GrubHub Reportedly Considering Merging With Another Parasitic Food Delivery Service

GrubHub Reportedly Considering Merging With Another Parasitic Food Delivery Service
Photo: Charles Rex Arbogast, AP

Food-delivery giant GrubHub is mulling the possibility of selling itself off, the Wall Street Journal reported on Wednesday, as part of a strategic review of its options amid increasing competition and a declining valuation.

Sources told the Journal that a sale is not the only move GrubHub is considering, and it could still amount to little less than rumours. But its market value has plunged from $US13 ($19) billion last year to around $US5 ($7) billion, and it could stem the flow by merging with a rival like Uber Eats, PostMates, or DoorDash. DoorDash and PostMates could pursue a merger with GrubHub, which already merged with rival Seamless in 2013 before going public the next year, as an alternative to pursuing their own initial public offerings, the Journal wrote.

GrubHub’s business model, which is mostly reliant on connecting customers to restaurants’ in-house delivery services and taking a cut, differs significantly from the other companies, which actually send their own contract delivery people to get food from restaurants to customers. For one, despite its falling valuation, GrubHub actually makes money.

Meanwhile, Uber Eats has continued to lose hundreds of millions, including $US316 ($461) million in Q3 2019, and has said its game plan is to dominate in a market or leave it. Gobbling up another company could strengthen its market share. (DoorDash and Uber are both money-losers financed by tech titan SoftBank, and the fact that such an acquisition could simply expand their losses and fuel their mutual war of attrition is somewhat irrelevant given their monopoly-at-all-costs mindset.) As the Journal noted, venture capital flowing into the food delivery sector dropped 22 per cent in Q3 2019 compared with the same time period a year earlier, potentially making an acquisition more appealing.

Both the middleman and contract delivery business models have been heavily criticised, including widespread backlash against GrubHub’s fees, claims DoorDash lists restaurants without their consent, and outrage over tip skimming and general exploitation of contractors. Further consolidation could very well exacerbate these issues, according to some research.

Shares in GrubHub jumped by double digits after the Journal report, standing at around $US56 ($82) on Thursday afternoon, compared to $US48.62 ($71) at the end of trading on Wednesday.