As newer third-party delivery companies mature into viable businesses, each will need to differentiate itself in the marketplace. Grubhub's $390 million acquisition of LevelUp offers restaurants a comprehensive way to manage its consumer-facing business and capitalize on opportunity.
— Kristen Hawley
As Uber and Postmates head toward their initial public offerings, Grubhub, which just celebrated its fifth year as a publicly traded company, is focused on building a robust product offering.
Grubhub acquired restaurant technology company LevelUp for $390 million in 2018. The company didn’t offer many details about its plans for the acquisition at the time, but did say that it expected to leverage LevelUp’s deep technology integrations.
Now, it’s shedding light on some of the implications of the acquisition and, in the process, helping to define what will differentiate Grubhub as it moves forward into a new era of growing competition in the space.
“If it faces the consumer, we really, really want to be touching it,” said Seth Priebatsch, head of enterprise restaurants at Grubhub and the founder of LevelUp, of the company’s growth strategy. He also noted that Grubhub works only with restaurant businesses, setting it apart from most competitors.
The company announced Tuesday it is now the exclusive delivery partner of Just Salad, a small fast casual concept with about 30 locations in four states. While news of this partnership isn’t particularly remarkable on its own, Just Salad is one of the first restaurants to incorporate the full range of products and technology from both Grubhub and LevelUp, according to a company spokesperson. Understanding what Grubhub can offer restaurant partners is key to understanding the future of the restaurant delivery market.
In a call with investors at the time of the acquisition, Grubhub CEO Matt Maloney said, “Over the medium and longer term, LevelUp’s technology and world-class team will help Grubhub dramatically expand our product offering for restaurants helping them compete most effectively in the online world for delivery and pickup business.”
Grubhub is at its core a delivery marketplace, focused on providing a platform for operators to reach diners mainly outside the four walls of a restaurant. LevelUp, which has continued to operate as a standalone business post-acquisition, is a technology company focused on implementing robust loyalty programs and creating restaurant-branded mobile apps to facilitate ordering ahead and pickup. Combine these capabilities, and restaurant businesses get a good look at what their customers want and what keeps them coming back.
According to Priebatsch, a core tenet of the acquisition is to offer restaurants a streamlined view of what’s working for their customers across all channels, from branded apps and loyalty programs (powered by LevelUp) to a robust delivery program (powered by Grubhub.) “Any market that’s undergoing aggregation has always been sort of cooperative struggle and dance between marketplaces and brands themselves that want to own their audience,” he said.
At the time of its acquisition, LevelUp had strong integrations with most restaurant point of sale systems. Grubhub is also leveraging that technology to to remove some friction in the ordering and fulfillment process.
For Just Salad, this means orders from every channel, delivery, pickup, and those placed in-store, will run through the same system, and are sent directly to the kitchen. Similarly, data from all orders will be pulled into a central dashboard, giving teams the ability to analyze data surrounding performance, ordering trends, or special offers.
Presumably, customers of both Grubhub and LevelUp will benefit from not only increased technological integrations, but preferred pricing. LevelUp charges restaurants a flat monthly fee per location, while Grubhub works on a commission model. Companies can buy into one or both of the services, which can also be bundled and priced in a way that’s appealing to restaurant partners.
While the company hopes to have its hands in every angle of consumer-facing restaurant technology, there’s one part of the business that Grubhub and LevelUp have decided not to insert themselves into: “We are not very good at making delicious salads so we try to stay as far away from that as we can,” said Priebatsch.