E-commerce pioneer Grubhub celebrates 20 years of delivering dinner to your door – Whittier Daily News

Grubhub CEO Howard Migdal sits at a table at the Loop headquarters in Chicago, July 16, 2024. (Eileen T. Meslar/Chicago Tribune)

The Chicago-based tech pioneer is celebrating its 20th anniversary this year. And no, it’s not Groupon.

From humble beginnings, Grubhub launched a billion-dollar online food delivery industry in the U.S. that has exploded in popularity during the pandemic, satisfying homebound consumers’ cravings for everything from avocado toast to quesadillas.

For millions of Americans, especially millennials who make up nearly half the market, ordering dinner online has become part of their daily routine. 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 out of a cluttered kitchen drawer and onto an organized website, Grubhub started with a single vendor—a now-shuttered Chinese restaurant called Uptown—building what would become a national e-commerce platform before a splashy IPO and, ultimately, a billion-dollar buyout, a classic startup tale.

But as growth slows in the post-pandemic landscape, Grubhub is falling behind competitors DoorDash and Uber Eats. It is owned by Dutch-based Just Eat Takeaway, which is trying to sell it and is looking for a new CEO to help it regain market share and its startup mojo.

Welcome to your twenty, Grubhub.

“Grubhub invented 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 truth is we have really good competitors, and customer expectations are really high. And we have to meet and exceed those expectations to earn our customers’ trust.”

Two decades after changing the way consumers order delivery from restaurants, Grubhub is celebrating its anniversary with a special promotion through the end of the month. Major national partners like Taco Bell, Wendy’s, Panera, Pizza Hut, Popeyes and McDonald’s are giving away 20,000 free items on designated days with minimum orders, adding everything from Big Macs to skillet pizzas for free.

But like other Chicago tech startups on the rise, maturation has been fraught with challenges for Grubhub, which has seen annual revenue declines since peaking at the start of the pandemic in 2020. The broader food delivery industry, while slowing, is still growing.

Last year, North American revenue for Grubhub’s parent company, Just Eat, fell 16% to about $2.3 billion, according to financial reports. Just Eat does not report revenue for Grubhub, its largest holding company in North America.

Food delivery services have seen huge revenue growth during the pandemic, rising from $3.8 billion in 2019 to $8.5 billion in the U.S. after stay-at-home orders were implemented the following year, according to research firm IBISWorld.

Revenue continued to grow at a slower pace after the pandemic, with food delivery services expected to generate $13.9 billion this year, according to IBISWorld.

According to KeyBanc Capital Markets, total spending by U.S. consumers on food delivery exceeds $90 billion annually.

San Francisco-based leaders DoorDash has 67% and Uber Eats 23% of the food delivery market, according to a Bloomberg Second Measure report from April. Grubhub is a distant third with 8% of sales but is more competitive in its core markets, such as Chicago and New York.

Grubhub partners with 375,000 merchants in more than 4,000 U.S. cities, including 15,000 in Chicago alone — the most of any food delivery service, Migdal said.

Since arriving in Chicago last year, Migdal has implemented both cost-cutting measures and initiatives to reverse revenue declines. Top of the list is an expanded partnership with Amazon, which will extend through 2022.

Grubhub CEO Howard Migdal sits at a table at Grubhub headquarters in the Loop neighborhood of Chicago, July 16, 2024. (Eileen T. Meslar/Chicago Tribune)

In May, Amazon received rights to increase its existing equity stake in Grubhub to 18%, while also allowing customers to order food deliveries from restaurants on its website. As part of the five-year deal, Amazon Prime buyers also received a free Grubhub+ loyalty membership, which 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 the most value to Prime members. And they know that restaurants are a very large category that they’re not currently serving.”

A Detroit native and Michigan State graduate, Migdal co-founded GrubCanada in 2008, an online food delivery service modeled after Grubhub. GrubCanada was acquired by Just Eat in 2011, and Migdal spent much of the next decade as a leading online food delivery executive north of the border before moving to Chicago and joining Grubhub as CEO in March 2023.

Grubhub launched in March 2004 after signing Charming Wok, the first Chicago restaurant, to offer food delivery through the service. Like online dealmaker Groupon, Grubhub quickly became a focal point of Chicago’s tech scene and an influential platform for the burgeoning e-commerce sector.

In 2014, Grubhub filed for an initial public offering, raising $193 million and valuing the company at over $2 billion. Co-founder Evans left Grubhub that same 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 months after it was taken over by new owners. By April 2022, Just Eat was already buying Grubhub amid declining revenue and market share.

During its April 2024 quarterly financial update, Just Eat said it was “continuing to actively explore the possibility of a partial or full sale of Grubhub.” It’s unclear how the May deal to allow Amazon to increase its stake to 18% over five years would impact a potential full sale of Grubhub in the future.

Meanwhile, Grubhub was cutting jobs and office space.

In June 2023, Grubhub laid off 15% of its workforce, which now numbers about 750 employees in Chicago and 2,400 overall.

Grubhub, which has occupied five floors in the Burnham Center on Washington Street in the Loop since 2012, is moving to a smaller space on one floor in the Merchandise Mart by the end of the year. With a hybrid work schedule and fewer employees, Grubhub is shrinking its space from 160,000 square feet to 90,000 square feet in its new headquarters.

“The Merchandise Mart is an incredible historic building in Chicago,” Migdal said. “One of the reasons I love our new space is that we can accommodate all 750 employees on one floor, which is fantastic.”

In addition to the economic woes, the company is also dealing with a slew of lawsuits filed by the city of Chicago against Grubhub and DoorDash in 2021, alleging the food delivery services engaged in unfair business practices by inflating prices and misleading customers during the pandemic.

Three years later, the Grubhub case is still working its way through the discovery process in Cook County Circuit Court. The DoorDash case was moved to federal court in Chicago in September 2021, where it is also pending.

“We are deeply disappointed with the city’s decision to file this lawsuit,” Grubhub said in a statement. “Every accusation is false and we will continue to defend our business.”

Grubhub isn’t the only Chicago e-commerce pioneer struggling to survive. Last year, Groupon, once a center of Chicago’s tech ecosystem, issued a continuing-business warning amid operating losses and dwindling cash reserves and announced a move from its sprawling River North headquarters to a 25,000-square-foot space in the Leo Burnett building in the Loop.

While Grubhub has built its business on restaurant delivery, the path forward may involve diversifying its offerings, Migdal said. Last month, Grubhub announced a new partnership with Albertsons that will allow it to deliver groceries from 1,800 stores nationwide, including Chicago’s Jewel-Osco.

Grubhub expects that in the future, its 200,000 drivers across the U.S. will deliver much more than just food, which will lead to other vendors entering the ecosystem, Migdal said.

“When we talk about the next 20 years, we’ve really built a really powerful logistics network,” Migdal said. “We’re one of the few companies that can get anything from point A to point B to 85 percent of Americans in 35 minutes or less.”

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