A pioneering Chicago technology company is celebrating its 20th anniversary this year, but it's not Groupon.
From its humble origin story, Grubhub launched a multi-billion-dollar U.S. online food delivery industry that has exploded in popularity during the pandemic, satisfying lockdown consumers' cravings for everything from avocado toast to quesadillas.
For millions of Americans, especially millennials, who make up nearly half of the market, ordering dinner online has become part of everyday life, thanks in large part to Grubhub.
Founded in 2004 by Chicago software engineers Mike Evans and Matt Maloney as a way to move restaurant menus from messy kitchen drawers to organized websites, Grubhub started with one merchant, a now-closed Uptown Chinese restaurant, and built what would become a national e-commerce platform, followed by a glittering IPO and, eventually, a multi-billion-dollar acquisition, the classic startup fairy tale.
But as post-pandemic growth has slowed, Grubhub has fallen behind rivals DoorDash and Uber Eats, whose owners, Netherlands-based Just Eat Takeaway, are exploring a sale of Grubhub and are searching for a new CEO to help regain market share and the startup's momentum.
Welcome to your twenties, Grubhub.
“Grubhub created the industry in North America,” said Grubhub CEO Howard Migdal, 37, a veteran online food-delivery executive who joined the company last year. “But the reality is we have very good competitors and very high customer expectations. To earn our customers' trust, we need to meet and exceed those expectations.”
Twenty years after changing the way consumers order restaurant delivery, Grubhub is celebrating the anniversary with special promotions through the end of the month. Major national partners, including Taco Bell, Wendy's, Panera, Pizza Hut, Popeyes and McDonald's, are each giving away 20,000 free items when minimum orders are met on select days, adding everything from Big Macs to personal pan pizzas to delivery orders for free.
But like other groundbreaking Chicago tech startups, maturity has been fraught with difficulties for Grubhub, whose annual revenue has declined since peaking at the start of the pandemic in 2020. The food delivery industry as a whole has generated continued growth, albeit at a slower pace.
Grubhub's parent company, Just Eat, saw its North American revenue fall 16% last year to about $2.3 billion, according to financial filings. Just Eat doesn't break out the revenue of its holding company, Grubhub's largest in North America.
Revenue from food delivery services has soared during the pandemic, jumping from $3.8 billion in 2019 to $8.5 billion in the United States after stay-at-home orders were imposed the following year, according to data from market research firm IBISWorld.
Food delivery services are projected to generate $13.9 billion in revenue this year, with revenue continuing to grow at a modest pace in the post-pandemic environment, according to IBIS World.
According to KeyBanc Capital Markets, U.S. consumers collectively spend more than $90 billion a year on food delivery.
San Francisco-based leader DoorDash has 67% of the food delivery market, compared with Uber Eats' 23%, according to an April report from Bloomberg Second Measure. Grubhub is a distant third with 8% of sales, but is more competitive in key markets like Chicago and New York.
Grubhub works with 375,000 merchants in more than 4,000 U.S. cities, including 15,000 in Chicago alone, more than any other food delivery service, Migdal said.
Since arriving in Chicago last year, Migdal has implemented both cost-cutting measures and efforts to reverse declining revenue. Topping the list of top-line items is an expanded partnership with Amazon, which the company has been working with since 2022.
In May, Amazon was granted the right to increase its existing stake in Grubhub by up to 18% and allow customers to order restaurant meals for delivery on its website. As part of the five-year agreement, Amazon Prime shoppers will receive a free Grubhub+ loyalty membership and reduced delivery fees.
“We're very proud to partner with Amazon,” Migdal said. “Amazon is one of the most customer-centric organizations in the world, and their goal is to provide as much value as possible to their Prime members, and they know that restaurants are a huge segment that they're not currently in.”
Migdal, a Detroit native and Michigan State University graduate, co-founded Grub Canada, an online food delivery service modeled after Grubhub, in 2008. Grub Canada was acquired by Just Eat in 2011, and Migdal spent the better part of the next decade as the top online food delivery executive north of the border before moving to Chicago, where he became CEO of Grubhub in March 2023.
Grubhub was founded in March 2004 after the city struck a deal with Chicago's first restaurant, the Charming Wok, to market food delivery through the service. Like online deal maker Groupon, Grubhub quickly became a central player in Chicago's technology scene and an influential platform for the city's burgeoning e-commerce industry.
In 2014, Grubhub filed for an initial public offering, raising $193 million at a valuation of more than $2 billion. Co-founder Evans left Grubhub that year to “pursue other opportunities.”
Just Eat acquired Grubhub for $7.3 billion in 2021. Maloney, who served as CEO for most of Grubhub's history, left the company a few months after the new owners assumed ownership. By April 2022, Just Eat had already acquired Grubhub amid declining revenue and market share.
Just Eat said in its April 2024 quarterly financial report that it “continues to actively explore the sale of all or part of Grubhub.” It's unclear how the May deal, which allows Amazon to increase its stake to up to 18% over five years, will affect a possible full sale of Grubhub in the future.
Meanwhile, Grubhub is downsizing both its employee base and office space.
Grubhub is laying off 15% of its workforce in June 2023 and currently has about 750 employees in Chicago and 2,400 overall.
Grubhub, which has occupied five floors of the Burnham Center on Washington Street in the Loop since 2012, will move to a smaller space on one floor of the Merchandise Mart by the end of the year. With hybrid work schedules and a smaller employee base, Grubhub will downsize its floor space in its new headquarters from 160,000 square feet to 90,000 square feet.
“The Merchandise Mart is an incredible Chicago landmark,” Migdal said. “One of the reasons we love our new space is that we can bring all 750 of our employees together on one floor, which is great.”
Beyond its financial problems, the company is also dealing with a lawsuit filed by the city of Chicago against Grubhub and DoorDash in 2021. The suit alleged that the food delivery services overcharged customers and engaged in misleading and deceptive business practices during the pandemic.
Three years later, Grubhub's lawsuit is still going through discovery in Cook County Circuit Court; DoorDash's lawsuit was transferred to federal court in Chicago in September 2021, where it remains pending.
“We are deeply disappointed in the city's decision to file this lawsuit,” Grubhub said in a statement. “All allegations are false, and we will continue to defend our business.”
Grubhub isn't the only Chicago e-commerce pioneer struggling. Last year, Groupon, once the centerpiece of the city's tech ecosystem, issued a going concern warning amid operating losses and dwindling cash reserves and announced it would move from its massive River North headquarters to a 25,000-square-foot space in the Leo Burnett building in the Loop.
While Grubhub built its business on restaurant delivery, it also plans to diversify its services, Migdal said. Last month, Grubhub announced a new partnership with Albertsons that will allow it to deliver groceries from 1,800 stores nationwide, including Jewel-Osco in Chicago.
Migdal said that in the future, Grubhub hopes that its 200,000 delivery drivers across the US will deliver things other than food, and that it will bring other types of merchants into the ecosystem.
“When we talk about the next 20 years, what we've really built is a very strong logistics network,” Migdal said. “We're one of the few companies that can get anything from point A to point B in 35 minutes to 85 percent of Americans.”
