Amazon will give its US Prime members free access to a meal delivery service Grubhub for a year under a deal announced Wednesday.
The Grubhub Plus membership — which normally costs $9.99 per month — lets customers order from thousands of restaurants with no delivery fees on most orders. Amazon Prime membership costs $139 per year.
Prime members must sign up for the Grubhub service. After one year they will be charged Grubhub’s normal fees unless they deactivate the program.
The deal is part of a partnership between Amazon and Just Eat Takeaway, the Amsterdam-based delivery company that bought Grubhub in 2020 for $7.3 billion. Amazon has an initial option to take a 2% stake in Grubhub, which could climb to 15% if certain performance conditions are met.
The deal could give Grubhub a much-needed boost. The Chicago-based company was the US market share leader as recently as January 2019, when it controlled 31% of food delivery sales, according to market research firm YipitData. But rivals DoorDash and Uber Eats chipped away at that lead by offering discounted service and rapidly expanding into suburbs. As of May, Grubhub controlled 11% of sales, while DoorDash held 57% and Uber Eats had 31%.
Grubhub was hurt by fee caps that dozens of cities put in place to help restaurants during the pandemic. It is also facing lawsuits in Chicago and Massachusetts, where officials have accused the company of deceptive practices, including delivery services for restaurants without their consent.
Grubhub has denied the charges. But they have been a headache for Just Eat Takeaway, which announced in April it was considering the partial or full sale of Grubhub. Just Eat Takeaway said Wednesday it continues to explore that sale.
Just Eat Takeaway said the agreement will have a neutral impact on Grubhub’s 2022 earnings but will be reflected in its results starting next year. The partnership will automatically renew each year unless Amazon or Grubhub cancels it.
In a statement, Grubhub CEO Adam DeWitt said he’s confident the offering will expose many new diners to Grubhub delivery. Grubhub said its research shows that more than half of US adults consider takeout or delivery food “essential,” but only 38% say they use third-party delivery companies.
Amazon said in a statement that the deal makes Amazon Prime membership even more valuable. Amazon has more than 200 million Prime members worldwide; most are based in the US
Just Eat Takeaway shares surged 15% on the Amsterdam stock exchange on the news. DoorDash shares fell 7% on the New York Stock Exchange.