A New Perk of Prime: Amazon Is Adding Grubhub to its Membership Program

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Ecommerce giant Amazon (AMZN) is adding another service for its Prime members. An annual subscription to Grubhub (TKWY) will now be included with Amazon Prime, allowing for certain restaurant delivery fees to be waived. At the end of the one-year trial period, Grubhub will begin charging Prime members a monthly fee, unless they opt out.

Just Eat Takeaway.com, Grubhub’s parent company, notes Amazon also has an option to purchase a 2% stake in the food delivery platform. Just Eat is also continuing to pursue either a full or partial sale of Grubhub.

Upside for Amazon

For Amazon, there’s ongoing pressure to make its Prime membership service more attractive. The loyalty program currently boasts over 200 million members who pay $139 per year. Executives hope the inclusion of Grubhub services will entice more people to sign up. Amazon has taken similar steps in the past, such as adding the NFL’s Thursday Night Games to Prime.

Grubhub is also of specific interest to Amazon, according to investors familiar with each company. Amazon is looking to disrupt and own the restaurant home food delivery market. Additionally, they want to better compete with Walmart (WMT) in the process. Adding Grubhub to their arsenal arguably does both.

Grubhub Eyes Growth

Grubhub’s founding dates back to 2004. Following a series of mergers and acquisitions, the company went public ten years later and consistently reported profits. In 2018, competition from DoorDash (DASH) and Uber Eats (UBER) began to eat into Grubhub’s margins.

Rather than launch a costly ad campaign in an attempt to gain market share from its competitors, Grubhub appears to see upside in partnering with Amazon and gaining access to its Prime customer base. The food delivery company has inked similar partnerships with Lyft (LYFT) and Instacart. While Grubhub has traditionally focused on delivering food to customers in offices, with the rise of remote work the company thinks that Amazon will help it deliver food closer to home. Zooming out, both companies seem to believe the partnership makes sense heading into the second half of the year.

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