What Amazon and Grubhub Get From a Partnership

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Grubhub, the struggling US meal-delivery business, is getting a second chance. On Wednesday, the company announced that it was teaming up with

Amazon is (cautiously) returning to the food delivery market. But first…

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The Amazon-Grubhub alliance
Grubhub, the struggling US meal-delivery business, is getting a second chance. On Wednesday, the company announced that it was teaming up with retail behemoth Amazon.com Inc., which is adding food delivery as a perk for millions of Amazon Prime members.

With the deal, Prime customers can get online food takeout with no delivery fees through a one-year Grubhub+ membership. As part of the tie-up, Amazon will get an initial option to take a 2% stake in Grubhub, and an additional 13% stake if the partnership goes well.

The agreement comes at a crucial time for Grubhub. In-person restaurant dining has gradually returned after pandemic lockdowns, while inflation has squeezed household budgets—meaning Americans’ appetite for takeout isn’t what it used to be. At the same time, Grubhub has fared poorly compared with its rivals. The Chicago-based subsidiary of Just Eat Takeaway.com NV has lost 10 percentage points of market share to DoorDash Inc. and Uber Technologies Inc. since the start of the pandemic, according to market research firm YipitData.

Just Eat Takeaway has stumbled, too: Its stock price plummeted almost 80% since it completed its acquisition of Grubhub in June 2021. More recently, it’s been desperate to sell the unit altogether to stem the losses.


But now, with the Amazon deal, Grubhub is suddenly back in contention. “The transaction essentially creates a more relevant No. 3 player after years of market share loss,” said CFRA analyst Angelo Zino. (DoorDash’s stock fell as much as 11% on the news.) And while Just Eat Takeaway doesn’t expect the deal to boost Grubhub’s cash flow and earnings until 2023, it could burnish its appeal to prospective buyers, Zino said.

Of course, Amazon isn’t interested in a rescue plan. The company has its own reasons for linking up with a third-party delivery service. For starters, the deal will offer customers one more reason not to cancel their Prime memberships, even as household budgets shrink.

Earlier this year, Amazon raised the price of its Prime program by $20 to $139 for annual subscriptions. Monthly members, which comprise the majority of Prime’s membership base, end up paying almost $180 a year. While higher costs from the gas pump to the supermarket have turned fee-laden delivery services from a handy convenience to a pricey luxury, the Grubhub+ membership (that normally cost $9.99 a month) could be a meaningful subsidy for Prime members.

Amazon also has a sprawling nationwide logistics network that makes food delivery a natural fit. As e-commerce sales growth has slowed from its pandemic-era highs, tapping into the food-delivery market could help the company lower the cost of deliveries.

Historically, Amazon founder Jeff Bezos was against deploying his logistics machine for food delivery, according to a person familiar with his thinking. He feared that one bad meal would diminish the value of Prime membership in the minds of consumers. The company briefly dabbled in the space with a service called Amazon Restaurants, launched in Seattle in 2015. But it was killed in 2019 after expanding to select metropolitan areas. The program never got the big investment or rapid expansion that would indicate Amazon executives liked what they saw.


The Grubhub deal could allow Amazon to have it both ways. The partnership is structured so that the e-commerce giant can deepen the relationship if things go well, or back out if it goes poorly. It will give Amazon a piece of the food delivery market. And if something goes wrong with your burger and fries along the way? Well, that’s Grubhub’s fault. —Jackie Davalos with Spencer Soper

The big story
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Amazon Will Cover That Grubhub Delivery Fee for You

Amazon, the company that has dutifully trained most of us to think of consumer goods as things we can get delivered to us right this very minute, has sunk its teeth into another wing of the delivery convenience realm: Grubhub. The result? Amazon Prime subscribers now have access to a free year of Grubhub+, meaning they won’t have to pay delivery fees for 12 months.

Grubhub’s parent company, Just Eat Takeaway, announced a commercial agreement with Amazon that affords Amazon a small stake in Grubhub. According to a press release from Just Eat Takeaway, that stake is a little over 2% (but could rise to 13%, according to Bloomberg).

“The agreement is expected to expand membership to Grubhub+, while having a neutral impact on Grubhub’s 2022 earnings and cash flow, and be earnings and cash flow accretive for Grubhub from 2023 onwards,” says the release.

In the same statement, Adam Dewitt, CEO of Grubhub, lauded the deal.

“I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants,” he said. “Amazon has redefined convenience with Prime and we’re confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers.”

What is Grubhub+?
Grubhub+, which was introduced in 2020, offers unlimited free delivery for any orders over $12. A Grubhub+ membership typically costs around $10 per month—meaning it pays for itself after about 3-5 deliveries—but Amazon Prime subscribers will now have access to the service for free for a year. Other “perks” are as you might expect, including the ability to earn rewards and access to a donation-matching program in which you donate the change by rounding up your order and Grubhub matches that donation.

How do you sign up for Grubhub+?
Amazon Prime subscribers can redeem their one free year of Grubhub+ by accessing their subscription through Amazon’s website, but there are a few hoops to jump through in order to get it.

I was able to sign up by clicking into my “Prime Membership” tab from the “Accounts and Lists” dropdown on the upper right corner of the website. From there, a bunch of offers came up, one of which was the Grubhub one.

According to the FAQs on the Amazon signup page, existing Grubhub+ members are also eligible for the free year of membership through Amazon Prime, “with the exception of Grubhub Campus, Corporate, and certain existing partnership members.” Those who already have a Grubhub+ membership should still go to their Amazon Prime benefits and follow the prompts to redeem the free year from there.


Watch out for auto-renewal: The page where you activate the membership through Amazon does note that you’ll be charged $9.99 per month after a year. If you don’t want that, make an alert in your calendar for this time next year so you can cancel your free membership in time and not get charged.

It’s also worth noting that you can’t currently activate the promotion though Grubhub directly; you have to do it through Amazon. I originally went to Grubhub’s website and clicked through to the Grubhub+ section. Clicking “Try for free” brought me to a screen where I was in fact signing up for a 30-day trial and would be charged $9.99 per month after the trial period ended. And as of this writing, the option to sign up appears limited to desktop, too; it isn’t appearing in my Amazon iPhone app, though that might change.

Why does Amazon want to partner with Grubhub?
Amazon has already been serving us food in just about every other way, via its Aplenty house brand, Amazon Go Grocery, and full-on acquisition of Whole Foods—so restaurant delivery seems like the natural next step for the mega-monopoly. In fact, it’s a previous step; the now shuttered Amazon Restaurants was a short-lived delivery service that teamed up with restaurants directly in major cities to coordinate delivery orders. Notably, these transactions did not include a third-party contractor. But it might just make more sense for Amazon (which already has a similar partnership with Deliveroo overseas) to partner with Grubhub, a service that already has the existing infrastructure and crucial name recognition among customers (despite recent struggles to keep up with competitors DoorDash and Uber Eats).

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Will the rush of new Grubhub+ members experience the absolute disaster of Grubhub’s most recent big, flashy free food promo? Amazon is a behemoth of a company, a perk of which is that it’s accustomed to handling logistics on a mass scale. So hopefully the customers, delivery workers, and restaurants all benefit from the arrangement rather than feeling the squeeze.

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