YUM Yum Brands Inc

By Cara Lombardo and Julie Jargon 

Yum Brands Inc. is buying a 3% stake in food-delivery service GrubHub Inc. for $200 million, making it one of the first fast-food companies to directly invest in a food-delivery service as it maneuvers the world of online food sales.

Yum Finance Chief David Gibbs told investors Thursday that the relationship with GrubHub is designed to increase customers' access to its KFC, Taco Bell and Pizza Hut brands. Food makers are increasingly trying to capture sales from consumers who are finding it easier -- and often, cheaper -- to dine at home or in their office.

Yum will partner with GrubHub to add online ordering for pickup and delivery to its restaurants. The company has been testing GrubHub with KFC and said it expects GrubHub to cover about 80% of the KFC restaurants that could provide delivery by the end of the year. Nearly 1,500 Taco Bell restaurants already deliver food, but the partnership with GrubHub will expand the number of Taco Bells that can deliver.

Mizuho analyst Jeremy Scott said the deal is "a major win for GrubHub" as it is likely to include a joint marketing campaign during the rollout phase. Pizza Hut President Artie Starrs will also join GrubHub's board of directors as part of the deal.

GrubHub shares rose 22% in early trading Thursday. Yum shares were down 2%.

Other fast-food chains have teamed up with delivery services but have stopped short of making investments. Wendy's Co. partners with DoorDash Inc. and McDonald's Corp. has a partnership with Uber Eats, enabling delivery of its burgers and fries to customers in 13 countries. Dairy Queen's new Chief Executive Troy Bader has said innovative mobile-app ordering and delivery services is one of his priorities.

Panera Bread Co., which has one of the highest rates of online sales in the industry, has its own online platform, Panera 2.0, which in its last quarter as a public company accounted for more than a quarter of the company's sales. Panera employs more than 10,000 of its own delivery drivers.

Other food retailers have made investments in or entered into partnerships with delivery or meal-kit subscription services as a way to get their food to consumers who have an increasing number of options from which to purchase food. Target Corp. in December agreed to buy grocery-delivery company Shipt Inc. National supermarket chain Albertson's Cos. last year bought Plated, a meal-kit delivery service. Packaged-food companies also have been investing in meal-kit companies. Campbell Soup Co. last year announced it would invest in Chef'd to help the soup maker grow its e-commerce business.

GrubHub makes local deliveries of food from about 80,000 restaurants in more than 1,600 U.S. cities. But it faces competition from Amazon.com Inc., which is partnering with restaurant-technology provider Olo to expand its restaurant delivery selection.

Write to Cara Lombardo at cara.lombardo@wsj.com and Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

February 08, 2018 10:38 ET (15:38 GMT)

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