Interview Transcript

Why wouldn’t a restaurant be on all the platforms?

It can be, and some restaurants do, but there are plenty who don’t like the hassle of delivery people from four, five, six companies coming in. I’d walk into a restaurant to order and see all their little tablets there for Grubhub, Uber Eats, Amazon, DoorDash, Postmates, Caviar — the list would go on and on. I’d talk with them about it, and it could be a big hassle. You have a process; some follow it, and some don’t. You’re looking at all these different tablets. It’s kind of a mess for some restaurants. So, they’ll choose to just stick with one sometimes because it’s easier. They can co-brand their window and counter and say, “Hey, you can order with DoorDash,” so everyone who comes in there knows DoorDash is the place to go for this restaurant.

But there’s no advantage there for each of the players? The restaurant looks at the demand they get from each platform, so the biggest players will typically win. If there’s two or three, it’s still quite a commoditised offering?

Yeah, it just depends. For example, Caviar did a really good job of differentiating themselves. “We are the cream of the crop.” It was interesting that they were just bought out by DoorDash. They were like, “We won’t work with you unless you’re exclusive with us, and you’ll want to be exclusive with us because you don’t want your restaurant showing up next to Taco Bell.” They did a good job of sticking with the very best restaurants. They were upscale, they were expensive. Caviar wasn’t for everyone, but their value prop made restaurants willing to work with a delivery company and stick with one.

Every one of those companies is try trying to sell why they’re so much better. Grubhub just won the contract with Shake Shack. Others might show up, stand in line, and place orders, but Grubhub’s the only one that has a contract and does all the deliveries officially. They did a competition. They would do DoorDash for a month, then Uber Eats, then Grubhub. They did separate tests to see which one they liked working with best, which one had their act together. Cheesecake Factory did the same thing. They get an impression of which one they like best, so they might just go with the one. Some decide whatever, we’ll just go with multiple, but some don’t want to make all franchises deal with multiple. “We’re just going to go with one, and this is the one.”

Matt Maloney also mentioned in the 2019 Q3 results, Grubhub and Seamless’ higher number of independent restaurants gives them an opportunity to have a price advantage.

That’s true, it goes back to my point about selection. If I pull up the Grubhub app in a town that’s 15 miles outside Kalamazoo and I’ve got three restaurants, then I open up DoorDash and they’ve got 40, who do you think I’m going to order from? If these three with Grubhub, they’re free delivery or low-price, then I look at DoorDash and it’s $2.50 or $5, there might be a little decision there, but it gets blown out of the water when I see North Italia’s on DoorDash — done. I’ll pay the five bucks, have it delivered. Price matters, but if you don’t have the selection, it doesn’t even come down to price. If North Italia was on both platforms, it would come down to price. Price is a very important part, but it’s not the driver. Selection is the driver, then price.

Maloney said, “We’re going to scale the non-partner restaurants on our platform to compete. Then we should have a price advantage, when we have similar restaurant inventory that should allow us to keep our profitability.”

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