Egregious, repulsive, dumb: These are just a few of the words CEO Matt Maloney used to describe his competition’s practices, even as he argued that Grubhub is significantly better positioned to succeed long term.
— Kristen Hawley
Grubhub CEO Matt Maloney wasted no time telling investors what he thought of the competition in his company’s first quarter earnings call on Thursday. With Uber and Postmates IPOs pending and DoorDash experiencing rapid growth (by some measures, bigger than Grubhub), he spent the hour forcefully promoting his company’s strategy and position in the marketplace.
“We are providing the total package. I’m extremely confident because I feel that we’re winning across the board when it comes to chain and enterprise conversations,” he said. “No one else has this combination of the marketplace growth, delivery, delivery as a service, and loyalty programs, including where we share customer data with [point of sale] integration. This is exactly what they want, and like I said, we’re the only ones offering [it].”
‘Buy vs. Rent’
What restaurants want, said Maloney, is control of their own data. “No one else is sharing customer data. That is a dramatic game-changer for the industry,” he said.
Grubhub paid $390 million in cash for restaurant technology company LevelUp last year in an effort to bolster its suite of products. On Tuesday, the company shared more about the power of its combined offering for restaurants: namely, the ability to combine information about online diners with that of in-store diners — something that, he said, the competition can’t and won’t offer.
Grubhub has latched onto a “buy vs. rent” narrative to explain this difference. The competition is “renting” customers to restaurants, it said, fueled by billions of dollars in venture capital investment. This comes in the form of extremely low fees paid by restaurant partners (“zero to near-zero,“ Maloney said) in return for foregoing orders from any other platform.
In fact, he said, “The concept that you’re exclusively renting is just… dumb.“
Enterprise Is Everything
After Uber filed for its IPO earlier this month, Uber Eats’ chain partnership strategy was laid bare — it’s incredibly reliant on the success of its large partners. The public filing also potentially confirmed what exclusive Uber Eats partner McDonald’s already knew, that the fast food giant has significant leverage, perhaps enough to end the exclusivity altogether.
This isn’t to say that fees paid by restaurants to Grubhub don’t matter, and those magical large chain partnerships are pivotal to Grubhub’s proposed long-term success. But, Maloney said, even though major chains have more negotiating leverage than the 70,000 independent restaurants on the Grubhub platform, the company isn’t as impacted by those pricing conversations. (Though worth noting at Yum Brands’ investor day last year, David Gibbs, the company’s president and chief financial officer, alluded to basically non-existent fees paid to Grubhub by Yum franchisees.)
“We actually bring real value and we’re helping brands to build a long-term and profitable business. So we’re paid fairly for our services, which then allows us to achieve long-term sustainable economics, which, I think, you also know is rather unique in our industry,” Maloney said.
Maloney also took the opportunity to directly call out two competitors, DoorDash and Postmates, for listing Taco Bell restaurants on their own platform without the restaurants’ consent. Grubhub inked an exclusive deal with Taco Bell parent Yum Brands in early 2018.
And, Maloney seemed to be working to restrain himself as he called a competitor’s practice of allegedly stealing tips from drivers “egregious and repulsive.”
Bottom line, he said, is that Grubhub is significantly better positioned than its newer-to-market competitors to succeed long-term. “Because we have built exceptional tools that help our restaurants build a sustainable and profitable online business, restaurants choose to work only with us not because of an economic incentive but rather a practical one because they want to own their customers and build a long-term asset,” Maloney said. “This is extremely rational.”
Grubhub reported net revenue of $324 million, up 39 percent year-over-year and up 13 percent from the fourth quarter of 2018. Gross food sales were $1.5 billion in the quarter, and Daily Average Grubs, a metric the company uses to describe number of orders on the platform, were 521,000, a 19 percent year-over-year increase.