The food takeout wars are heating up as new entrants set their sights on market leader GrubHub Inc. (NYSE: GRUB), which controls 50% of the market share as of March 2018. One of the more high-profile companies to join the fray is Yelp Inc. (NYSE: YELP), the leading review site, which has nearly 150 reviews as of 4Q 2017.

In 2014, Yelp, which already has an online restaurant reservation service, purchased one of GrubHub's smaller competitors, Eat24, for $134 million with the intent to dominate the space. That didn't work out, as Yelp looks to close down the company.

GrubHub has been fighting back with several upgrades to its ordering platform and by staying laser-focused on the customer experience, which is a key differentiator in this service business. Yelp is less of a competitor these days, with most of GrubHub's competition coming from Uber Eats and DoorDash.

GrubHub

GrubHub is the most established online ordering service, with 15.6 million active diners ordering from more than 85,000 restaurants in 1,600 cities. It currently processes more than 423,000 orders per day, which generated more than $239 million in revenue last quarter. Its growth has been meteoric, leading to an initial public offering (IPO) in 2014.

GrubHub's success has been driven by providing a superior customer experience on both sides of the transaction. For its restaurant clients, its online ordering platform provides an instant boost in takeout sales while increasing efficiency in processing orders. For its diners, GrubHub promises a fully cooked made-to-order meal at their doorsteps within an hour of ordering. Diners can even track their orders on a special GrubHub app. GrubHub charges the restaurants an average of 13.5% of the food bill. Although it doesn't charge diners for using its service, restaurants can apply a small delivery charge.

Also, GrubHub in Sept. 2018 purchased campus food delivery company Tapingo for $150 million. GrubHub has been on an acquisition spree of late. It also recently purchased LevelUp, the digital ordering solution for restaurants, for $390 million. Then there's Eat24, which it's bought and plans to shut down.  

Yelp and Eat24

Yelp has over a hundred million restaurants reviewed on its site, and it has always been looking for a way to monetize that asset. In 2010, Yelp purchased OpenTable, allowing its users to make reservations at restaurants they have reviewed. In 2013, Yelp acquired its competitor, Urbanspoon, to increase its market share. Also in 2013, Yelp entered into a partnership with Eat24 to add online ordering of restaurant takeout food. For the restaurants that Eat24 serviced, which numbered about 20,000 at the time, Yelp added a widget to takeout diners' orders after they reviewed the restaurant. In 2015, Yelp bought Eat24 for $134 million. 

Then, in 2017, GrubHub bought Eat24 from Yelp for $287 million. It now plans on shutting down the company down. Eat24 controls a small fraction of the order delivery market, specifically focusing on San Francisco. 

GrubHub's Advantage 

At the core of the GrubHub's offering is an online ordering engine that quickly connects diners with the restaurants of their choice. Yelp's best bet on that market was Eat24, which it no longer owns. GrubHub provides users with easy navigation experiences to search for restaurants by a multitude of criteria.

Conclusion

GrubHub still has the edge in the food delivery wars. For now, it has a larger footprint, and it has built a solid reputation for customer service. Eat24 is less established but does have access to Yelp’s 130 million monthly visitors. If you use Yelp to look at restaurant reviews, you connect to Eat24 by clicking a button.

However, if you search for a food delivery service on Google, GrubHub will probably pop up first. If anything, it's worth worrying more about Uber Eats or DoorDash. The food delivery business is growing fast, but when it comes to GrubHub versus Yelp, GrubHub is the clear winner in food delivery. In the end, it's the only pure play available for stock market investors looking to own a piece of the growing food delivery market.