Before we dive deep into the SWOT analysis, let’s get the business overview of Grubhub. Grubhub Inc. is an American online and mobile prepared food ordering and delivery platform that connects diners with local restaurants. Founded in 2004, the company is based in Chicago and, as of 2021, operates in over 4,000 U.S. cities and London.
In its business model, users can order from a vast range of restaurant partners, including chains and local restaurants. These orders can be placed via Grubhub’s website or mobile applications on iOS and Android platforms. Grubhub makes money primarily through commission fees from restaurants on each order placed through its platform and delivery fees charged to consumers.
The platform offers searches by cuisine type, specific food items, user ratings, and reviews. Grubhub also provides perks and promotional deals to attract and retain customers. In addition, the company offers services like Grubhub+, a subscription program that offers free delivery and cashback on orders for a monthly fee.
In 2020, Just Eat Takeaway, a European food delivery company, announced the acquisition of Grubhub. This move was part of a larger consolidation trend in the food delivery industry, driven by the desire to achieve better scale and profitability.
Financial Performance: In 2021, Grubhub made $551 Mn in revenue and has $68 Mn as an operating loss.
Here is the SWOT analysis of Grubhub
A SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats of a business, project, or individual. It involves identifying the internal and external factors that can affect a venture’s success or failure and analyzing them to develop a strategic plan. In this article, we do a SWOT Analysis of Grubhub.
SWOT Analysis: Meaning, Importance, and Examples
Strengths
- Strong Brand Recognition: Grubhub is one of the most recognized food delivery brands in the U.S. This brand strength allows it to attract new customers and retain existing ones.
- Extensive Network: Grubhub has an extensive network of restaurant partnerships across thousands of cities in the U.S. This comprehensive coverage ensures a diverse selection of cuisines and restaurants for customers to choose from.
- Robust Technology Platform: Grubhub has a robust online and mobile platform, providing an easy-to-use interface for customers to order food. This includes advanced search options, tracking delivery in real-time, and customer reviews/ratings.
- Innovative Marketing Strategies: Grubhub has leveraged innovative marketing strategies to attract and retain customers. This includes promotional offers and a rewards program, Grubhub+.
- Data Analysis: Grubhub has leveraged its data on customer preferences and ordering habits to provide valuable insights to its restaurant partners, helping them optimize their offerings and increase sales.
- Mergers and Acquisitions: Grubhub’s acquisition by Just Eat Takeaway.com has the potential to bolster its financial strength and international presence, providing opportunities for growth and expansion.
Weaknesses
- Intense Competition: The online food delivery market is highly competitive, with several prominent players like Uber Eats, DoorDash, and Postmates (acquired by Uber) in the U.S. market. These competitors have comparable or greater resources and can potentially offer lower prices, quicker delivery, or a wider selection of restaurants.
- Low-Profit Margins: The online food delivery business tends to have relatively low-profit margins due to the high operational costs associated with delivery logistics, marketing, and technology development. This challenge is compounded by the price sensitivity of consumers and the need to provide discounts and promotions to attract and retain users.
- Dependence on Restaurant Partners: Grubhub’s business highly depends on its relationships with its restaurant partners. Any disruption in these relationships or loss of significant partners could impact Grubhub’s operations.
- Customer Acquisition and Retention: Acquiring and retaining customers in the online food delivery industry can be costly and challenging due to high competition, the price-sensitive nature of consumers, and the high expectations for quality of service and delivery speed.
- Regulatory Challenges: Grubhub, like other food delivery platforms, faces potential regulatory challenges. Some cities have considered or implemented limits on the fees that delivery platforms charge restaurants, which could impact Grubhub’s revenue and profitability.
- Reputation Risk: Any adverse incidents related to food quality, delivery, data privacy breaches, or other issues could damage Grubhub’s reputation and customer trust.
Opportunities
- Expansion into New Markets: Grubhub has opportunities to expand into new geographic markets, both within the United States and internationally. This includes under-served rural areas and international markets where online food delivery services are still growing.
- Partnership with More Restaurants: Grubhub could continue to build relationships and partnerships with more local and chain restaurants to expand its service offerings. It could also explore exclusive partnerships to differentiate itself from competitors.
- Diversification of Offerings: Grubhub could diversify its product and service offerings, such as grocery delivery, alcohol delivery, or other goods and services. This would help the company to increase its revenue streams and reduce its dependence on restaurant food delivery.
- Enhanced Technology and User Experience: Grubhub can invest in improving its technology platform and mobile app to enhance the user experience, making it easier and more convenient for customers to order food. This could involve A.I. and machine learning to personalize recommendations or improve delivery efficiency.
- Leveraging Data Analytics: Grubhub can further leverage its data analytics capabilities to provide personalized marketing and promotions, optimize its delivery routes, and provide valuable insights to its restaurant partners.
- Sustainable Practices: As more consumers become environmentally conscious, Grubhub could look into integrating more sustainable practices into its business model. This could include eco-friendly packaging, carbon-neutral deliveries, or promoting restaurants with sustainable practices.
- Strategic Partnerships: Grubhub can partner with e-commerce companies to drive growth for the Grubhub asset. In July’22, Grubhub partnered with Amazon to offer U.S. Prime Members Free Grubhub+ for Unlimited $0 Food Delivery from Restaurants.
Threats
- Intense Competition: The online food delivery market is highly competitive. Competitors like Uber Eats, DoorDash, and Postmates present a constant threat. These companies may have significant resources and could offer lower prices, quicker delivery, or a more comprehensive selection of restaurants, all of which could draw customers away from Grubhub.
- Regulatory Changes: Changes in regulations can impact Grubhub’s operations. For instance, some cities have started to limit the commission rates that food delivery services can charge to restaurants. This could lower Grubhub’s profitability.
- Dependence on Partners: Grubhub’s business model relies heavily on its relationships with restaurant partners. If these relationships were to sour or significant partners were lost, Grubhub’s operations and financial performance could suffer.
- Economic Downturns: Economic downturns or periods of uncertainty can reduce consumers’ disposable income, leading to reduced frequency or size of orders.
- Operational Challenges: Grubhub faces potential operational risks, including food safety, delivery logistics, and technology disruptions. Any significant operational problems could damage Grubhub’s reputation and customer trust.
- Data Breaches: As an online platform, Grubhub is at risk of data breaches that could compromise user data. A significant data breach could lead to a loss of trust, legal penalties, and significant costs to remedy the breach.
- Gig Economy Legislation: Changes in laws related to gig economy workers, such as drivers being classified as employees rather than independent contractors, could increase Grubhub’s operational costs and affect its business model.
