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Jim Cramer Loves The Food Delivery Business, GrubHub's Business Model

Jim Cramer Loves The Food Delivery Business, GrubHub's Business Model

CNBC's Jim Cramer hosted GrubHub Inc (NYSE: GRUB)'s Matt Maloney during Wednesday's "Mad Money" show. Cramer has spoken very positively of the food delivery industry, which is benefiting from consumers deciding to stay home and order in rather than go out to restaurants that are more expensive.<?p>

Maloney was quick to highlight the rapid growth in his food delivery business, which now includes many notable chains, such as Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB) and Buffalo Wild Wings (NASDAQ: BWLD). After all, his business model is "getting the right restaurants to the right houses," and this helped contribute to large-scale growth at even its tier-two markets.

Maloney did suggest that his business is actually a positive for restaurants, as many consumers want to eat out at their favorite locations but are unable due to time constraints or other limiting factors. But by delivering food to the consumer, the restaurant still recognizes a transaction that wouldn't have happened otherwise.

First-Mover Advantage

GrubHub was among the first large-scale businesses to offer food delivery options. But the market has since expanded to include new entrants, including Uber Eats.

But according to Maloney, GrubHub boasts a greater economics scale than any competitor, which helps drive costs lower for both restaurant partners and consumers. This is perhaps the most important factor since at the end of the day a delivery service like Uber Eats offers essentially the same service, so price is the sole determining factor.

GrubHub As A 'Trump Trade'

Cramer noted that GrubHub is operating at a 40-percent tax rate, which implies any corporate reforms and reductions from President Donald Trump will immediately benefit GrubHub.

Maloney noted that 90 percent of its business in the U.S. and the tax relief will "absolutely" help its financials.

Related Links:

Oppenheimer Upgrades GrubHub, Sees Biggest Threat Towards Food Ordering As An Opportunity

Grubhub Is Credit Suisse's Favorite 'Trump Trade'

Latest Ratings for GRUB

May 2021BNP ParibasUpgradesUnderperformNeutral
Apr 2021Credit SuisseMaintainsNeutral
Jan 2021Morgan StanleyMaintainsEqual-Weight

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