Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=164626
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Jesse Young/MEDILL

GrubHub has partnerships with more than 1,600 restaurants in Chicago.


Too lazy to dine out? Chicago's GrubHub seizes an opportunity

by Jesse Young
May 13, 2010


GRUBHUB-side1

Jesse Young/MEDILL

Visits to GrubHub.com have doubled in the past year, according to web analytics company Compete.com.

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GrubHub.com

Hungry for Italian? There's an app for that. However, you're out of luck if you don't live in the 10 cities that GrubHub operates in.

It’s a rather simple idea: Create a service that lets people order food online and have it delivered to them.

GrubHub Inc., headquartered in Chicago, has done just that. Of the 11,000 restaurants in its nationwide network, more than 3,000 are set up for online ordering, allowing customers to browse and pay for food directly through GrubHub.

“[It] is about making ordering from your local restaurant easier,” said Matt Maloney, GrubHub’s co-founder and CEO. 

The service is free to use, and a restaurant pays nothing to advertise its menus on GrubHub. When an order is placed online or by phone through GrubHub, only then does the company charge a fee to the restaurant. Last year, GrubHub processed $35 million in orders and is projecting to double that figure by the end of 2010.

“There’s no sign-up or monthly fee,” said Mike Evans, co-founder and chief operating officer. “If it doesn’t work, it’s no skin off their back.” 

GrubHub got off to an auspicious start. From angel investors and venture capital firms, the founders obtained investments of $1.1 million in 2007 and $2 million last year, despite the faltering economy. Total employees quickly rocketed from two to 62. 

“To get investment was a clear signal we were doing something right,” Evans said. “We’re right on the cusp of profitability.” 

Online food ordering, however, is hardly a new concept. Since as early as 1999, websites such as SeamlessWeb.com and NYCToGo.com (nowDelivery.com) have connected hungry diners with local restaurants. When Maloney and Evans founded GrubHub.com in 2004, many restaurants in cities such as San Francisco and New York had already established partnerships with existing food ordering services. Nevertheless, the two entrepreneurs set forth with their plan. By focusing on better customer service and a user-friendly experience, the two sought to distinguish GrubHub from the throng of competitors.

“Ease of use is definitely a huge bonus. From the moment you hit their website to the moment you complete the order, it’s really quick,” said Ross McKillop, a blogger for SimpleHelp.net. McKillop, who lives in New York, placed his first order in February and has used the service a total of 21 times since. 

Management has expanded the customer service department to keep up with GrubHub’s growing popularity, which can reach up to 25 orders per minute during peak hours, according to Evans. A customer service representative is on call seven days a week, and every order must be reviewed and confirmed. The company is also hiring bilingual people, not so much for the benefit of diners but to facilitate communication with restaurateurs not fluent in English.  

“A large portion of restaurants in the United States are Spanish-speaking or Chinese-speaking,” Maloney said. “We need to be able to communicate to them ... in their own language and cultural context.” 

Taking it one step further, the company encourages restaurants to sign up with other ordering services in addition to GrubHub. The rationale is that if a restaurant gains more customers, they eventually trickle down to GrubHub. BaBa Pizza & Pasta in Chicago, for example, accepts online orders from both GrubHub and foodler.com.  

“It’s our job to make sure that our service provides them so much more value that they love us,” Evans said. 

While most restaurants welcome the boost in revenue, some have yet to reap the benefits from online orders. Chicago’s Epic Burger signed up with GrubHub in March, but owner David Friedman remains wary. 

“Business has been OK,” Friedman said. “I wouldn’t say it has been strong enough that we’re going to go forward with GrubHub, but it also hasn’t been bad enough for me to cancel it yet.” 

From the start, Maloney and Evans were intent on building the largest network of takeout and delivery restaurants possible. 

“A lifestyle business is a great opportunity for many people, but that’s not what Mike and I wanted when we set out our definition for the company,” Maloney explained. 

GrubHub grew so quickly the company had to relocate to a larger 10,000-square-foot office. In May, with the service expanding to Seattle and Portland, Ore., GrubHub’s footprint stretched to 10 cities. 

Traffic to the website has also increased steadily, though paltry in comparison to that of mobile traffic, which has risen 800 percent on a yearly basis, according to Evans. Debuting in 2008 when the company operated in only five cities, GrubHub’s free iPhone app has been the main contributor to the whirlwind mobile growth. Despite widespread adoption, however, the app has garnered many unfavorable reviews and low ratings from users. 

“We just got completely slammed in ratings by everyone who wasn’t in those five cities,” Evans explained. Expanding the service to other cities and writing a clearer app description has somewhat allayed the deluge of one-star ratings. 

With 45.5 million smartphone users in the U.S., according to a report released in April by comScore Inc., companies such as GrubHub cannot afford to ignore the opportunities found in the mobile market. 

“It’s the most important new growth opportunity for our business,” said Evans, who estimated mobile orders to reach $10 million for the year. 

Mobile business is so important that Evans, who leads the company’s mobile initiative, has carved out half of the technology team to specifically build mobile apps. GrubHub is looking to hire more engineers and designers well versed in iPhone, Android and BlackBerry development. 

“We’re committed to getting great people and we’re not afraid of paying for it,” Evans said.

For now, the company is concentrating on doubling its business annually, though all that hard work hasn’t kept GrubHub too busy to bask in kudos; the company received a Rising Star Award from the Illinois Technology Association in April.

As to what the future holds for GrubHub--whether it's going public or being acquired by a larger player-- Maloney says, “It’s way too early to tell.”