Delivery succcess: GrubHub files for IPO with $1 billion valuation

The food-ordering website GrubHub is going public putting its value at more than $1 billion. GrubHub is now in 600 cities, working with more than 28,800 restaurants. It is considered the nation's leading online and mobile food-ordering company.

CNET editor-at-large Tim Stevens joined the "CBS This Morning" co-hosts to discuss the company's IPO and the online food boom. GrubHub reports that in 2013 they brought in $1.3 billion in food sales, had 3.4 million diners and averaged 135,000 orders per day.

Stevens said that "now may be a good time" for the company to head to Wall Street.

"We're seeing a bit of a resurgence of tech IPOs - Facebook, Twitter and a few others - and they've done reasonably well. For that reason alone, it's a pretty good thing," he said.

GrubHub has remained successful while many other food-ordering companies with similar operations have failed. Stevens credits their staying power with their large presence.

He said the company differs from most online start-ups because they do not rely on advertising.

"These guys are charging a commission of about 10 to 15 percent on restaurants that the consumers don't see when they do the order. But it's more or less passed on to them," he said. "They've got a solid revenue model. As their orders increase, their revenue should increase as well."

In its IPO filing, GrubHub revealed that restaurants that pay more commission will show up higher in search results when customers log on to place an order. On top of that, Stevens said the more orders a restaurant receives, the more they are charged in commission by GrubHub.

"Some of these restaurants are a little upset about it. You would think the more successful they'd be, the commissions might go down, but it goes the other way around," he said.

While the commissions might seem high, since GrubHub is just taking orders, Stevens said that the restaurants are paying to use their expensive technology.

"If these restaurants were to build that technology themselves, it would be a pretty complicated thing," he said. "And of course they get immediate access to the millions of users of Grubhub and Seamless, which are now combined."

The company merged with another online-ordering site Seamless last summer, but under the IPO the name will become solely Grubhub. The GrubHub family of brands also includes MenuPages and Allmenus websites. The IPO goes up on Monday.

To see Tim Stevens full interview, watch the video in the player above

  • Shoshana Davis

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