For GrubHub, New Acquisition Puts Take Away on the Menu

On Tuesday, U.S. online food delivery company GrubHub Inc. announced it agreed to pay $150 million for college campus food ordering company Tapingo, Inc. The deal is expected to close by the end of the year. In an interview later that day, Tapingo co-founder Udi Oster told Calcalist that while GrubHub has streamlined food delivery, takeout is a whole other story.

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Tapingo was founded in 2012 by Israeli entrepreneurs Oster and Daniel Almog. The company operates a location-specific web and mobile app where users can order and prepay for food from local eateries and set a time for collecting the order. Tapingo is designed for students and has become a part of college campus marketplace. Students who do not wish to collect their own food can have it delivered to them by fellow students directly to their dorm room, a classroom, or a library aisle.

New York-listed GrubHub is the U.S. market leader in online and mobile food ordering and delivery services. Founded in 2004, the company reports a network of more than 85,000 restaurants and is active in over 1,600 cities in the U.S., as well as London. GrubHub owns other online food ordering platforms such as Seamless, LevelUp, Eat24, and MenuPages. In the second quarter of 2018, GrubHub reported $31 million in profits compared with $17.9 million in the same period the year before. GrubHub concluded 2017 with an average of 334,000 daily deliveries to a total of 14.4 million customers and nearly $90 million in profits.

According to Oster, the issue of people ordering and collecting their food from restaurants and food stalls requires different technological solutions than what GrubHub has. “We have mastered exactly that--optimizing the entire process from ordering to take out,” he said. For instance, when ordering take-outs from Starbucks the company’s service lets baristas know when they should prepare specific orders.

On Tuesday, GrubHub’s stock rose by 2.62%. Since the beginning of the year, GrubHub’s share increased by 94%.

Tapingo’s service launched in 2013 at Santa Clara University in California. Today, the company is working with over 150 colleges and universities.

In a 2016 interview with Calcalist, Oster and Almog explained why they chose to focus on College campuses. Looking for high-traffic ecosystems, they first considered hospitals and office buildings. They ended up opting for campuses which are often remote and isolated, and are populated by young people who have an affinity for using apps. The strategy proved successful. Back in 2016, Oster and Almog said that in some of the campuses where Tapingo is active they reached a 50% market share.

Tapingo has raised $66 million in investments to date according to Pitchbook data. Investors include Greenfield Cities Holdings, Qualcomm Ventures, Carmel Ventures, and Fosun Capital Group. Headquartered in San Francisco with an additional office in Tel Aviv, Tapingo employs a team of 90. According to Oster, Tapingo’s growing popularity with college students is one of the reasons it piqued GrubHub’s attention. GrubHub wants to reach new customers in their first years of financial independence and preserve them once they graduate and leave campus, he said.

Oster said that GrubHub will continue operating Tapingo as an independent subsidiary. Tapingo’s Tel Aviv research and development center, which employs a team of 30, will become GrubHub’s R&D center in the country. It is yet unclear whether GrubHub will begin operating its own service in Israel.