Grubhub Hopes a Greater Delivery Focus Will Keep Copycats at Bay

443145850_1280-e1393607221897.jpgThe food delivery market is a crowded one, with new competitors emerging every day. Grubhub, which owns Seamless, may control a large portion of that market, but all that competition took a toll last year. In 2015, the company’s growth slowed significantly and their stock value followed suit. In response, Grubhub declared that they would move from handling logistics only to actually delivering the food.

Currently, Grubhub handles the physical delivery of about 8% of their orders. The other 92% are delivered by the restaurants themselves, which use the Grubhub equipment and software to take the orders. Taking over delivery gives the company greater control, and may make them more appealing to the restaurants themselves – but the strategy is not without its pitfalls. Hiring contracted companies to handle the food can be very expensive, and consumers are reticent to pay much for the convenience. In the fourth quarter of 2015, Grubhub lost $5.5 Million on delivery.

CFO Adam DeWitt claims that that loss was still a significant improvement over the third Quarter, so the momentum may be in Grubhub’s favor. That’s good news, since Uber and Amazon are no insignificant threat. Whatever their strategy this year, Grubhub’s biggest advantage may be simply that they got there first.

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The New Meal-Kit on the Block Raises $3.7 Million

hungryroot-variety-pack.jpgIt is now nearly impossible to ignore meal-kit companies like Blue Apron and Hello Fresh, which continue to plaster subway cars with advertisements and encourage huge investments to start-up competitors. The latest is Hungryroot, a meal-kit delivery company that wants to fill several niches at once: healthy, vegetarian, and quick.

Hungryroot has raised $3.7 million in funding from Lightspeed Venture Partners, Crosslink Capital and others, justified by the success of their predecessors and their own rapid growth. Unlike Blue Apron, Hungryroot’s business model does not involve subscriptions; one-off meals are available to order on Amazon and the company plans to expand to Whole Foods soon. While some have questioned whether the meal-kit trend is a bubble waiting to burst, the success of any business is directly tied to its ability to stand out. In this sense, Hungryroot’s biggest selling point is its innovative recipes: brownies made from black beans which somehow taste like the real thing, and noodles made from sweet potato with a  “Creamy Cashew Alfredo” sauce.

While there’s no replacement for good old fashioned comfort food, there’s definitely a market for substitutes like this – especially if they’re easy to prepare. Look out for Hungryroot in your neighborhood Whole Foods soon.

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The Yelp Underpaid-Employee Saga Continues

140245452.jpgThis weekend a (now former) Yelp employee, Talia Jane, wrote an open letter to her employers revealing the financial struggles brought on by her low paycheck, and criticizing the irony of the company spending millions on a food delivery app while employees “can’t afford to buy food.” The post was widely shared, and Jane was subsequently let go – a move which, predictably, Yelp Human Resources claims was not caused by the letter but which Jane herself says was a direct result.

Yelp CEO Jeremy Stoppelman has since taken to Twitter to acknowledge Jane’s point that the cost of living in San Francisco is much to high, but skirt around her direct attacks. Both Stoppelman and other spokespeople have mentioned expanded entry level employment in areas where the cost of living is cheaper.

It’s likely that this event will blow over without too great of an effect on Yelp’s sales or stocks. But the viral nature of the original post reveals a distrust for the large companies like Yelp and Seamless which increasingly act as middlemen between restaurants and their guests.

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Uber Eats has Steep Costs for Restaurants

The food delivery market, once handled primarily by restaurants themselves, has gotten more and more crowded lately as both start-ups and established companies muscle their way into the fray. As the field grows, the importance of differentiating oneself is obvious – whether it’s by offering more options or fewer, a shorter delivery time or a cheaper surcharge. But one factor that’s largely invisible to the end user is the percentage these companies charge to the restaurant themselves.

A typical rate for standbys like GrubHub and Seamless falls in between 10 and 15 percent, while others (like Caviar), charge nothing to the restaurant and make their profit entirely from delivery fees paid by the customer. Uber Eats, on the other hand, will be rolling out services in major cities this month at a 30% rate – even worse than the current high of 25% charged by Amazon.

It’s worth noting that, unlike GrubHub and Seamless (who do not supply their own delivery people), Uber and Amazon offer a more complete service to restaurants. Beyond the interface they offer, the delivery itself is taken care of, not to mention promotional assistance and photographers. To some, these services and the exposure they provide more than justify the cost. But to others – particularly those with lower profit margins per-item to begin with – Uber Eats is simply out of reach.

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How Bad was Jonas for New York Restaurants?

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In preparation for the blizzard this weekend, residents up and down the East Coast cleared out grocery stores and prepared to hunker down for the weekend. Many restaurateurs followed Mayor De Blasio’s urging and shut down operations on Saturday, although there were notable exceptions (including Mario Batali and Andrew Carmellini). It’s no surprise that restaurants took a financial hit; according to restaurant reservation app Resy, same-day reservations were down 88% on Saturday and 38% on Sunday, decreasing weekly reservations by 25% from the previous week.

Food delivery also suffered, and GrubHub reported to Bloomberg that they were dealing with a record number of refunds for undelivered orders. They did not offer any exact numbers, but considering they were also offering a 10% discount during the storm, it’s likely the weekend was particularly hard on their bottom line.

New York is cleaning up this week, and most restaurants are open for business once again. If you’ve burned through all the milk and bread you purchased last week, considering heading out and giving your neighborhood spot some love. Just make sure to wear your snow-boots.

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UberEats Launches in Ten Cities

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New York, along with 9 other major American cities, can soon benefit from Uber’s extensive network of drivers to satisfy their lunchtime munchies in record time. The company is finally launching UberEats, which they hope will ultimately compete with Grubhub and Seamless, although their existing ten-minute lunch delivery still has a very small user base. New York, Chicago, L.A., San Francisco, Austin, Houston, Dallas, Atlanta, and Washington, D.C. should all be able to use UberEats by March.

Drivers will be able to opt in to or out of the new program if they prefer not to mix hot foods and New York gridlock, but Uber is charging a flat delivery fee of $5 to encourage more drivers to participate. And true to the sharing-economy, there will also be an UberPool version which allows users to pay only $1 and have their food delivered with other orders in the area. With more and more food delivery companies joining the fray, each will have to work harder to stand out – the promised shorter delivery times Uber offers could go a long way towards doing that, especially with Grubhub and Seamless averaging over 45 minutes.

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David Chang’s Maple Expands Delivery Zone

As of today, workers in midtown now have the option to order there lunch from Maple – the streamlined food delivery competitor of Seamless and Grubhub backed by Momofuku’s David Chang. The Maple app launched last spring, and has since then allowed users downtown to order lunch or dinner from a rotating selection of menus (roughly 5 a day) to be delivered to their work or home. What separates Maple from other delivery apps is that there is no restaurant or selection of restaurants you are ordering from; instead, their small staff operates out of a commissary kitchen testing, preparing, and packaging the recipes each day (although Chang describes the operation as a “real restaurant,” with the app and delivery logistics taking the place of typical front of house operations).

Maple is a favorite of downtown 9-to-5’ers for it’s focus on presentation, affordability, and simple, healthy options. Chang originally invested in the project because he believed that “no one [had] ever taken the time to really do delivery food well.” They are expanding slowly for now, and still have all the trappings of a service-focused start-up: they have a small team of well-paid employees with a high attention to detail, and if you contact them with any problems (like a food order that arrives after 30 minutes), you’re likely to get emails back from a real person whose top priority is keeping you as a customer. Orders even include a free sugar cookie to set them apart. So far all thi has worked to Maple’s advantage, and press has been consistently good. We’ll know soon whether they can build the momentum necessary to compete with top delivery apps on a larger scale.

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