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Grubhub (NYSE: GRUB) recently agreed to buy Tapingo, a leading platform for college campus food orders, for about $150 million. Tapingo has over 150 college campus partners, and processes "tens of thousands" of daily transactions for over half a million active diners at on-campus cafes, restaurants, and cashierless stores.
Grubhub's active diners rose 70% annually to 15.6 million last quarter, while its daily average grubs (orders) rose 35% to 313,900. Buying Tapingo won't give Grubhub's growth figures a huge boost, but it could help the company secure a younger demographic on college campuses while expanding its digital ecosystem.
Image source: Tapingo.
Tapingo's major partners include food service and facility management providers Aramark and Sodexo, as well as Yum Brands' Taco Bell, Chipotle, Panda Express, Jamba Juice, and Chick-fil-A. Grubhub expects to close the deal in the fourth quarter.
An unsurprising purchase
Grubhub's takeover of Tapingo isn't surprising; the company has repeatedly expanded by acquiring smaller platforms. It merged with Seamless in 2013, and subsequently acquired a long list of companies including MenuPages, Allmenus, DiningIn, Delivered Dish, LAbite, and Yelp's Eat24.
That aggressive expansion turned Grubhub into the biggest online food delivery platform in the US. Earlier this year, Second Measure estimated that Grubhub controlled 50% of the US food delivery market. Its closest rival, Uber Eats, held a 21% share. DoorDash ranked third, with a 15% share, followed by Postmates' 9% share, and a 4% share for Square's (NYSE: SQ) Caviar.
Amazon (NASDAQ: AMZN), which initially spooked Grubhub investors with its entrance into food deliveries, controlled less than 1% of the market. But Grubhub knows that it can't become complacent, and that it needs to keep gobbling up smaller players to scale up its operations and widen its moat against its rivals.
Some of Grubhub and Tapingo's services overlap. For example, both platforms provide deliveries from Chick-fil-A and Taco Bell. However, buying Tapingo could tighten Grubhub's bonds with fast food chains, especially among college students. That could help Grubhub counter similar strategies from its rivals, like Uber Eats' partnership with McDonald's.
Image source: Tapingo.
Another move into the POS market
GrubHub's takeover of Tapingo also complements its recent acquisition of LevelUp, a payments and loyalty services provider. LevelUp helps restaurants manage digital orders, payments, and loyalty programs on a single online platform.