Grubhub adds 150K non-partnered restaurants as controversy grows

The delivery platform grew its network to 300,000 restaurants in Q4 and is eyeing a subscription service and pickup to grab market share, but frustration over its strategy could threaten its future.

Grubhub is determined to regain its delivery dominance, and though it made sizable gains in Q4, its path to growth is riddled with controversy.

The delivery company doubled its restaurant count during the period to 300,000 by adding 150,000 non-partnered restaurants and 15,000 partnered brands, according to a letter to shareholders.

This growth was a major milestone for the brand and came well ahead of its goal of doubling its restaurant count by the end of 2020, the letter revealed. The quarter brought thousands of new partnered locations with enterprise restaurants including Applebee’s, Dunkin’, McDonald’s, Popeyes, Shake Shack and Wendy’s and regional chains like Round Table Pizza and honeygrow. It also signed up five independent or small or regional chains for every QSR location that it added in Q4, Adam DeWitt, Grubhub president and CFO, told investors during an earnings call on Thursday. But the company’s biggest push targeted restaurants that had not agreed to join its network.

These non-partnered restaurants are driving orders from new and existing diners, orders that could have otherwise been lost to a competitor if it didn’t have that restaurant mix, the company said in the shareholder letter. 

“If we have a loyal Grubhub diner looking to order from their local favorite that’s not on Grubhub, … we have that option for them on Grubhub, even if it’s a little bit more expensive,” DeWitt told investors the earnings call.

But it may be too soon to tell whether this strategy is effective. As the company expected, diners pay higher fees for these orders since Grubhub doesn’t collect a restaurant commission, resulting in a lower conversion rate among customers. These restaurants made up a low-single digit percentage of orders, according to the shareholder letter. 

Credit: Taco Bell 

Its strategy to add restaurants has been met with growing resistance as well, and many non-partnered restaurants are pushing back against being listed. Restaurants have written negative reactions on social media about how their restaurants were posted without their consent and some have said they don’t even offer takeout, let alone delivery. Grubhub’s integrative partnership with Yelp, where customers can order delivery from Yelp restaurant pages, also brought Yelp into the restaurant discord, and both are working to remove non-partner delivery capabilities from the pages.

“We’ve been very sensitive to the idea that you put a non-partnered restaurant on a platform, and maybe either the restaurant says, well, this is a good relationship as there is [or] we don’t want to partner. Or it frustrates them and they don’t want a partner,” Grubhub CEO Matt Maloney said during the call.

DoorDash and Postmates have also received complaints in recent years over wrong menu items and food quality that restaurant operators can’t easily address. It’s interesting to note, however, that DoorDash’s non-partnered restaurant listings haven’t garnered the same level of scrutiny, Hetal Pandya, Edison Trends founder, told Restaurant Dive. DoorDash has instead been on the hook for problems with its tipping policy, she said.