Amazon teams up with Grubhub to offer free delivery to Prime members

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An Amazon Prime driver prepares to make a delivery. (Photo by Dinendra Haria/SOPA Images/LightRocket via Getty Images)

Amazon will give its U.S. Prime members free access to 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.

"Being able to give Prime members one year of Grubhub+ and no delivery fees from restaurants is our way of saying ‘thank you,’ Jamil Ghani, VP of Amazon Prime, said in a statement. "The value of a Prime membership continues to grow with this offer, and this year is shaping up to be a great time to enjoy the convenience, savings, fun — and deliciousness — that membership provides."

The deal could give Grubhub a much-needed boost. The Chicago-based company was the U.S. 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 advertising 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 U.S. 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 U.S.

Just Eat Takeaway shares surged 15% on the Amsterdam stock exchange on the news. DoorDash shares fell 7% on the New York Stock Exchange.