Famous investor Jim Chanos, founder of Kynikos Associates, said that Grubhub, a food delivery company, makes barely anything per order and that fees will go down while employee costs rise, according to a report by CNBC.
Chanos is known for short-selling stocks.
“Right now, Grubhub is making almost no money per order – it’s something like 15 cents,” Chanos said. “There’s just no margin in this business.”
After Chanos’ comments on Thursday (Sept. 19), shares in Grubhub fell 3 percent. He also talked about the high volume of competition for drivers in the delivery industry, and how many other options are available for consumers.
“We believe that this pressure is occurring at both ends of the spectrum for the delivery companies,” Chanos said. “Not only are we seeing pressure on the labor side with the California law, we believe that the labor arbitrage – calling these guys contractors – works in insidious ways.”
Chanos highlighted that Grubhub can’t compete with the likes of Uber because it doesn’t have the “financial wherewithal,” and that trying to compete is like being “locked in a cage with a psychopath with an ax.”
Chanos added that the restaurant business itself isn’t growing by leaps and bounds. “The restaurant business is a tough business,” he said. “Even if this all works, and all four of these delivery companies grow to 20 or 25 percent of all meals, you are growing into a no-growth business.”
Grubhub has been steadily expanding in the past year. Just this month, the delivery company announced a new partnership with McDonald’s in the New York City and tri-state area. McDelivery will be available both on Grubhub and Seamless.
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