On May 17, 2022, Grubhub offered New York City residents a free lunch. Specifically, Grubhub offered $15 off orders placed between 11am and 2pm, not including tax, tip, or delivery fees.
The offer was tremendously popular. At one point, Grubhub received 6,000 orders per minute. Orders arrived at a rate six times higher than a similar promotion the company ran in 2021.
Unfortunately, instead of being a tremendous success, it turned into an epic failure. Almost immediately, the app failed and customers couldn’t complete their orders. Then many restaurants that should have benefited from the promotion were overwhelmed.
Some restaurants turned the app off and didn’t accept orders. Other restaurants prepared the orders, but the drivers never showed-up, resulting in food being thrown-away. As a result, many customers never received their free lunch.
This post is based on the NY Post article, Grubhub ‘free lunch’ turns into an NYC food fiasco: ‘I didn’t eat all day’, by Asis Grace, May 18, 2022, and the YouTube video in the Spotlight. Image source: fizkes/Shutterstock
1. What operational issues did Grubhub run into with its NYC promotion?
Guidance: The biggest issue turned out to be forecasting demand based on the promotion. Obviously, Grubhub based its forecast on last year’s promotion, which was a fraction of the size.
This underestimation led to several other operational issues. While Grubhub offered additional incentives for drivers, there still weren’t enough drivers. There was also a communication problem with the restaurants. Some restaurants received a communication about the upcoming promotion. However, the message lacked specifics. Moreover, many restaurants either didn’t receive the message or overlooked it.
An additional problem is that the Grubhub software appears to accept orders without considering capacity of restaurants and drivers—an infinite capacity scheduling system.
As long as there is adequate capacity of restaurants and divers at any point in time, the issues are minor. However, when the system is overloaded with demand, such as in this case, a large number of orders will be later or cancelled.
One possible solution is to move to a finite scheduling system where orders are approved by restaurants and assigned to available drivers. If enough capacity doesn’t exist, the order shouldn’t be accepted, or the delivery time delayed to match available capacity. This type of system would slow down the ordering process, as it waits for the assignment of the order.
2. Should Grubhub do similar promotions in the future?
Guidance: Scale is everything for service providers and apps like Grubhub’s. The company needs to acquire as much market share as possible to remain viable. Therefore, promotions such as this one will be needed. However, providing a high-quality product is vital to attracting and maintaining customers. Failure to deliver orders in a timely fashion will not accomplish this goal.
3. What type of response should Grubhub have to this promotional failure?
Guidance: Some type of service recovery is needed. Obviously, cancelled orders that were billed need to be refunded. Also, it would be appropriate to offer some form of coupon, potentially for a free lunch. Grubhub has already done this for many of the customers impacted by the promotion.
Customers can excuse a one-time failure due to an extremely popular promotion. Future failures will lead to even greater customer dissatisfaction and loss of market share.