Olo’s IPO and a Disgruntled DoorDash

As a B2B transactional SaaS company, Olo has left its mark in the restaurant food delivery segment. On March 17, the company reached a valuation of $3.6 billion after its first day of trading on the New York Stock Exchange when shares surged by 39%. Olo’s original target price of $16-$18 per share quickly rose, opening up at $32 and closing at $34.75. The company raised $450 million in the offering. As of early-morning market trading on April 1, Olo’s shares are priced at $26.45.

Unlike other companies in the restaurant delivery sector, Olo is making a profit due, in part, to the increase in online restaurant ordering brought on by the pandemic. In 2018, they reported a net loss of $11.6 million. In 2019, the net loss decreased to $8.3 million. In 2020, their revenue rose by 94% year-over-year. The company brought in $98.4 million and posted a net income of $3.1 million.

What Is Olo?

Olo, which stands for online ordering, is one of the big players in the digital platform space. Through the use of Olo’s software, a restaurant can manage their orders, whether they come in from Uber Eats, DoorDash, the restaurant’s website, or social media, all on one platform. Their Google integration also offers customers the ability to order from Search, Maps and via voice with Assistant.

Gone are the multiple tablets lining restaurant counters.

A digital online, mobile, and, more recently, tableside ordering system, Olo works with 400 brands and 64,000 restaurants. The rising star in the digital world processes 1.8 million orders every day. Some of the restaurants they partner with include Applebee’s, Cheesecake Factory, Chipotle, Denny’s, Jamba Juice, Shake Shack, and Chili’s.

When COVID-19 struck, Olo added new features to help their restaurant partners. These included increased functions for curbside pickup. Customers push a button upon their arrival and the restaurant receives notification that the guest has arrived for pickup. The information includes the customer’s vehicle identification.

The company also added Table Service 2.0, a digital solution that allows guests to place their orders from their tables or before they arrive using QR codes, an online ordering site, or an app. They’ve also focused on improving the guest experience by updating the visual layout on the menus and optimizing user flow. According to QSR Magazine, the redesigned menus have increased conversion rates by 6% on average.

Olo also incorporates delivery, allowing restaurants to integrate third-party delivery services into their POS system. When a delivery order comes through, Olo’s software processes the sale and finds the cheapest or nearest delivery person to pick it up. They also work with third-party delivery apps which send orders through their API so that every order comes through the same POS system, making it easier on restaurant operators.

DoorDash Accuses Olo of Fraud  

Trouble is brewing with one of these third-party apps. DoorDash, Olo’s biggest delivery partner, recently accused the company of fraud. According to New York State Supreme Court filings, DoorDash alleges that Olo has been charging them more than their competitors which constitutes a breach of contract.

DoorDash discovered the discrepancy after purchasing Caviar and finding out what fees they had been paying the digital software company. DoorDash stated that, had they been charged the same fee as Caviar, they would have paid Olo approximately $7 million less since the start of their contract in 2017.

According to Olo, an addendum to the contract had nullified the clause promising equal fees to delivery platform providers. They also stated that, because Caviar was focused on high-end restaurants, they were not in direct competition with DoorDash.

According to the filings, DoorDash was responsible for over 19% of Olo’s revenue in 2020 and was their biggest delivery partner. The question remains if they will continue as partners or attempt to break their contract which runs for at least another year, until March 2022.

The Digital Age of Restaurants

While many restaurants had already delved into the digital age, the pandemic speeded up the process. Restaurants without drive-thru or well-established delivery systems were left scrambling for a solution.

Drive-thru, carry-out, and delivery all saw massive surges. According to NPD, digital orders increased by 145% in December 2020 year-over-year with carry-out accounting for 46% of all off-premise orders. Olo was definitely in the right place at the right time.

Olo works with restaurants with at least 10 units and charges a monthly fee as well as a small fee per transaction. Their software integrates with POS systems, payment providers, loyalty programs, CRM systems, and social media.

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