Summary List Placement
A new food tech disruptor is making its Wall Street debut Wednesday. But unlike other recent splashy IPOs like DoorDash, digital ordering platform Olo is flying under the radar.
Investors outside the restaurant industry might not know much about Olo, but rest assured they will learn a lot by the end of Olo’s IPO day. The leading online ordering and delivery solution for top restaurant chains like Wingstop makes its stock market launch today.
The company plans to raise $450 million by offering 18 million shares at $25 a share under the NYSE ticker “Olo.” That’s up from a previous range of $16 to $18 a share set earlier this month.
Before the pandemic, Olo’s valuation was rumored to be hovering around $1 billion, according to Bloomberg. Now that target price has more than tripled to $3 billion.
Here are five things you need to know about Olo:
Who is Olo?
New York-based Olo, short for “online ordering,” was founded by Noah Glass in 2005, about one year after Grubhub was founded and several years before DoorDash and Postmates were household names.
Glass’ mobile ordering technology pre-dates the iPhone as early technology made text messaging orders between consumers and restaurants possible.
Olo’s technology has since adapted to meet the demands of today’s convenience-seeking consumer.
Olo’s platform marries restaurants with a vast and complex vendor market. In totality, Olo’s platform integrates with more than 100 restaurant technology solutions such as POS systems, delivery aggregators, payment processors, and loyalty programs. Think of Olo as having the universal key that unlocks dozens of doors, or tech solutions, used by restaurants.
Olo’s platform processes an average of about 1.8 million orders a day.
Big chain strategy
The company’s strategy is to work with large, well-capitalized national chains – the “fastest-growing restaurant brands in the industry,” according to Olo’s S-1 filing.
Olo currently works with 400 brands across 64,000 restaurant locations, playing an integral part of a chain’s digital ordering channels. Clients include Wingstop, Applebee’s, Chili’s, Denny’s, Five Guys Burgers & Fries, Jamba, Noodles & Company, Shake Shack, Sweetgreen, Red Robin, Dairy Queen, and Cracker Barrel.
Wingstop, whose key food ordering and delivery providers are DoorDash and Olo, posted more than $1 billion in digital sales in 2020, a company record.
Digital ordering boom
Olo projects its “addressable market opportunity is $7 billion” as the pandemic fueled the acceleration of new kinds of contactless digital ordering for both dine-in and takeout customers, the company stated in its IPO paperwork.
“Growing consumer demand for convenience has made off-premise consumption, which includes take-out, drive-thru, and delivery orders, the single largest contributor to restaurant industry growth,” the company wrote in a regulatory filing. “Even before the onset of the COVID-19 pandemic, off-premise consumption accounted for 60% of restaurant orders in 2020, and was expected to contribute 70% to 80% of total restaurant industry growth in the next five years, according to the National Restaurant Association.”
Olo is profitable
After experiencing two consecutive years of losses, Olo swung to a profit in 2020. The company recorded net income of $3 million, compared to a loss of $8.2 million in 2019. That profit swing is noteworthy given that third-party delivery companies, who also provide off-premise ordering solutions for restaurants, have yet to become profitable.
In DoorDash’s first earnings call on Thursday, the leading third-party delivery operator posted a net loss of $312 million in the fourth quarter of 2020, compared to a loss of $134 million in the same period last year.
A variety of restaurant solutions
Unlike third-party delivery providers, Olo’s prime mission is to drive digital orders through a restaurant’s own branded channels. It does not have its own app or marketplace.
The company sells restaurants three main services, or modules: Ordering, Dispatch, and Rails.
“Restaurant brands rely on Olo to increase their digital and in-store sales, maximize profitability, establish and maintain direct consumer relationships, and collect, protect, and leverage valuable consumer data,” Olo wrote in its S-1 filing.
Its Ordering module provides chains a white label direct-to-consumer ordering channel. So when a customer orders pickup from Wingstop’s app or website, Olo is powering that service.
Dispatch enables restaurants to accommodate delivery orders through their own website or app. This is less costly than being listed on a delivery marketplace because commission fees for restaurants are less per order.
Rails integrates orders from multiple aggregators like Grubhub into a restaurant’s POS system, thereby avoiding what Glass calls “tablet hell.”
As of December 31, 2019, 44% of Olo’s customers used all three of its modules. That number grew to 71% in 2020.
SEE ALSO: The next big restaurant delivery tech company to IPO, Olo, is now eyeing a $3 billion valuation. Here’s how founder Noah Glass grew his company to power delivery and ordering for 400 major brands like Wingstop, Sweetgreen, and Shake Shack.
Join the conversation about this story »
NOW WATCH: Why thoroughbred horse semen is the world’s most expensive liquid