Grubhub Founder & CEO Matt Maloney joins Yahoo FInance’s Brian Sozzi and Seana Smith to discuss the steps the delivery giant is taking as the coronavirus shutters restaurants across the U.S.

Video Transcript

SEANA SMITH: Welcome back to Yahoo Finance live. The coronavirus is having a major impact on the restaurant industry. We've been talking about that a lot here on Yahoo Finance. Many are being forced to either cut their staff, some are even being forced to close their doors.

Let's talk to the CEO of Grubhub, because the company is looking to help out this sector in the time of need. We have CEO Matt Maloney joining us now. Matt, thanks for taking the time to join us this afternoon. There's lots to talk about here.

But first, let's start with what Grubhub is doing to help out the restaurant industry at a time like this. How are you doing this?

MATT MALONEY: Oh, thanks for having me on. It's a real crisis for restaurants, as you point out earlier. Small businesses are closing in record numbers. We're seeing 30% closures of restaurants in some markets.

And many times, these independent restaurants, they only have a month of cash on hand. So if they're closing, they're probably not reopening. So we're doing everything we can, from coordinating with government officials, to making sure that their kitchens can stay open for pickup and delivery, as well as deferring our fees for as long as possible to be able to help them with this immediate cash relief, so they can pay their hourly employees and hopefully stay open.

And we're driving as much demand as possible. We're coordinating big discounts for consumers. We're doing Supper for Support things, just to try to drive more orders to small and medium-sized businesses, especially when everybody's got these stay-at-home orders.

BRIAN SOZZI: Matt, Brian here. Good to speak with you again. I need some good news. What chains, what cuisines are doing well in this type of environment? And I guess secondarily, what chains and cuisines are not doing so well?

MATT MALONEY: Sure. You know, we've seen-- immediately when the crisis hit, especially in the markets that were hit the hardest early, Seattle being one of them, we saw a massive drop off in orders. But since the population there has kind of stabilized in terms of their mentality, not necessarily the COVID infections, people are really relying on the restaurants more than they-- than they were during the depths of the crisis.

So we're definitely seeing an upsurging in certain markets, based on the longevity away from the darkest days. But I would say that in general, it's the restaurants that are staying open. The ones that are able to be open are the ones that are really able to handle the volume that's coming through.

DAN HOWLEY: Hey Matt, Dan Howley here. I just want to kind of get some clarification on the-- I guess holding off on the fees. How will that eventually be reinstituted? And I assume, will restaurants have to pay the $100 million back in total?

MATT MALONEY: No, we're still seeing. What happened was last Friday, when we saw that this was happening and there was going to be a major cash crunch with independent restaurants specifically-- and independent restaurants, that's our business. 80% of our orders are coming through the mom and pops around the cities that they serve. We wanted to be sure that immediately, we took the leadership role, and were supporting them with cash, because they need cash.

They need orders. They have to pay their rent. They have to pay their employees. So we immediately suspended all fees.

I mean, eventually, though we have a liquidity situation for us if we're not able to start collecting that. But for now, we're just pushing it off until we have more clarity. Luckily with the federal stimulation-- stimulus pack that's coming through, hopefully that comes in soon enough that it's going to be-- we're just bridging the gap between the crisis and the federal dollars.

ZACK GUZMAN: Hey, Matt, just wanted to jump in here in regards to what you said in your guys' shareholder letter, back when you guys saw shares fall pretty quickly. You guys highlighted that logistics alone aren't going to be enough to make a food delivery business work. You've been talking a lot about having partners sign up on the platform. A lot of those had been the smaller mom and pop shops versus those bigger corporate companies, since they need to onload delivery function here.

What have you seen in terms of-- if you are dealing with those store closures, what you're seeing in driving profitability, since you did admit that it wasn't just logistics that were going to get you there?

MATT MALONEY: Sure-- nuanced question. I think part of this right now is we're really trying to protect the small businesses. I think that the larger, more enterprise partnerships we have, they have a large enough balance sheet that they're going to be able to weather a few weeks, if not a few months here.

But the inability of the small businesses to sustain through that period mean you're going to see a much higher level of attrition, just in general. So we're trying to maintain those restaurants' ability to survive, so that they can use our platform in the future, which is where we get the demand generation fees. I think the comments you're talking about are if you have to deliver every order, for example, you're effectively a logistics platform, which will be commoditized to low margins.

What we offer is demand generation, and the ability for independent restaurant specifically to compete with each other through a fulsome marketplace. And so trying to help these restaurants get through this tough time is going to be able to have customers for us in the future for the primary business model that we serve.

- And my question is about contactless delivery, the safety of consumers who are getting delivery. I know that in China, certain online delivery services have actually been giving consumers the body temperature of people who have been preparing the food. Do you see the US going to that kind of a stance, and do you think you would be able to put in other measures to protect consumers?

MATT MALONEY: Sure. Well, I mean, that's a-- that is an extreme. I don't even know if we're doing that in our own airports currently. But I can say that health and safety for us is paramount, for the whole community.

It's not just the diners. We need to have our drivers safe so they can come and deliver food, and they're not infecting others. And, of course, the restaurant workers also.

So we instituted contact-free delivery immediately, I mean, within days of realizing the situation that we were in. Contactless, it's an option on the app. I think we're transitioning it over to be default nationwide shortly now that we know all the kinks are worked out.

It's very simple. The package is dropped off at your front door. You get a text or a call from your driver saying it's there. They wait for you at a good six foot distance, so that you're not communicable. And then you get your food.

We also instituted recently a two-weeks' paid leave for our independent contractors who are impacted by COVID. We don't want anyone working if they had any symptoms of feeling bad whatsoever. And so we're working with the drivers and the restaurants, obviously full CDC guidelines, everything we can do to make sure everyone's being safe.

But this is a crisis. I mean, we're all sitting at home right now talking to each other, which is not standard. So we're all-- we're all making changes.

BRIAN SOZZI: Yeah, man, I'm flying-- the other poster right behind me, Yahoo Finance flag from my home. That's for sure. You know, looking out-- looking out to let's say 12 months. What emerges with the delivery space? Do you think with the number of restaurants going down, does this speed up the industry consolidation?

I know you've been in no rush to consolidate. We talked about this a couple of months ago. But how does the industry emerge from this?

MATT MALONEY: You know, it's a really good question. You have these moments sometimes where everything seems up in the air, and you know things are changing, and you don't quite know how it's all going to land. In terms of consolidation, I can tell you, I haven't spent a moment thinking about this. We're really thinking it through the independent restaurants, and what can we do for the industry, as well as these specific businesses?

These are the lifeblood of our communities. I mean, you think about it, they create the flavors that you remember when you're in your favorite neighborhoods. So it's really gonna be sad if there's huge loss there.

I think that one trend we might see is that the industry accelerates. So remember, it's over 200-- some people say it's $250 billion spent on pickup and delivery in the US alone annually. The entire industry, including all of the of the major pizza chains that have their own platforms-- we're not doing $50 billion.

So the vast majority of pickup in this country and delivery is still on the telephone, which is surprising a lot of people for how big our industry's gotten, but it's true. So I think when you're thinking about the offline to online transition, that is probably going to be accelerated because of this event, because people are realizing how they need more-- they need their restaurants. They need to be online. The restaurants realize they need to be online.

And so we're seeing five to ten X the leads for sign up. Our sign ups are off the charts-- multiples of our previous, highest day, week, month-- we're blowing by all the records. So there is a lot of restaurants coming online. Even as I said earlier, there's a lot of restaurants that are going offline, perhaps permanently.

So I think it's going to mean acceleration of the digital adoption of ordering in the US. And we'll all look back at this time, and we'll see inflection points. But frankly, I just can't-- other than that, I don't know what-- what the impacts are going to be.

SEANA SMITH: This time, there's so much uncertainty. There's so much built-up demand for Grubhub at this point. Are you able to keep up with that? Will you be able to hire at the pace that you need to at this point, at least in the short term?

MATT MALONEY: Yeah. So I think you're specifically asking about the independent contractors, and absolutely. I mean, so the good news as it comes to driver availability is there-- I mean, obviously, from this morning's numbers, there's a lot of people that are looking for something to do right now, which is really unfortunate for them. But in terms of making sure you have a driver ready to get your food, no problems there. We're having record adds and applications to be a driver as well. I think there's a lot of latent ride share capacity, too, and they're looking for something to do.

I'm really just more concerned about the restaurant supply. Because for us, it's the restaurant supply and the driver supply. So driver supply is good. Restaurant supply, really working hard to make sure we have that available.

SEANA SMITH: All right, Matt Maloney, CEO of Grubhub. Thanks so much for joining us today.