E-commerce giant Amazon could take up to a 15% stake in Grubhub under a new partnership that gives Amazon Prime members free access to Grubhub's subscription service.
Members of Prime, Amazon's subscription program, can now get a free one-year trial of Grubhub+, which waives delivery fees on orders over $12 from many restaurants.
As part of the agreement, Amazon can choose to buy a 2% stake in Grubhub for a minimal price, Grubhub owner Just Eat Takeaway (JET) said Wednesday. Additionally, Amazon will be able to purchase up to 13% of Grubhub shares at a "formula-based price" depending on how many new customers the partnership delivers to Grubhub.
The deal is likely to drive significant adoption of Grubhub+, which now has an audience of Amazon's more than 200 million Prime members. Grubhub, by comparison, had about 33 million total active users as of April 2021.
"Amazon has redefined convenience with Prime and we’re confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers," said Grubhub CEO Adam DeWitt in a statement.
The move comes at a pivotal time for Chicago-based Grubhub, which was acquired by JET last summer. Its new owner has been looking for a strategic partner or buyer to help grow the company as it struggles with declining sales and order volumes. Even with the Amazon partnership, JET's search is ongoing: The company said Wednesday it "continues to actively explore the partial or full sale of Grubhub."
Amazon itself has been floated as a potential player in such a deal. Cat Rock Capital, a JET investor, has suggested that the company sell Grubhub to an online grocery retailer like Amazon, Walmart or Instacart, arguing it would help them compete with DoorDash and Uber Eats.
JET said it expected the Amazon Prime agreement to have a neutral impact on Grubhub's earnings and cash flow this year, but it will become accretive in 2023 and beyond. The partnership will renew each year unless Amazon or JET decides to cut it off.
For Prime customers, Grubhub+ adds to a lengthy list of existing benefits such as free, faster product delivery; two-hour grocery delivery; and access to streaming video. Prime costs $139 a year, while Grubhub+ costs $9.99 a month.
Amazon said the new perk is its way of saying "thank you" to members. "The value of a Prime membership continues to grow with this offer, and this year is shaping up to be a great time to enjoy the convenience, savings, fun—and deliciousness—that membership provides," said Jamil Ghani, vice president, Amazon Prime, in a statement.
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