Groupon is turning over much of its food-ordering and delivery business to Grubhub.
Groupon’s hungry deal-seekers will be able to order from restaurants in Grubhub’s stable of 55,000 restaurants directly from the Groupon platform. Grubhub, which has built out a large delivery component through multiple acquisitions, will provide the order and delivery services to Groupon restaurants.
The deal brings Groupon’s customer base of 31.6 million to Grubhub. Groupon gets access to 55,000 restaurants and 1,100 Grubhub markets, compared with about 40 cities Groupon had from its acquisition of Baltimore-based OrderUp two years ago.
With the entry of Amazon and Uber into food delivery, Groupon faced a expensive, uphill fight. Food is just the latest traditional business to be upended by the smartphone and the gig economy where scale is the name of the game.
Terms of the deal weren’t disclosed, but Grubhub will get a commission on every order placed from Groupon. Grubhub is acquiring customers and assets in 27 of the former OrderUp markets. Another 11 are owned by franchisees and will be supported by Groupon.
For Groupon, restaurants have always been a big part of its core business of offering deals at local merchants. But Groupon CEO Rich Williams, who took over the top job about 18 month ago, has been pruning the company’s operations in various overseas markets to focus on its strongest and most profitable geographies and business lines.
The partnership brings together two of the best-known names in Chicago tech. Groupon has struggled to achieve the growth and profitability investors have expected since it went public in 2011 at $20 a share. Its stock price is up 22 percent since June 20 to $3.76. Grubhub has fared much better. The stock, which went public in 2014 at $26 per share, is up 38 percent since March 8 to $46.13.
Both companies report earnings this week. Groupon is out Wednesday before the market opens, with Grubhub reporting results after the market closes Thursday.