What Uber’s Proposed Grubhub Acquisition Would Mean for Franchise Brands

On Tuesday, Bloomberg reported that Uber has made a play to acquire Grubhub. Grubhub is apparently receptive to the offer, and the two companies “could reach an agreement as soon as this month,” according to unnamed sources familiar with the matter.

Third-party delivery services have been something of a gift and a curse for the foodservice industry in recent years. Some brands have been eager to use delivery services to expand their reach without building their own delivery infrastructure while others have bristled at the pressure to adapt their offerings to accommodate a service they have little control over.

And then there are the fees charged to restaurants, which in some cases can get as high as 40 percent of the order price. In recent years, as more third-party delivery platforms have launched in markets across the U.S., restaurant owners have had no shortage of options of delivery partners, and competition between companies like Grubhub, Seamless, DoorDash and Postmates has provided leverage for owners to negotiate more favorable contacts.

A merger between two of the biggest players in the industry would threaten that competition. The buyout’s implications are particularly dire for independent restaurant owners, who have little leverage for negotiation. Franchise brands, on the other hand, have more weight, and franchisors would do well to establish system-wide contracts that are favorable to franchisees wherever possible.

Both Uber and Grubhub have been hammered by the coronavirus pandemic, but according to Bloomberg, shares for both companies shot up after the announcement.

Grubhub shares climbed as much as 39% in New York trading after being temporarily halted. They were up 36% at 2:09 p.m., valuing the company at $5.8 billion. Uber, with a market value of about $59 billion, rose as much as 8.2%.

In April, San Francisco became the first city to cap delivery-service fees at 15 percent. If Uber’s attempted takeover of Grubhub is successful, restaurant owners will likely push lawmakers to establish similar caps across the country.