The rise and fall

Currently Playing: The rise and fall of Grubhub

Overhaul your legacy code with Morph.AI - http://modelcode.ai/morph. Use my code "MICHAELGIRDLEY" to get 50% off your first year! What happened to Grubhub? This business breakdown explains how the company that invented online food delivery in America went from absolute market dominance to being sold for 91 cents on the dollar, while DoorDash built a logistics empire around them. Get the 2-minute cheat sheet for this video → https://girdley.com/youtube 👇 SUBSCRIBE for more business breakdowns https://www.youtube.com/@Michael-Girdley?sub_confirmation=1 ------------------------------------------------------------------ ► Get my weekly letter to business owners: essential insights to run, grow, and stay ahead in your business → https://links.girdley.com/newsletter-yt ► For sponsorships or inquiries please reach out to: Contact@girdley.com ► Do you have a hat I should wear in a video? Send it to us: Contact@girdley.com ► Free events on all things small business: https://links.girdley.com/lectures-yt ► Deep dives on businesses for sale: https://www.youtube.com/@AcquisitionsAnonymousPodcast ► Follow me on Twitter/X: https://x.com/girdley ------------------------------------------------------------------ The story of Grubhub starts in 2004 in Chicago, where two engineers tired of flipping through paper menus built the first online food ordering directory. By 2014 they had gone public, were actually profitable, and held 43 percent of the food delivery market. That kind of dominance in consumer internet, especially with real margins, was almost unheard of. But within six years, they had been lapped by a startup that didn't even exist when Grubhub went public. The rise and fall of Grubhub is really a story about two completely different ways of seeing the same business. Grubhub saw itself as a software marketplace connecting diners and restaurants. DoorDash, founded in 2013 by four Stanford students after watching an overwhelmed Palo Alto dessert shop owner juggle delivery iPads, saw itself as a logistics company. That distinction in worldview drove every strategic decision that followed: DoorDash went after chain restaurants and the Sunbelt suburbs that Grubhub ignored, built a subscription loyalty program modeled on Amazon Prime, and kept spending aggressively while staying private. Grubhub raised commissions on already-struggling restaurants, registered 45,000 lookalike domains, and blamed consumers for being promiscuous across apps. By the time COVID hit in March 2020, the moment that should have been Grubhub's breakout, their structural weaknesses were fully exposed. DoorDash was up 220 percent that year. Grubhub was up roughly 50 percent, hamstrung by its reliance on urban office workers who were no longer going out on expense account dinners. The city-focused, mom-and-pop-heavy model that had worked in 2014 was exactly wrong for a pandemic where suburban families needed chain restaurant delivery at home. In June 2020, a Dutch company called Just Eat Takeaway paid $7.3 billion to acquire Grubhub, believing it could run the same disciplined, profitable European playbook in the United States. It could not. DoorDash kept spending and kept winning. By August 2022, Just Eat had written down the acquisition by three billion euros. By 2023 they reported a five-billion-euro loss, most of it Grubhub. Active users had fallen from 33 million to 21 million. In 2024, they sold Grubhub for $650 million to Marc Lore, an experienced e-commerce operator, representing a 91 percent loss on the original investment. For founders and operators, the Grubhub story is a clean case study in what happens when you define your market too narrowly, raise prices on customers who already have alternatives, and confuse a lead in market share with a durable competitive advantage. DoorDash did not beat Grubhub by being first. They beat them by understanding what they were actually building. If you want to understand what happened to Grubhub, why Grubhub failed, and how food delivery went from Grubhub's market to DoorDash's, this breakdown walks through the full story.