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How does Grubhub Just Eat Takeaway Merger closing impact contractors?

The deal is done.

On the morning of June 15, Just Eat Takeaway closed their purchase of Grubhub Inc. in an all stock transaction worth $7.3 billion. Grubhub shareholders will receive shares of Just Eat Takeaway as part of the merger agreement. Just Eat Takeaway will have 100% of shares of Grubhub.

All regulatory approvals have been met. The definitive agreement has met the final approval of both Just Eat Takeaway.com and Grubhub's boards. When the plan of merger was announced, Just Eat Takeaway founder and chief executive said “I am excited that we can create the world’s largest food delivery business outside China.”

With the deal closed, he's one step closer.

There are all sorts of big picture questions about this. Can the new combined company see profitable growth? Will the founder of Just Eat Takeaway.com, Jitse Groen, be able to reverse Grubhub's market share slide in the United States? Can they recapture business relationships with restaurant partners who walked away?

The bigger question for me is, what does the acquisition of Grubhub mean for the long term for independent contractors? What will change? When will things change if they do change?

We just watched one of the four major delivery companies get swallowed up when Uber Eats merged with Postmates. Caviar was swallowed up by Doordash. We, the true food delivery veterans, have fewer options now. Will this deal make it worse?

Grubhub Just Eat Takeway merger illustrated by businessmen holding up puzzle pieces with the respective businesses' logos.

While we don't know what exactly will happen, it's probably safe to say nothing will change for awhile.

As we look at this we'll talk about:

  • Who is Just Eat Takeaway?
  • Immediate changes at Grubhub in the merger
  • What happens in a merger like this?
  • Does this open the door to Grubhub switching to an employee model?
  • Is this a good move for Grubhub drivers?

Who is Just Eat Takeaway?

Just Eat Takeaway is a leading food delivery platform with significant presence in Europe and Austrailia and New Zealand. They also own Canadian delivery company Skip the Dishes.

Jitse Groen founded Takeaway at the turn of the century, creating a way for people to order from local independent restaurants online. This is very much like Grubhub, who also started with online ordering before growing into an online food delivery market. In early 2020 they completed their merger with UK based Just Eat, establishing the new Just Eat Takeaway as the dominant food delivery provider in Europe.

Also in 2020, Jitse Groen created some waves by announcing the company was switching to an employee based model instead of the traditional gig economy independent contractor model. They have started to roll out what they call the “scoober” employee model. It's a model that is designed to offer flexibility in scheduling similar to what independent contractors have, but drivers are hired as employees.

Will there be immediate changes at Grubhub?

There has already been one major shake up in the corporate leadership. Grubhub founder Matt Maloney has stepped down as CEO and is taking a position with the Just Eat Takeaway.com management board. Bizjournals reports that he will be one of four board executives running the combined global business. He will focus on North America, which you can translate as Grubhub and Skip the Dishes.

Business desktop with paper, notebook, pen, and a stack of business newspapers with the headline on the top paper saying Changes Ahead!

Adam Dewitt, the current Grubhub President and CFO, is being promoted to CEO. Grubhub will continue to operate as its own brand. I don't expect there to be much of a substantial change in how they do things for awhile.

As far as independent contractors? Nothing will change right away. It takes time to complete a merger like this, and any changes that impact contractors will take several months.

Using the example of similar mergers to guess the future of Grubhub.

We have two recent mergers in the food delivery industry that can give us an idea of how these things work. A couple of years ago Doordash bought Caviar, and more recently Uber Eats and Postmates merged.

The Just Eat Takeaway merger with Grubhub is different in one major way. With the two mergers I just mentioned, both delivery services worked in similar markets. Just Eat Takeaway does not have a US presence. Skip the Dishes did have a presence in some US cities but they pulled out in April, 2019.

Interestingly, part of that move involved transitioning their operations in those markets to Grubhub.

In the Doordash and Uber Eats acquisitions, there was a similar pattern. Caviar and Postmatesoperated independently for a time after the deal was closed. Contractors for those respective businesses continued delivery as though nothing changed.

with those companies' food delivery apps. Much of those first several months involved merging front office operations.

Eventually, the delivery operations merged. The Caviar and Postmates brands remain where customers can order. However, Doordash handles all Caviar deliveries, and Uber Eats now delivers all Postmates orders.

One other merger comes into play. In 2016, Takeaway took over Skip the Dishes. Skip continues to operate in Canada as an independent brand.

What can these mergers tell us about the Just Eat Takeaway.com and Grubhub deal?

Here are my thoughts on what you can expect from the combined entity:

There will be no big changes for contractors for a few months. Grubhub will remain as an independent subsidiary. I don't expect to see any change in name or branding.

The corporate way of doing things at Just Eat Takeaway will have more and more influence on how things happen at Grubhub. Ultimately that could lead to changes in the structure of the independent contractor relationship. We may begin to see changes by the end of the year.

For most people outside the company, changes in culture won't be noticeable. Grubhub will always look like Grubhub.

Some things I expect to see over time.

A magic 8-ball showing the phrase Better Not Tell You Now.

This is all based on my observations. And opinions. My opinions may not be objective. Just giving you a warning.

I think overall the relationship with contractors will be better under Just Eat Takeaway management.

I always felt like Grubhub had a more brash confrontational style of relating to their contractors. They seemed more likely to try to force drivers into compliance. I know many times where driver specialists would threaten things to drivers verbally. It was always verbal, never written.

I feel like Grubhub sees us as employees in spirit where they want to direct us like employees without paying the price. Just Eat Takeaway seems more concerned with the welfare of delivery drivers. That could improve the relationship with contractors. However, it could also lead to a major change that we'll talk about in the next section.

One last thing that comes to mind. Just Eat Takeaway positions themselves as an environmentally conscious company. I see two ways that could have a positive change.

  • In my experience, Grubhub is the worst at long distance, inefficient dispatching. They are the most likely to offer a delivery from a restaurant several miles away. I could see the JET management making changes here.
  • Grubhub is the only major player not offering bicycle delivery options in several markets (including my market in Denver). It only seems to be an option in places like downtown Chicago or New York. I would love to see the bike delivery options expand, especially in light of the increasing gas prices.

Does this open the door to Grubhub using employees instead of independent contractors?

This to me is the big one to watch out for.

It starts with Prop 22. When California passed AB5, a law that made it more likely that gig companies would have to use employees in California, Many gig companies pitched in a TON of money to campaign for Prop 22.

Did you ever notice who didn't pitch in? Grubhub. I've never found any reason why not. I can't even find any speculation out there. I have three guesses:

  • With the pending merger with Just Eat Takeaway, a company that has already committed to moving to an employee model, it wasn't worth the money.
  • Because they were going to be bought out, they'd rather not spend the money and let the new owner deal with it
  • They wanted Prop 22 to fail because they didn't want to pay the extra money it would require to contractors. Maybe they thought they could win in court against the state.

Seeing how Grubhub responded to passage by discouraging people from tipping in California, I'm leaning towards the latter. Maybe it's a combination of the three. However, it does bring up an interesting question.

Just Eat Takeaway has been moving their Scoober employment model to their subsidiaries around Europe. How likely are they going to do the same here?

Just Eat Takeaway's Scoober model.

In late summer of last year (2020), Just Eat Takeaway announced they were ditching the gig economy model. They would begin to use employees throughout Europe.

Just Eat Takeaway announced rolling out a Scoober service in parts of Europe. Much of the delivery work would be done on company provided bikes, scooters and e-bikes.

But the part that gets my interest is that Scoober also involves a sort of hybrid model of employment. Couriers are actually employees with benefits, insurance, etc. More than that though the model is designed to give employees the same kind of scheduling flexibility that independent contractors have.

Within a year of completing the takeover of Just Eat, the model is being moved into the United Kingdom. That can give us an idea of a timeline we could expect IF JET decides to make a change in the case of Grubhub. However, some of the change may have been pushed forward because of a recent UK Supreme Court ruling that Uber drivers were employees.

Would Just Eat Takeaway consider switching Grubhub to an employee model?

I think it's a possibility.

The main reason that gig companies are using contractors is that they can't afford the extra costs of using employees. Yet somewhere along the line Takeaway has decided they can go to an employee model in Europe, where employers have even greater legal obligations towards their employees than in the US.

Something that might a little telling about this: In April Just Eat Takeaway CEO Jitse Groen got into a little Twitter war with Uber CEO Dara Khosrowshahi. This comment from Groen was the clincher:

Tweet from Jitse Groen to Dara Khosrowshahi: Thank you for the advice, and then if I may .. Start paying taxes, minimum wage and social security premiums before giving a founder advice on how he should run his business.

I really do believe using employees could be a profitable model. I've said this many times: Delivery companies are trying to tell us they aren't delivery companies. That's because if they aren't delivery companies, it's easier to justify using contractors. But when delivery companies refuse to admit they are delivery companies, they can also get really bad at delivery.

A company using employees has greater control over the end product. They can make sure deliveries are fulfilled. They can utilize branding and better control the conduct of the couriers. All of them bring extra value in a time when driver behavior, poor quality delivery, and unfulfilled deliveries are all a plague on the delivery world right now.

Using employees allows more control. More control can fix those problems.

I believe that there's a potential that this could be the thing that could turn things around for Grubhub, who's been in a marketshare tailspin in the US delivery market. If they can control the outcome better they could set themselves apart from the competition.

However, I look at Skip the Dishes. There, you don't see any sign of them making such a change. This could mean that they may keep the status quo at Grubhub as well.

Is this a good move for Grubhub drivers?

I'm of the firm belief it could be. I think there are things about JET that offset some of the most bothersome things about Grubhub.

I don't know enough about Jitse Groen or about Just Eat Takeaway to say for sure. However, I feel more comfortable that he would better respect the relationship with couriers than what I saw with the Matt Maloney version of Grubhub.

While I'm not as big an environmentalist as some, I see some promise in the way that JET seems more interested in sustainability. As a driver, I'm frustrated by the unnecessary long drives on a large percentage of Grubhub deliveries. I think this transition could make a difference here.

As someone who does a bit of bike delivery, this could open the door to including Grubhub while I'm out on deliveries.

The biggest question is what happens on the employee front. I think a move to employees could be better for a lot of drivers, especially if they use the flexible Scoober model. With the way that Grubhub currently tries to get contractors to act like employees, I feel like it's more honest to actually hire them as drivers.

For me, that particular move would be unfortunately. I would never be an employee of any of these gig companies, and that means it's one less opportunity for me.

It'll take time for us to get additional certainty and actual results. That means it's impossible to say for sure. However, it's about to be an interesting ride for Grubhub, their restaurants, employees and contractors.

Could this help someone else? Please share it.