After a year in which Grubhub increased the number of diners ordering food through its platform by more than 6 million, the Chicago-based company will expand to hundreds more cities nationwide through a new partnership delivering Taco Bell and KFC.
The move comes as fast-food companies increasingly see value in using online orders and delivery to let customers get their food without having to leave the house. The partnership is set to put Grubhub in towns long overlooked by the on-demand economy.
“That’s exactly where we see a lot of growth opportunity,” Grubhub CEO Matt Maloney said.
Yum Brands, the Louisville, Ky.-based parent of Taco Bell, KFC and Pizza Hut, hopes working with Grubhub will increase its customer base in cities large and small.
“We’re starting from the point with KFC and Taco Bell where we really don’t offer delivery through the U.S.,” said David Gibbs, Yum president and chief financial officer. “Think of the opportunities we have in large towns like Chicago to do delivery. We think that’s massive.”
As part of the deal, Yum purchased $200 million of newly issued common stock in Grubhub, which the delivery company said will help accelerate its expansion. Grubhub’s shares jumped more than 27 percent at close Thursday to $89.04.
In addition to using Grubhub to get Cheesy Gordita Crunches and buckets of fried chicken to customer’s doors, Taco Bell and KFC will use the company’s technology to power their online ordering platforms. It also will be integrated into the stores’ systems. When a Taco Bell cashier receives an order through Grubhub, it’ll pop up just like the orders made at the store.
That’s a deviation from many quick-service restaurants, which have waded into food delivery in recent years but typically offer it through several platforms. Taco Bell, for example, has used DoorDash and Postmates.
Using just one service allows the restaurant to better control the quality for its customers. “This is a massive step in the right direction for restaurants,” said Jeremy Scott, a research analyst who covers Grubhub at investment bank Mizuho Securities.
McDonald’s was the first fast-food giant to use just one delivery service nationwide through its partnership with Uber Technologies’ UberEats, Scott said. Last year, it expanded delivery service to more than 5,000 U.S. locations. With Taco Bell and KFC taking a similar approach, more will likely follow, he said.
Yum also will roll out a co-branded marketing campaign with Grubhub, so customers will see the Chicago company’s name when they order.
“I can’t even extract how important that is for Grubhub’s growth to have that platform, to have that voice,” Scott said.
Grubhub is currently in about 900 cities nationwide, Maloney said. Working with Yum will help the company more than double that.
The impact on Pizza Hut, which has long handled its own online ordering and delivery, is less clear at this point, Maloney said Thursday during an earnings call. Artie Starrs, Pizza Hut’s U.S. president, will join Grubhub’s board as an independent director.
“We need to better understand how Pizza Hut has been as successful as they are … (and) how we can better support them and make them more efficient,” Maloney said.
The two companies are not putting an exact timeline on the rollout, but Maloney said that by the end of the year, Grubhub should cover between two-thirds and three-fourths of the two chains’ more than 10,500 U.S. locations.
Twitter @AllyMarotti