Grubhub stock halted after report Uber is eyeing a takeover

https://www.cnbc.com/2020/05/12/grubhub-stock-halted-after-report-uber-is-eyeing-a-takeover.html

by uptown • 6 years ago

190 230 6 years ago

elliekelly2• 6 years ago

Offering to buy a $4.5 billion dollar company twelve hours after you’ve laid off thousands of people is kind of a dick move.

jzig• 6 years ago

but this way they can all be hired back as drivers

toomuchtodo6• 6 years ago

Uber is betting food delivery is here to stay at higher levels than pre-COVID, and is gobbling up market share to reach scale.

lumost2• 6 years ago

As an external investor why would you be on that ride for a second time? Uber has demonstrated that they are not able to deploy capital in a sustainable way to acquire market share in ride hailing, or with UberEats. As most companies that grow through acquisition fail to deliver material gains - why would the acquisition of GrubHub fair any better?

duxup3• 6 years ago

I'm not a fan of how either company treats their non employees, but you still make the business decisions that you need to to try to keep everyone else employed too.

vmception2• 6 years ago

and also rational.

they shouldn't have been trying to inefficiently create uber eats so quickly. so cut out that nonsense, and buy the established player that has probably negotiated better pricing. Uber probably outbid them in a lot of restaurants to get into those restaurants quickly.

vikramkr5• 6 years ago

You can buy a company in all stock, but it's quite a bit harder to buy labor with 100% stock compensation. If Uber is dipping into cash reserves for a deal like this, well, I hope for their sake this deal goes well. And if it is a all stock or majority stock deal, I wonder if Grubhub is going to ask for an even higher premium on their valuation than otherwise considering that 4.5 billion in uber stock with a lockup period of a few years at this time is probably not as valuable as the same amount in cash.

andrewprock2• 6 years ago

Uber stock is quite liquid. I would certainly be willing to entertain offers of pure stock compensation for publicly traded companies.

asdkhadsj3• 6 years ago

I hate this. The implication that companies should have any moral behavior here just enables immoral behavior.

There is no dick move here. The only reason you call it that is because we have a society (America) built to give almost no support system to workers if they lose their jobs. The company isn't in the wrong for failing to pay users. Our societal structure is. Our lack of social safety nets, and communally focused behavior is.

We set up a system prone to Americans getting screwed, and then are annoyed when companies screw them? This is our mess. We need to fix it, and not try to pretend companies should be moral. Doing so will only allow them to be immoral and hurt workers.

teachrdan• 6 years ago

I completely agree with what you said. One important consideration is how companies like Uber have contributed to a lack of support for workers who are laid off. Uber in particular has failed to pay billions of dollars into states' unemployment insurance funds.

https://www.kqed.org/news/11812496/uber-and-lyft-arent-payin...

jorblumesea3• 6 years ago

Large companies have outsized impact on influence public policy, using bribery aka lobbying. Collectively, billions are spent yearly to influence lawmakers.

The idea that large companies "just exist" in this system and abide by its rules strikes me as naive. In many cases, companies are making the policies themselves through lobbying efforts. They also influence governing agencies that are supposed to police them. It's called regulatory capture and it's a well established phenomenon.

https://en.wikipedia.org/wiki/Regulatory_capture

So back to this:

We set up a system prone to Americans getting screwed, and then are annoyed when companies screw them

When the companies are the ones advocating for policies that screw workers and stop lawmakers from creating proper protections, yes, annoyance is a mild way of putting it.

B-Con• 6 years ago

They decided they didn't benefit from certain job positions and did benefit by buying another company.

What's the alternative action for them to take?

lhorie• 6 years ago

This is a bit like saying buying croissants+coffee for breakfast after throwing out last night's leftover takeout pizza+beer is somehow a character flaw.

The layoffs were in customer support, who - if you think about it - were largely twiddling thumbs due to the large loss of ridership (and therefore, of customer support demand).

It's not like Uber could just magically take CSRs and somehow turn them overnight into roles that were strategically meaningful for food delivery competitiveness.

twblalock2• 6 years ago

If Uber goes out of business, that is equivalent to laying off 100% of their employees.

I can't really fault a company in these circumstances for pivoting toward a model that will enable it to survive the downturn.

bluedino• 6 years ago

Just think of all the layoffs they'll get to do after they buy Uber!

ceejayoz4• 6 years ago

Does Grubhub have any special sauce, or would this just be a direct acquisition of market share?

jonathanjaeger• 6 years ago

They just have the normal sauces from the menus on the site, but if you call the restaurants directly they can add special sauces per your request.

ra1n852• 6 years ago

Can confirm - only native restaurant sauces are supported. Special sauces must be sourced from your own internal sources.

deminature• 6 years ago

Enormous marketshare on the East Coast of the US both on the restaurant and customer side, due to operating there for 20yrs. GH also has 10-20% share in most cities, so this acquisition would put Eats comfortably ahead of their main competitor DD.

ceejayoz4• 6 years ago

Wow, I had no idea Grubhub has been around since 2004!

vikramkr5• 6 years ago

"More information is available on the bloomberg terminal"

And I thought "Sign up for blah news Premium(tm) for 9.99/day or whatever to access the rest of this article" was bad. At least those subscriptions aren't 20k/person/year licenses for financial services/trading software ...

ska5• 6 years ago

On the other hand everyone I know who has one (a bloomberg terminal) would readily pay more for it. Can't say that about most news subscriptions.

vikramkr5• 6 years ago

That's true. Bloomberg terminals are pretty awesome. The customer base for them are probably the customer base the most able to quantify how much value any software provides to their business, and could afford a far higher price as well. Though I imagine Thomson Reuters and other competitors might be getting in the way of bloomberg capturing more value than they already are.

intopieces2• 6 years ago

If you care about your local restaurants and have the means to do so, consider calling in your order and picking it up yourself, with mask and gloves. Services like GrubHub take a huge portion (like 30%) of the ticket price just for delivery.

toomuchtodo6• 6 years ago

What are the best apps or websites for eatery discovery that are employee owned, take very small cuts or no cut at all, or both?

fitzn• 6 years ago

https://ontrayapp.com/ is not very large but it basically gives the restaurants a portal to take online orders with a minimal cut.

MattGaiser5• 6 years ago

I’m not sure better is possible given that the delivery companies themselves aren’t making money.

30% of the bill seems to basically be what it costs to move most orders to their destinations.

s_dev• 6 years ago

https://LoyLap.com

We're not "an eatery discovery app" as our app is generally used by a single end user with a single brand (a sort of pseudo white-label) but we do service a similar market and are low priced relative to GrubHub. We don't do delivery but we do click&collect, online ordering solutions, cashless transactions for gift and loyalty, branded PWAs, Clover&Poynt integrations. Employee owned.

ceejayoz4• 6 years ago

Google? Put in "sushi" on Google Maps, call a place, and you're done. Grubhub doesn't offer much more than that for their 30% cut anyways.

ahelwer• 6 years ago

It's easy to use yelp or google to find restaurants. Then just look at their menu online & call them for pickup.

hkmurakami• 6 years ago

I've seen my local Japanese curry joint (they opened in March literally during the height of COVID lockdown) use this service for pickup processing.

https://www.gloriafood.com/pricing

"We understand that your restaurant's profit margin is already low and we don't want to reduce it even further with fees or commissions. That's why we offer this simplified, do-it-yourself ordering platform for free.

However, we do have (and continue to add to the platform) premium features that are more complex, that you can choose to pay for (if they bring extra value for your business). For example: online payments, promotions, sales optimized website, branded mobile apps."

ydnaclementine• 6 years ago

https://slicelife.com

Small business pizza focused app, and takes much less than the 30% the other apps take to help these businesses succeed

cheungyinglon9• 6 years ago

https://www.eatnyc.org/

If you live in NYC, this nonprofit helps you find restaurants still open and order directly. Restaurants keep 100% of commission. I use it to order food every weekend. Local restaurants seem to really appreciate it.

melvinram• 6 years ago

To be fair, it's not just for delivery. It's for bringing the restaurant customers/revenue.

duxup3• 6 years ago

I wish there was a good option for delivery... but that they treat their employees and stores well, but the race to the bottom there seems to indicate there isn't.

A few stores locally have "we deliver" type messaging, but it's really just grubhub :(

ryanianian3• 6 years ago

Exactly this. GrubHub can be useful for trying out new places, but once you become a "repeat" customer, go direct. Many, many restaurants have their own online ordering systems and don't require you to make a weird phone-call. My favorite local restaurants all have ChowNow which charges restaurants a monthly fee rather than a percentage and has a grubhub-like ux. I also call in my order to the restaurants where I know the wait-staff and they always throw in extra portions for me :)

dannyw3• 6 years ago

Sometimes calling is actually the most convenient. There's nothing wrong with picking up the phone and placing a 30 second phone call.

You'll also synchronously resolve any issues, like if they're out of a certain item.

bhupy• 6 years ago

Honest question: what's stopping restaurants from charging 30% extra for items on GrubHub?

Transaction fees aren't new, and merchants typically bake that into the cost of doing business. Ostensibly, the end user would have to pay more for the convenience of someone else using their labor to deliver them food.

tyingq2• 6 years ago

Contractual terms.

For example, from Uber's terms for UberEats restaurants[1]:

"Notwithstanding anything to the contrary in this Section 5, Merchant may not make any Item available to Customers through the Eats App at a price that is higher than the price that Merchant charges in-store for similar Items. Merchant agrees that you will not make an Item available under this Agreement at a price higher than the amount Merchant is charging for similar Items through any comparable platform for food delivery services."

[1] https://www.uber.com/legal/en/document/?country=united-state...

ryanianian3• 6 years ago

GrubHub prevents it (or at least tries to). I think they enforce by fear, but I've seen restaurants get around it by giving smaller portions to grubhub orders than they would otherwise.

londons_explore2• 6 years ago

It's against the GrubHub T&C's, and a resturant will be banned if they are caught doing this. Many still do though.

Benjammer2• 6 years ago

They do charge more, among other strategies. I think these sites/services drastically increase the competition for restaurants though, and I think delivery food prices are more elastic than the restaurants can handle if they increase prices to match previous net income.

memco• 6 years ago

Our office started looking for a service to use for collective ordering for about a dozen people: we tried grubhub, postmates and a few local services. We usually ordered from a set pool of local restaurants. When we started ordering prices went up considerably after a few orders. Some orders just got cancelled inexplicably and some just started adding a group service fee. We also had situations where we were limited to orders of a certain size so would have to split our groups to be able to order food for everyone. Our suspicion was that some places found ways to adjust to the demand and in some cases decided that the cost of doing business with us was too high due to some factors that were unknown to us. We also had a few of those services that dropped us as clients which is why we went through so many.

cavisne• 6 years ago

Expedia gets away with charging 20% and hotel chains are (or at least were) pretty powerful businesses.

The sales funnel is pretty valuable, and they’ll cut you off/derank you if you undercut.

There is also a contract but I don’t think that’s the main motivator.

paulgb• 6 years ago

I once compared the fee across four major delivery sites for the same order at the same restaurant. It turns out, the food did vary by a few bucks between services.

My accounting is here (I mainly focused on the fee structure but the base food cost is there too)

https://twitter.com/paulgb/status/1219013003577872387?s=19

cfitz• 6 years ago

While I understand it is a business like many others, it'd be genuinely nice if GrubHub would stop airing their "restaurants are our family"/"support local restaurants" advertisements.

If we really want to support local restaurants (and give them better chances of post-COVID survival), we should do exactly as stated above: call in to order directly.

Do not give GrubHub, Uber Eats, and similar services a large portion of your order total just for being an easy-to-use middleman. The vast majority of restaurants around today are capable of processing payments and handling pickup/delivery themselves.

While these restaurants fight to stay alive in unprecedented times, the least we can do is put in a bit more effort for an order of food we would have placed and paid for anyway.

dave51042• 6 years ago

I know that DoorDash specifically also raises the price of individual menu items by a $1 or $2 sometimes compared to paying the restaurant's menu price directly.

standardUser• 6 years ago

"Do not give GrubHub, Uber Eats, and similar services a large portion of your order total just for being an easy-to-use middleman"

Thank for the advice, but I highly value an easy-to-use middleman. How many orders would these restaurants miss out on if they didn't offer the easier option? And it's not just the ease of use (viewing the menu, adding comments, seeing real-time delivery status) but it's that fact that these services offer a centralized way to find restaurants to order from in the first place. I'm not saying I love the current balance of power, but much like with old-style taxi services, the new way is an undeniably better experience for the end user. People will never abandon the easier way, and much like with more traditional boycotts, relying on consumer action is a losing strategy for enacting change.

SkyBelow• 6 years ago

Call me cynical, but I think "Any man who must say, "I am the King", is no true king." is a mentality that goes well when viewing advertisements.

lumost2• 6 years ago

Restaurants are pricing in the 30% cut, I know of no restaurants offering anywhere near a 30% price reduction for pickup - so why would I go for the more complex option? I'd love to call-in an order for a 20% reduction in price, or use a competing service for a 10% reduction.

It's entirely plausible that for many restaurants running an online ordering system/delivery network costs them 20-30% of the order price regardless.

phyzome• 6 years ago

« call in to order directly »

Then I would be 95% sure to get at least two things in my order wrong, rather than just 50% sure to get one wrong.

(There are several reasons I don't order out, and that's a biggie.)

mrgreenfur• 6 years ago

You can use other services that charge a flat monthly fee, like ChowNow, etc.

Benjammer2• 6 years ago

I've been a heavy Seamless user for a few years. I recently started only browsing on Seamless, and then once I decide, I go find that restaurant's ChowNow or other private hosted page and order directly. I've found on average I get better service, lower prices, and actually better quality food in some cases, where it seems like they made it fresh and sent it right away, instead of the meal sitting in an "uber eats" type car for an hour and getting cold. And, I really only have a "pool" of like, max, 12 restaurants or something. Once I make an account and put my credit card in on each site, it's exactly as easy as Seamless to go back and re-order my favorites at each place with a few clicks.

tommoor• 6 years ago

I don't understand why more restaurants don't just offer a discount for direct ordering if the fees are this high. Seems like a win-win

balls187• 6 years ago

I don't understand why more restaurants don't just offer a discount for direct ordering if the fees are this high. Seems like a win-win

The margins on restaurants are already very small.

Instead (at least in my experience) charge more for items purchased via DoorDash/Uber Eats.

In effect you get a discount for ordering and picking up.

Spivak• 6 years ago

Look I don't really understand this sentiment. This whole situation is absolutely shitty for everyone involved but I don't think the 30% cut is unreasonable.

Say I pay ~$20 dollars total for a delivery including tip. My usual Indian takeout order. A real human spends 30 minutes picking up and delivering my order and makes ~$7 (or a little less than $15/hr but not really since they're not getting a steady stream of deliveries). $4 of that order was my tip for the driver so the delivery service and the restaurant now have to divide up the remaining $9 which is already less than 70% of the menu price of what I ordered.

Unless people start getting okay with paying way more for delivery it's gonna continue being a "squeezing water from a stone" situation.

yibg4• 6 years ago

30% may not seem unreasonable to you as a customer and from the perspective of paying the delivery driver, but it can be deadly for the restaurant. Restaurant margins are low as it is, and an extra 30% cost on every order puts a lot of them in the negative.

You can argue that is a free market and restaurants are free to not participate if the cost is too high. Some do, at least some of the popular local spots around me are NOT on any delivery app. But most restaurants also can’t afford to not have this sales channel, especially during COVID. So now they are left in the shitty position of choosing between losing a lot of their orders and losing money on a lot of orders and hope dine in comes back soon.

pwinnski2• 6 years ago

It's not just the 30%, though. One restaurant's monthly statement[0] showed them not quite breaking even after all of the fees and charges were applied.

That said, I completely agree with the rest of your comment. We just don't want to pay what things are worth.

[0] https://www.eater.com/2020/5/1/21243966/giuseppe-badalamenti...

munchbunny• 6 years ago

I think that's the actual complaint: the stone squeezing is happening at the expense of everyone but the customer or Grubhub. It'd be more sustainable for the actual businesses or the delivery persons if Grubhub took less of a cut or charged more of a delivery premium. (Implied: I value the sustainability of restaurants as more important than preserving the convenience/luxury of food delivery, and for edge cases where it's more of a necessity I'm sure we can come up with ways to address that.)

blululu• 6 years ago

30% is totally reasonable for the cost of delivery. As you point out people hate paying for delivery in spite of the marked increase in cost/service. Where things get complicated here is that a lot of takeout services will require businesses to offer items at the same price given to pickup/takeout orders. This constrains the restaurant's pricing while providing a large benefit to the delivery service. If the restaurant could just charge 30% more for people using the delivery service then fine. Instead they need to either make take out customers pay more which usually means making your neighbors and long term customers pay more to subsidize a large well funded company.

catalogia2• 6 years ago

Besides the matter of whether the cut they take is unreasonable or not, there's the matter of user experience.

Ordering on the phone is very easy. I don't need to make an account, don't need to get out my credit card, don't need to fill out my name, email address, etc. All the restaurants I order from seem to have systems that remember the address associated with incoming phone numbers, so after the first call I don't even need to tell them my address. If I order from a restaurant frequently enough, I often don't even need to tell them what I want, because they remember that too. It frequently goes "Hey, Big Joe's Pies, same as usual?" Yep. "Paying cash?" Yep. "Okay it'll be about 20 minutes." How can fidgeting around with an app compete with that?

intopieces2• 6 years ago

Restaurants didn't previously have to pay this 30% charge on everything they make, because they had dine-in to balance it. Margins were already razor thin, and then the virus hit and now the only way to do business is to fork over 30% of your income to a third party, whose value add is likely not 30%.

cwhiz• 6 years ago

I just want the cost on the screen to be a reflection of the actual costs to bring food to my door. Let me make the judgement on whether I want to pay the delivery surcharge. Don’t obfuscate the true cost and silently punish the restaurants.

I think the only reason this model works is because people don’t actually know what is happening. I think if people knew GrubHub was running restaurants out of business they would consider alternative options.

vowelless• 6 years ago

Not sure if I understand your point. Is the idea that it is better for restaurants to not participate in Grubhub, letting customers do pick ups?

Given the higher volume provided by Grubhub, I assume using Grubhub is a net positive, isn’t it?

pwinnski2• 6 years ago

For some restaurants, it is. For others, it is not. These companies and the restaurants alike seem to be splitting already-thin margins.

mrlala• 6 years ago

Shrug. I'm pretty sick of getting in the middle of this shit.

I'm already in the middle of it every time I eat out- having to add an arbitrary tip to the end of the my bill and always get surprised because I'm supposed to sit there and increase everything 10-20% of the menu prices.

Then I order groceries from walmart online and they try to bug me to add a $10-20 tip for every order that arrives.

Screw all of that. If the restaurants are paying too much, then they can figure it out. It's not my problem.. I'm done with it. Just show me what it costs.. telling me to go to the restaurant instead of using a service is ludicrous and pretty much defeats the purpose of delivery.

When I ordered from Costco last week, you know what they did? Increased all their prices so it included all the extra work. That way every item I ordered I could see exactly what I was paying- I didn't have a choice, which is great. I don't want the choice.

mattacular• 6 years ago

You also won't need to worry about your tip money being used to pay their contractor* wages like DoorDash and others have been caught doing.

Edit: not employee

speeder• 6 years ago

Sadly where I live during covid times this is not allowed :(

Some places, like bakeries and ice cream store can let people pick up orders, but food trucks for example can't, they must operate with doors (and windows in case of food trucks) closed and only send orders with delivery services of some kind.

And yes, delivery companies are expensive, a food truck owner I often chat with about business told me iFood charges them 30% of the total value, some restaurants then opt to have high food price, others just charge a lot for the delivery service, even then they might lose money (for example of they charge 5, but you buy only low margin dishes that cost 100, they lose money)

xoxoy• 6 years ago

Most restaurants I see on delivery apps inflate their menu prices to compensate. And “calling in” implies that they have their own delivery people on staff, which isn’t true of the majority of restaurants that partner with these apps.

specialp• 6 years ago

I find that GrubHub will also oversubscribe their drivers by a huge amount. We tend to support restaurants more and don't use GrubHub but a few months ago we placed an order for a Thai place near us. The restaurant called and was like yah Grubhub took your order, and we'll make it, but they won't have someone here for a long time (2+ hours 10PM!) I'd cancel it.

I thought it was the owner not wanting them to take the rip but sure enough there was no sign of GrubHub going there. Calling them resulted in being connected to an offshore call center that said that we shouldn't cancel it is "in progress" but the projection was still over an hour later after we had been waiting 45 minutes. We finally cancelled and went there and got it ourselves. The restaurants I frequent often and know the owners I just call them or use their chow-now powered site. It is much more fair that way. Also saves the unpredictability of the whim of gig workers.

smallgovt3• 6 years ago

Grubhub actually only charges 10% for delivery.

It charges an additional 15%+ for the marketing component (to get your restaurant listed and to appear higher up in search rankings).

In other words, if a restaurant sources their own customer and only uses Grubhub for delivery, they only pay 10%. This charge seems reasonable when compared to what it costs to have an inhouse courier.

malandrew• 6 years ago

Will you also advocate for going directly to the kitchen and cutting out waitstaff when sit-down service resumes?

Advocating for cutting out the ordering/delivery company and delivery person is akin to cutting out the waitstaff since those are the ones taking your order and bringing it to you.

cheungyinglon9• 6 years ago

If you live in NYC, there's a nonprofit that helps you to easily find restaurants still open for pickup / delivery and to order directly: https://www.eatnyc.org/. Restaurants keep 100% of the commission, so it really helps our favorite restaurants stay alive.

They seem to have solid coverage in Manhattan.

smallgovt3• 6 years ago

How do we support non-profit sites like this more?

I think it's pretty absurd that Grubhub and Uber take such a large commission for what amounts to pretty basic software.

But, I bet this site isn't getting much traction because it has no marketing budget (because it makes no profit).

troydavis• 6 years ago

take a huge portion of the (like 30%) of the ticket price just for delivery.

At least for restaurants which don't offer delivery themselves (which is the vast majority), the delivery service may be creating more than 30% of the value of the final product. "A meal delivered to me from any restaurant within about 3 miles" is often a different product than "A meal that I need to spend 20-50 minutes going to and coming back from." Although they're similar, they aren't always substitutes for one another.

Obviously the adoption of delivery speaks for itself, but beyond that, I think if one just asked buyers how much of the value is provided by the delivery company, many or most would say over 30%. The target market does not consider it "just delivery."

catalogia2• 6 years ago

I've encountered a handful of restaurants that no longer take orders by phone. In one case you call the number still printed on their pizza boxes, you get a prerecorded message telling you they only take orders from grubhub now. Sadly this means I can no longer order from them.

paxys3• 6 years ago

While I agree with the sentiment, if people had the ability to go pick up their own orders they wouldn't be using delivery services in the first place. Remember that it's completely optional for the restaurant to even support it.

chanmad29• 6 years ago

Not to forget the markup they charge from customers on the prices. Paid 10% more even on a pick up order from a restaurant downstairs. Learnt that the service is best used when you cannot drive to a certain place.

tren-hard• 6 years ago

More surprised the headline is Uber and not Lyft. What is Lyft doing to make headspace into food delivery?

ceejayoz4• 6 years ago

Lyft is probably too late to the game.

kube-system2• 6 years ago

They can call their competing service: Lyftovers

koolba3• 6 years ago

GrubHub would be wise to take the money and run. If it’s cash bank it. If it’s stock, buy some Uber puts.

The economics of last mile delivery can not justify these valuations so if Uber thinks they can make it happen with driver downtime then grab the cash while you can.

lawnchair_larry• 6 years ago

I’m pretty sure you can’t take a short position against the interests of your own company. That’s boilerplate language in the deals I’ve seen, for obvious reasons.

busyant• 6 years ago

I think that was hyperbole to emphasize the imprudence of the takeover offer.

ertemplin• 6 years ago

Some companies will allow this, but only if it's a covered call or protected put on an investment that you own. The idea is that you're limiting your risk while also limiting the potential upside of the investment.

yellowstuff• 6 years ago

Carl Icahn may have found a way around this kind of restriction after the Lyft IPO by selling in a private transaction to someone who hedged in advance of the sale, although it's not at all clear what really happened.

https://www.bloomberg.com/opinion/articles/2019-05-07/lyft-s...

whatok3• 6 years ago

It's almost certainly going to be all-stock and any takeover will prevent anyone receiving shares from buying puts or shorting stock of the acquirer for the duration of the lockup. If you are an insider buying puts now you could also potentially look at some jail time.

toomuchtodo6• 6 years ago

If you are an insider buying puts now you could also potentially look at some jail time.

Information is public at this point, you might breach a contract if you've got equity but it's not jail time. Assuming recent regulatory actions, even if your actions were egregious, it's likely no jail time, just a large fine and disgorging profits made.

Disclaimer: Not a lawyer, not your lawyer.

harryh• 6 years ago

It's possible that executive insiders at Grubhub could be prevented from buying puts via a deal contract, but I can't see how members of the general public could possibly be limited by these sorts of deal terms.

nogabebop23• 6 years ago

It states in the article that it will be all stock. You take all these meal delivery companies, mix in other frothy VC-funded nonsense of uber and somehow end up with a triple-A portfolio made entirely of dog shit.

vikramkr5• 6 years ago

I wonder if any execs at grubhub might be True Believers(tm) in their industry and genuinely believe in the market and "synergies" enough from a deal like this to not immediately take out a big hedge or put a collar on their payout. I imagine investors wouldn't want to be stuck exposed to uber stock and would financially engineer away that exposure after a deal, but some of the executives could want that exposure?

formercoder2• 6 years ago

The market can stay irrational longer than you can hold OTM Uber puts.

koolba3• 6 years ago

That doesn’t matter. The point is to maintain the valuation until your lock up period expires. Once you can actually sell the stock you don’t need the puts.

christopherwxyz• 6 years ago

Why spend $4.5 billion to buy a company instead of spending $4.5 billion on your own to be competitive?

The only answer is that Uber is attempting to monopolize the food delivery market.

bpicolo2• 6 years ago

Selling to restaurants to convince them to onboard to your platform is a slow, expensive process that's neither easy nor guaranteed. GrubHub has acquired many other companies (e.g. Eat24) in the past purely for the relationships/business.

dehrmann3• 6 years ago

This. While Uber might also want to be a monopoly in this space, growing market share is a lot harder than buying it.

nkohari• 6 years ago

The actual answer is that with acquisition, you're also eliminating a competitor in addition to gaining their share of the market.

whoisjuan• 6 years ago

Why spend $4.5 billion to be competitive when you can instead buy a company that already did what you want to do?

MattGaiser5• 6 years ago

Something is going to need to give in food delivery because nobody is making a profit on it.

Restaurant loses money on the percentage.

Driver loses money on the vehicle depreciation much of the time.

The delivery company loses money on the delivery.

I just don’t think a burger can be profitably delivered 15 minutes away for 1.99.

jacobr1• 6 years ago

What do the economics look like for the old Pizza or Chinese delivery places in a pre-app world?

dannyw3• 6 years ago

Restaurant: Keeps ~85-90% of order

Delivery driver: Paid a portion by restaurant, paid a portion by tips

Telephone: $60 / month utility bill

----

Today:

Restaurant: Keeps 60-70% of order

Delivery driver: Paid a portion by Uber, paid a portion by tips

Uber: Paid 30% + delivery fees, service fees

See the problem?

MattGaiser5• 6 years ago

Perhaps this is a bit dated, but one of my relatives once did delivery for a Chinese restaurant. He worked solely for tips. So in that case, the entire delivery was paid for by the customer.

Not so sure about pizza, but the tip issue probably comes into play there again. The customer covered the delivery cost and a 15% tip is more than most delivery fees in my area even on small orders.

ska5• 6 years ago

To be fair, they often also pushed depreciation onto their (young, naive) drivers.

But other than that, there is essentially no marginal cost to the delivery infrastructure, you pay part of the driver cost directly (via tip), they at most take a cut to go to drivers (minimum) wages, but that's a fixed cost not % of checks.

bpicolo2• 6 years ago

Lots of those roles paid/pay under the table. At GrubHub's scale, tax evasion doesn't work.

yibg4• 6 years ago

I did pizza deliveries back in my youth. Got 2-4 dollars plus tips for every trip. The 2-4 dollars essentially covered vehicle costs and the tips were what I made.

Thing is when I did we kind of optimized for the trip costs / payout. Deliveries only happened (for free) for orders over a certain value. During peak times (around dinner) we’d also batch orders. I’d often go out with 3 or 4 deliveries at a time and come back in about an hour with $30 or so just in tips. The 3 hours or so of dinner rush basically paid for the rest of the day.

jcdavis• 6 years ago

Ancedotally (I don't have a ton of concrete details here):

1. From what I understand restaurants doing delivery largely were breaking even on it considering the costs - there was no third party looking to take 20-30% of the gross.

2. Again anecdotally, I suspect the old school pizza/chinese delivery places are more efficient in terms of deliveries per driver per hour. What I see with a lot of UberEats/Grubhub etc is drivers waiting a lot at restaurants, bouncing around a bunch to pick up one or 2 orders each. Vs the old-school pizza model of a driver being able to pick up a bunch of orders at once.

freewilly1040• 6 years ago

I did delivery for a slightly upscale pizza restaurant about ten years ago. For lower tier chain restaurants I think delivery driving was a scam in which the restaurant relied on the employee being unable to calculate that costs of gas + vehicle depreciation made the effective wage of driving delivery very close to zero.

I think the old world was restaurants squeezing delivery drivers. Now it's the app squeezing both the restaurant and the delivery driver.

bitcurious• 6 years ago

Driver loses money on the vehicle depreciation much of the time.

This shouldn’t be as much of an issue, compared to the ride share market, as you can make deliveries in a $2k junker for years before it gives out.

MattGaiser5• 6 years ago

True, although that would probably require a shift to more full time drivers. My last Chinese food order arrived in a new Caddilac.

ska5• 6 years ago

You can't expect run a 2k junker on significant monthly miles without incurring costs. You might be lucky, but it's a bad bet. Not to mention the risk that some mechanical failures may cost you your job.

Old cars are definitely cheaper to run (net) than new ones, but they aren't free.

enlyth2• 6 years ago

Where are these $1.99 burgers? Every app I check has like a £10 minimum order, £2.50 delivery fee, £0.50 service fee, please tip our driver prompt, and jacked up prices compared to in-store.

MattGaiser5• 6 years ago

The delivery fee is $1.99, not the burger.

brandall10• 6 years ago

"Restaurant loses money on the percentage."

Do they? For delivery, FOH is out of the equation, so there is a very big cost of running a restaurant that is not impacted.

"The delivery company loses money on the delivery."

They're a software/customer support service. At scale there has to be an inflection point.

"I just don’t think a burger can be profitably delivered 15 minutes away for 1.99."

It's way more than that... 1) the upfront cost the person pays (these services are sneaky about how this is calculated, often times the menu prices are adjusted for delivery + the hard fee) 2) the amount the restaurant pays 3) tip for the driver. The end user will end up paying $5 for say a $10 meal, and the restaurant might pay $2.

I guess the question is - does a person want to spend 30 minutes driving + gas vs. pay $5 for the convenience of delivery for a $10 meal? I think quite a few people will pick the latter.

dehrmann3• 6 years ago

Restaurants and delivery contractors should figure out very quickly if they come out positive on this. Maybe the restaurants won't figure out how much was cannibalization, but they'll know if it's a net loss. If you're losing money with, say Grubhub, you stop working with Grubhub.

The only question is if delivery services can find scale and a price point where they're profitable.

fragmede2• 6 years ago

Restaurants aren't software though. The FOH cost doesn't disappear like terminated EC2 instances. The sometimes-lavish furnishings and rent on a pricy, high-profile location with a lot of foot traffic remain, even after firing (human) servers/waiters and other FOH staff.

Ghost restaurants, which are restaurants run out of commercial kitchens away from downtown areas, and with no physical presence to speak of, using the Internet to drive orders, are trying out running FOH-less operations, but for an existing restaurant that's a bit more difficult a move to make. (Since a restaurant with ~no FOH staff has no human servers/waiters, maybe we could call that model serverless.)

buboard• 6 years ago

This seems to be an area where europe is v different from US.

How would it work in the US? Would it work if the app did not take a cut at all? Is there just little demand for delivery in the US?

fullshark• 6 years ago

Self driving delivery bots!

https://patch.com/virginia/fairfaxcity/robots-make-food-deli...

wwarner• 6 years ago

Agree. I don't think restaurant delivery is crying out for central planning. It's overhead that would be better spent in any number of ways.

formercoder2• 6 years ago

Markets are so wonked that both companies would shoot up on this. No way this creates that much value.

jannotti• 6 years ago

If food delivery and ride hailing continue to experience inverse demand relationships, there's a pretty big synergy here in being able to keep your drivers (oops, I mean the independent business owners you've contracted with) busy.

ravenstine2• 6 years ago

I hope they keep GrubHub and Uber Eats separate, because UE has way stingier customers than GrubHub, in my experience. Something about the Uber brand seems to bring about all the no-tip Taco Bell orders from across town.

Uber is also more likely to play psychological game with its drivers. It's been a while since I drove for these services, but I remember GrubHub being pretty straight forward with how much you are getting paid. I think Uber hid the tip amount until you picked up the food. I imagine their driver support would be abysmal.

dehrmann3• 6 years ago

Interesting question. The backends will definitely be merged, but on the ordering side? Maybe it still makes sense to maintain separate brands. Expedia kept Orbitz up.

ravenstine2• 6 years ago

That would be smart of them because I know I'm not the only one that chooses not to use Uber on the grounds that they represent just about everything wrong with today's big VC funded corporations. However, I think they're more likely to just swallow GrubHub.

vmception2• 6 years ago

I'm stingier on Uber Eats because there are so many fees! But I haven't used Seamless since 2015 so I don't know if the same happens there nowadays.

All I know is that my $13 food choice costs me $22 when I go to check out, and I think twice about it, then check the promos, and then consider the price of just pickup, or order something else (lower price, or different restuarant with different delivery fees, or maybe add a $2 item to remove the $3 small order fee)

You price according to what the market can bear, as a participant of the market this has stretched the rationalization of what I am willing to bear, and if it isn't economically viable then maybe lay off 3,700 employees and buy the leaner competitor, crazy idea right

helen___keller• 6 years ago

GrubHub tends to lean more on merchant costs (like commission) than consumer fees. This is why lately you may have seen (a) scary looking news articles about GrubHub taking half of a restaurants income, and (b) cities talking about emergency orders to limit commissions.

But either way, the economics are roughly the same: getting food made and delivered to your door is really really expensive. It just comes down to how that gets sliced between restaurant, consumer, and driver.

matchamochi• 6 years ago

It's just a market share play. None of the unit economics on these businesses make sense yet.

s1artibartfast• 6 years ago

I'm not sure how you can say that when Grubhub has been operating since 2004, public since 2014, and turned a solid profit up until 2019.

anthony_r• 6 years ago

The short seller's biggest annoyance. Jim Chanos is probably pissed off right now that another good short will be bailed out with private capital.

Uber has $9B cash on books in their latest 10-Q. I wonder if they'll burn some of that or will they issue new securities to finance this. It feels a little reckless to abandon half of your savings, especially as your cost of capital was just marked up and uncertain times are ahead.

rmrfstar• 6 years ago

It's about establishing a monopsony for contract drivers. Uber and Lyft are duking it out for those monopoly dollars.

nojito• 6 years ago

Random acquisitions is a telltale sign of a company on its last legs.

0xB31B1B• 6 years ago

ah yes,

google, facebook and amazon have clearly died from their acquisitions as well.

smallgovt3• 6 years ago

How is this random? Uber has been making significant investments in the food delivery space via their Uber Eats offering. Consolidation makes sense given industry-wide razor thin margins and intense competition.

paxys3• 6 years ago

Damn, someone should let Apple/Google/Amazon know, considering they do dozens, possibly hundreds of these "random acquisitions" every year.

eterm• 6 years ago

Does GrubHub have much of a presence outside of the US?

As someone from the UK I've never heard of them (Deliveroo is everywhere here along with Uber Eats).

kube-system2• 6 years ago

Not sure, but here in the US, GrubHub has been popular for a long time. I remember ordering from their website before ride-sharing apps even existed. Back then, GrubHub was just an online ordering service, they didn't do the delivery.

greatgib• 6 years ago

Now you know the truth of why they fired a lot of people. Not because of the covid but to free cash for the acquisition!

paxys3• 6 years ago

Quite the opposite actually - layoffs are a very expensive one-time cost for a company.

frellus• 6 years ago

After laying off 14% of their workforce they're going with an acquisition? This makes zero sense.

Healthy companies do not have a large restructuring and then try to burn capital on an acquisition for revenue. Restructuring to be acquired is a different story.

cheungyinglon9• 6 years ago

If you live in NYC and care about local restaurants, there's a nonprofit that helps you to easily find restaurants still open for pickup / delivery and to order directly: https://www.eatnyc.org/. Restaurants keep 100% of what you pay, so it really helps our favorite restaurants stay alive.

They have solid coverage in NYC, especially Manhattan.

sharkmerry2• 6 years ago

what an awesome idea. wonder if someone has done it for other areas

cheungyinglon9• 6 years ago

You should email them and ask if they can serve your area! They're pretty responsive. I emailed them at hi@eatnyc.org to request filtering by cuisine and they pushed the feature the same day.

chadlavi2• 6 years ago

I'm seeing decent coverage for Park Slope, BK as well. Thanks for the rec!

sgarman• 6 years ago

Is there an SF version?

cheungyinglon9• 6 years ago

Hm, I'm not sure atm, but I think they'd be happy to help if you email them at hi@eatnyc.org.

calciphus• 6 years ago

Google maps has "takeout" as a search term, with filter by cuisine, open now, price range, distance. Plus you can usually see the menu and contact info and reviews not manipulated by Yelp sales people.

tareqak• 6 years ago

Since Uber has publicly stated that they will lay off 20% of their employees rather soon, how does this new decision to acquire GrubHub square with that [0]?

[0] https://news.ycombinator.com/item?id=23011146

_57jb• 6 years ago

"More info available on the Bloomberg Terminal"

Did I get tricked into a Paywall Ad?

I have been debating for a long time of creating a Hacker News feed that filters out specific domains. Bloomberg is on that list without a doubt.

cachestash• 6 years ago

I thought that said github at first.

dang• 6 years ago

We changed the URL from https://www.bloomberg.com/news/articles/2020-05-12/uber-appr... to one that has a bit more info.

russellbeattie• 6 years ago

The pandemic finally broke my online food ordering habit, which was getting ridiculously expensive over the past year. Along those lines, I refuse to support Uber in any way as I loathe Uber's company culture. So Seamless (GrubHub) will be an instant uninstall if they are unfortunately bought by Uber. Which will continue to help curb my bad habits.

So bad things can be good, I guess...

chadlavi2• 6 years ago

Damn, I would really hate for Seamless to get swept into the Uber mess. I've been using them for a decade and it would be painful to give them up.

Though on the other hand, I've been doing the old school call and pick it up myself method with local restaurants during quarantine, and not only are their prices usually lower, it does feel good to know that (besides card processing fees from Visa) all that money is going into their pockets. Maybe I should just take this opportunity to stop using food apps anyway.

cheungyinglon9• 6 years ago

Not all food apps suck! I use https://www.eatnyc.org/ since I live in NYC. They help customers order direct and don't take any commission.

mattzito• 6 years ago

Seamless is just as bad:

https://www.theverge.com/2020/1/29/21113876/grubhub-seamless...

https://www.theverge.com/2019/6/28/19154220/grubhub-seamless...

https://www.eater.com/2020/3/31/21201207/restaurants-pay-gru...

https://www.eater.com/2020/5/1/21243966/giuseppe-badalamenti...

lilyball2• 6 years ago

Nobody is as a bad as Uber.

nimbius• 6 years ago

Not to sound like a party pooper but is it staring to seem like Ubers recent strategy is akin to chasing cars?

- in 2019 Uber threw itself into bike share after cities had success with it.

- Uber scooters followed immediately after Bird scooters

- Uber self driving showed up almost instantly after Waymo.

- Uber eats showed up almost immediately after GrubHub.

Is there anything meaningfully unique this company does anymore?? I mean the self driving truck company they bought basically imploded. its got 22 individual criticisms on Wikipedia everything from murder and sexual assault to tax dodging.

callalex• 6 years ago

There is a lot of money to be made in making "your idea, but more polished and well integrated into an existing ecosystem". Just look at Apple as the prime example.

Supermancho• 6 years ago

Amazon adding a delivery service to their Amazon Fresh + Wholefoods would crush all of the food delivery apps. Not sure why they are still trying with random restaurants, which will never give you a stable profit line.

Grubhub stock halted after report Uber is eyeing a takeover

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