Grubhub's CEO Announces A Massive 400-Employee Layoff

In 2021, the VP of brand and creative marketing at Grubhub told Forbes that the brand sought to engage diners in personal and innovative ways like augmented reality. While that concept could drive success, the food delivery company has struggled to keep up with its competition. Given the highly competitive meal delivery space, rising food costs, and other variable factors, Chicago-based Grubhub has decided to eliminate 400 employees from its payroll.

Grubhub CEO Howard Migdal announced in a June 12 open letter the difficult decision to eliminate 15% of its workforce. Using the term "rightsizing," Migdal said that this reduction will help the company become "more agile, make bolder bets and take advantage of all of the opportunities on our doorstep." Due to increasing operating and staff costs, the organization could not maintain its margins.

CNBC reported that employees would receive 16 weeks of severance. It was not stated which company sectors would be impacted by the staff reduction. Also, there is speculation that one reason for the layoff could be due to a potential sale by Grubhub's parent company, Just Eat Takeaway. Grubhub did not respond to CNBC's inquiries.

Recent analysis from Bloomberg Second Measure stated that meal delivery service demand continues to see increases, although the percentages are lower than the pandemic highs. Even though consumers are still placing those food orders, Grubhub had the lowest consumer spending in April 2023, with just 9%. Given the competition within the food delivery space, many major players have been leveraging strategic partnerships to gain market share.

Recently, Grubhub announced that it extended its Amazon Prime partnership. The benefit gives Amazon Prime members access to Grubhub+, which offers free delivery and other perks. In a March 2023 earnings call, the business partnership was credited with strengthening the brand's competitiveness and future growth.

In addition, Grubhub partnered with Homewood Suites to be the "go-to meal delivery provider" for the hotel chain. In hotels without onsite food options, the program would provide access to local restaurants within a delivery range.

While these initiatives sought to increase use, the reality is that current economic factors can and will impact the bottom line. As stated in the recent layoff announcement, rising costs are not being offset by demand. Consumers are tightening their wallets across the board, and food delivery is one of those categories. Whether or not Grubhub can use cost reduction in collaboration with strategic brand partnerships to strengthen its market position remains to be seen.