the service).
Connecting Hungry People With Restaurants and Drivers
Grubhub has grown so quickly by establishing a smart business model which connects restaurants with people who want food delivered, and then acting both as a web commerce platform and logistics company to make sure the restaurants get the food to those hungry people in an efficient manner.
It makes its money by a commission on the restaurants, which allows restaurants to decide how much they want to split with customers, and incentivizes them to make the right decision for how much they charge per delivery. Their workforce picks their own hours, and they strongly encourage tipping to make sure they get paid a fair wage. It’s not rocket science, but it’s not as easy as tapping a button and having food show up at your door might make it seem.