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GrubHub: Green Initiatives, D.C. Expansion, and Pizza by Geography

Chicago Tech News March 18, 2009
By Todd Allen

GrubHub is another of Chicago's more successful tech start-ups. If you haven't heard of them (and if you haven't, you really do need to get out from under that rock), GrubHub is an aggregator of take-out menus and facilitator of deliveries, making it simpler for people to order out. They're in the process of expanding nationally with 4 cities covered and 2 more on the near horizon. While they did eventually capture the VC infusion that eludes most Chicago start-ups, GrubHub still follows that familiar local pattern: bootstrapped on an open source platform. GrubHub CEO Matt Maloney was kind enough to talk with us about GrubHub's expansion, the economy and their successful green initiative.

Chicago Tech News: You're currently operating in Chicago, San Francisco, New York and Boston. Milwaukee is off the site and we hear Philadelphia's launch is imminent. What makes a good market for GrubHub and how do ordering patterns differ between cities?

Matt Maloney: In terms of what makes a good market, restaurant and population density are important. If there aren't a lot of restaurants or if people and/or restaurants are too spread out, that's not ideal. The percentage of restaurants that deliver is of course important as well, as we need a to have a healthy amount of potential customers. Cold weather we think is important, but San Francisco is doing very well without it, so it might not make much of a difference. Related to that, order patterns are very seasonal in the cold weather markets. Orders always spike when there is a rain or a snow storm, and in general there is a lot more demand for delivery in the winter. In San Francisco, there is no such seasonal effect so orders steadily come in year round and really spike when the occasional rain storm comes to town.

As for types of food, obviously in Chicago pizza dominates. You would think pizza dominates in New York as well, but really the orders are all over the place there. In San Francisco, Asian and Indian food are much more popular than pizza. Boston is more diverse, with traditional American food being the most popular.

CTN: Have you seen the economy causing any changes in user habits?

MM: It's hard to say. We didn't really start going full steam with this business until the economy was already on the downturn. So, we've never seen what we can do in a good economy. What we do know is that we've continued to grow healthily over the last year even though the health of the economy has been steadily going in the opposite direction. Does that mean the economy is helping us in that people are choosing delivery over expensive in-restaurant dining experiences, or does that mean we would be growing a lot faster if the economy were better? It's hard to know the answer to that. Our guess is that the demand for delivery is increasing and has been for quite some time, and that the economy is not going to change that trend too much in one way or another.

Things we are noticing more are the demand for coupons on the site. We have always displayed coupons on GrubHub.com, but now we're working with restaurant partners to offer exclusives, and in the first couple that we've done we've seen a huge response.

CTN: What percentage of participating restaurants are now 100% online, in terms of order integration with GrubHub's software?

MM: That depends on what you mean by participation. When we cover a market, we list every restaurant that delivers whether they have any relationship with us or not. When we work directly with a restaurant, that typically means they start to receive online orders from us. But there is no integration with our software necessary. As long as the restaurant has a fax machine, we transmit the order through a fax and make them type in a confirmation number to confirm they received the order. It's simple for the restaurants and more accurate than using the phone. We are adding some reporting features for them online and are probably going to move more in that direction in the future, but restaurants typically are not very tech savvy, so we want to let them do what they're good at which is making food, and have us handle the technology.

CTN: What percentage of your restaurants also advertise with you?

MM: In Chicago, we work directly with about 40% of delivery restaurants. In Boston, it?s 50%. In San Francisco it's 26% and in Manhattan it?s 7% because the market is so new for us. CTN: GrubHub is a little unusual, in that it's been built with venture capital money. How early in the building process did the VC funding start to arrive and what do you think was different that allowed GrubHub to get funding in a market were seed stage funding is so rare?

MM: We actually bootstrapped for a long time, starting in 2004. We won the University of Chicago New Venture Challenge in 2006 and were a functional business with solid revenue before any investment. Our model requires substantial up front investment to launch a new market so we turned to outside funding sources for our growth capital.

It is difficult for first time entrepreneurs to find seed stage funding here or anywhere else for that matter. If you don't have experience on other founding teams, you typically have to prove out your unit model before people will take you seriously. We showed that our idea worked here in Chicago and that we were the right team to launch a national expansion.

CTN: What platform/languages is GrubHub built on?

MM: We are very technology focused business and have built all of our core software on open source platforms. We typically use Java/MySQL/Apache because we have a lot of experience in them and many of our vendors supply Java integration packages; however we, have nothing against newer technologies such as PHP or Ruby. In fact, we are considering a rails project for a standalone application for restaurants to update their data.

CTN: What percentage of company time would guess is spent on just calling up restaurants and tracking down menus?

MM: The majority of it definitely. We have a data team that works on new menu updates every day to make sure menus are as up-to-date as possible. We have a customer service staff that makes sure restaurants are delivering orders on time and addressing any issues. We also have sales people in every market calling and meeting with restaurants to show how we can help increase their business and offer a more effective way to accept delivery orders. The majority of our staff is working on talking to restaurants.

CTN: You've recently started a Green initiative, which includes allowing customers to opt-out of receiving napkins, forks, straws and the like. What percentage of people are opting out?

MM: In February, almost 30% opted out. We're really excited by that number, and we're looking to do more things to help delivery become greener. We currently purchase carbon credits to offset all delivery orders, and we're working with the Illinois Institute of Technology on creating greener containers for delivery food.

CTN: Where do you see the expansion path going next?

MM: As you said, Philadelphia launch is near. March 23rd to be exact. Then we are heading to Washington DC in May. After that, we are still discussing what the next market should be. Some of the cities that have been tossed around are Los Angeles, Seattle, Denver, and Miami.