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Lyft Deal With Grubhub Challenges Uber in Food Delivery

By Howard Smith – Updated Oct 14, 2020 at 11:36AM

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The ridesharing companies have different expansion strategies into food delivery.

Earlier this year, Uber Technologies (UBER 0.12%) pursued the acquisition of food delivery service Grubhub (GRUB) to expand its Uber Eats business. When an agreement couldn't be reached on that deal, Grubhub announced it was being acquired by European food delivery company Just Eat (JET 0.16%) for $7.3 billion.

Now Uber rival Lyft (LYFT -0.97%) has announced that it will be partnering with Grubhub, providing its Lyft Pink subscription members access to Grubhub+ for free food delivery and other perks. 

masked food delivery driver with package on passenger seat

Image source: Getty Images.

The food delivery service has exploded during the coronavirus pandemic, with on-site dining restrictions in many places, and consumers opting to avoid going out. After Uber's failed bid for Grubhub, it agreed to buy Postmates for $2.3 billion. 

Lyft's partnership with Grubhub takes advantage of the booming food delivery business using a different strategy. Lyft Pink was rolled out in December 2019 providing subscribers with discounts on rides and perks, including priority airport pickups, for $19.99 per month. Lyft Pink members now have access to Grubhub's subscription service, which normally costs $9.99 per month, as part of the Lyft membership program.

Lyft's move into the delivery business is an attempt to gain some share in the growing market without making a large acquisition. Uber said in its second-quarter earnings report that gross bookings for its delivery service grew 113% for the period ending June 30. This was an acceleration from the 54% year-over-year growth it saw in the prior quarter as pandemic restrictions were initiated. Now Lyft's monthly subscribers will have another option for home food delivery. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Just Eat N.V. and Uber Technologies. The Motley Fool has a disclosure policy.

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