Noah Glass used to tout a seemingly ambitious milestone when outlining his company’s long-term vision. The day Olo achieved 51 percent of sales for a customer would represent the moment it became the majority order channel for that restaurant. And others would soon follow.
“The dawn of digital ordering primacy,” he says.
Well, there are Olo customers today processing 100 percent of their transaction volume through the company’s platform. COVID-19 might have lit the ignition on Olo’s rise, but the landscape was already headed this direction. Takeout, delivery, marketplace, and even tableside orders where guests sit down and scan a QR code. They’ve all turned that ambition into what Glass now calls “digital entirety.”
Olo, a cloud-based, on-demand commerce platform founded in 2005, went public in mid-March after raising roughly $450 million at a valuation of $3.6 billion.
Its first quarterly review, which recapped the Q1 period that ended March 31, reflected a rapidly shifting industry. Olo’s total revenue increased 125 percent, year-over-year, to $36.1 million as non-GAAP operating income surged 7.6 million to $6 million, or 17 percent of total revenue. Average revenue per unit lifted 61 percent to about $525 million. Platform revenue hiked 136 percent to $34.9 million and gross profit increased 150 percent to $29.3 million (81 percent of total revenue).
And perhaps one of the more vivid stats—Olo’s active locations jumped 42 percent, year-over-year, to about 69,000. In Q1, Olo deployed a number of top chains, including Outback parent company Bloomin’ Brands, which moved from a homebuilt system. Culver’s, Krystal, and Nando’s U.S. Union Square Hospitality also expanded its relationship with Olo, “demonstrating that on-demand commerce can play an important role in fine-dining establishments,” the company said. More on this later.
Olo’s open SaaS platform for multi-unit restaurant concepts welcomed more virtual concepts, too, from goop Kitchen to Guy Fieri’s Flavortown Kitchen. It’s also the engine behind the phenomenon of MrBeast Burger, which has spread north of 600 locations.
Glass, who recently turned 40, says he hasn’t been caught off guard necessarily by the “digital entirety” movement that now exists in the restaurant space.
Olo saw this for the first time when Shake Shack opened a kiosk-only, cashless store in 2017 at 51 Astor Place in New York City. Shake Shack ran the kiosks through Olo’s platform, and also deployed its web and mobile ordering for those guests ordering ahead.
And thus, 100 percent of that unit’s order volume, when it opened, flowed through Olo.
“And that was exciting. It was an anomaly,” Glass says. “We short of thought of it as a one-off. But what we’ve seen during the era of COVID, specifically with virtual brands, is that they are inherently 100 percent digital. One hundred percent delivery oriented.”
Glass was recently chatting with Liam Farrow, the chief digital officer at Bluestone Lane. Pre-COVID, the Australian-inspired coffee shop, cafés, and lifestyle brand took 95 percent of its orders at the counter, or table. The rest came via digital. That inverted during the pandemic.
Bluestone Lane uses a QR code, or what some refer to as “table service 2.0.” Where guests have the ability to order and pay, and have the order tagged to the table where they’re sitting. It’s then run out.
All of this has reset Olo’s concept of what’s possible. It’s gone from touching every off-premises transaction to touching every transaction, Glass says.
He relays another story to illustrate the point. A couple of years back, Glass joined the Culinary Institute of America as a trustee. During his first lunch as such, he sat around a table with industry giants Charlie Palmer, Michael Mina, and Roy Yamaguchi. “And I was kind of embarrassed to tell them what I did,” Glass says. “I said, I do something in the restaurant industry, sure, but I don’t know that it’s going to be relevant to you all.”
Palmer, whose Aureole has earned 13 Michelin stars, told him he was mistaken. Takeout and delivery, even then, was on the radar of even the country’s most traditional chefs. Glass says Palmer told him the ability to deliver a hospitable and high-quality experience, but remote, was something they wanted to get ahead of.
Hospitality guru Danny Meyer sits on the board of Olo. The Union Square Hospitality executive, founder of Shake Shack, and “enlightened hospitality” visionary joined in 2014 when OpenTable disbanded its board after being sold to Priceline for $2.6 billion.
Meyer sat in on an investment pitch from Glass. Afterward, he expressed interest in investing and joining leadership.
“It was fascinating because what he said at the time was, I saw OpenTable as restaurant technology 1.0. Helping the 40,000 restaurants that take reservations take reservations online. [And now] I see Olo as restaurant technology 2.0. That it’s not just for the 40,000 restaurant locations that take reservations online—it’s the 600,000 that take orders and helping them to take orders online.”
Olo currently serves more than 400 restaurant brands across the aforementioned 69,000 individual locations. Quite a leap from when Glass founded the company after asking himself why he couldn’t get a cup of coffee faster by ordering ahead and skipping the line.
An interesting distinction over the years is Olo didn’t divulge into becoming a consumer brand alongside that growth. It’s a B2B software platform, not a B2C marketplace or aggregator.
Essentially, customers use Olo without having any idea they are doing so.
“… our interests are aligned with our customers' interests to help them drive direct digital traffic first and foremost,” Glass says.
The subscription element of Olo’s transactional SaaS model includes both a fixed fee component, as well as a usage-based component that increases as transaction volumes grow. It also charges per-transaction fees for certain ordering and delivery enablement products.
Combined subscription and transaction fees charged on a per-location basis is defined as the average revenue per unit noted earlier.
Glass doesn’t consider COVID to be a bubble. Arriving at a restaurant. Being seated. Looking at a menu. Placing an order with a server after a brief conversation. Then having the meal delivered to your table. That experience simply doesn’t define the majority of transactions in the industry.
It was true before a global crisis shut the dine-in doors across America. Going back to 2019, off-premises represented 63 percent of all restaurant industry transactions in the U.S. “In that context, you can understand why it's so valuable for restaurants to enable a more efficient model for ordering and paying for a meal that will be consumed off-premises, both for the benefit of the consumer and for the operational efficiency of the restaurant,” Glass says.
Yet, of course, COVID pulled digital ordering adoption into the future. Brands were forced to shift attention and consumers shifted their use of restaurants to off-premises occasions.
And a broader interest in safety through contactless-order collection pushed digital ordering even higher on the checklist. It’s become “mission-critical to Olo customers and the restaurant industry as a whole,” Glass says.
But what this encompasses continues to change. Shake Shack, for instance, realized in its early days that delivering on some of its brand ethos would be difficult at the volumes it was generating. Could it offer the hospitality Meyer was famous for at breakneck speed?
A reason it tapped Olo then was to relocate some of the team’s time to guest-facing activities. To take tasks like punching in orders, repeating them back, correcting them, and taking payment, off the plate of frontline workers. Digitize all of that so Shake Shack could become more hospitable in a new digital age.
Presently, the notion fits right into the labor shortage plaguing operators as well.
“I think that these are things that are going to help brands do more with less from a labor standpoint and be efficient,” Glass says. “We're not saying that brand should have less labor than they'd have traditionally had. We believe there's going to be a lot of in-person dining and sustained high levels of off-premises dining continuing to grow as we've seen. We think that digital and Olo have a big role to play in both.”
And that’s where USHG and the fine-dining conversation comes in. Glass isn’t talking about QR codes or kiosks when he references Olo’s partnership with the group. That probably will never be the case.
Rather, it’s creating an off-premises experience fueled by digital. Delivery and takeout where the process runs smoothly, instead of feeling like a restaurant swimming in foreign waters.
“It’s more of how do we augment the experience by enabling the opportunity for those that are in a hurry to be able to place their order before somebody comes over to ask for their order,” Glass says.
Olo looked at how it could enable an experience, such as the ability to place an order that is held in the cloud until someone is seated. Then, it’s released into the kitchen. It’s a use-case the company witnessed in family dining, Glass says, where they have big rush periods on Saturday and Sunday morning brunch.
Or the idea of a waitlist where a guest can get an order queued up and then, when the restaurant seats them, the order heads back to the kitchen. Also, the concept of consumers being able to see a menu when making a reservation, and even perhaps placing an order tied to that reservation. This way, they sit down and the plate comes out.
“I don’t think this is for every restaurant,” Glass says. “I don’t want to replace everything that exists today. But I do think these kinds of use-cases are things that are now more interesting to consumers than ever before for convenience reasons, for safety reasons. And I think they may be more welcomed by the restaurant industry because it’s a tough business, and it’s been made tougher this past year. I think looking for efficiencies that also enrich the consumer experience—those are golden nuggets that I think the industry can get behind.”
Another evolution is taking shape with chains adjusting from homegrown platforms to Olo’s, like Brinker International. Papa Murphy’s did something similar.
This is also what happened in Q1 with Bloomin’, which re-platformed its long-standing homegrown digital ordering program to Olo.
“This is another anchor for our conviction that Olo's enterprise-grade SaaS platform will be a compelling alternative to the capex and opex of building in-house,” Glass says. “Olo's enterprise-grade open SaaS platform offers lower upfront costs, faster time to market, lower ongoing costs of ownership, built-in best practices from a decade and a half of experience, ongoing innovation, a broader partner ecosystem, and benchmarking against 400-plus other customers.”
“… It's not OK just to have a program for on-demand commerce, you need the best program for on-demand commerce,” Glass adds.
The quick-service industry, naturally, represents the largest pool of transactions for Olo, and in general. Over the years, Glass says, quick-serves have grown through franchising, leading to disparate technology systems across franchisee operator groups. It’s manifested in the kind of nonhomogeneous environments for which Glass built Olo. The company processed more than 500 million orders in 2020.
But broadly, the number of total industry transactions is not fixed. It’s expanding with population growth and greater preference for prepared food, off-premises consumption, and digital ordering. That 500 million number? While sizable, it fits into the roughly 60 billion transactions processed each year by restaurants.
“On our recent board call, one of Olo's directors asked me what inning we were in for the Olo journey? Given that we're yet to achieve 1 percent of restaurant industry transactions, my response was we're just getting out of the dugout,” Glass says.
With virtual brands, Glass says the channel is democratizing access to launching restaurants. It doesn’t restrict a brand to a single geography. MrBeast, for instance, launched simultaneously in 200 kitchens across the country overnight. That could have taken decades to achieve that kind of physical availability before.
“I think that restaurants and restaurant operators are proving that they can manage these virtual brands in a way that is highly profitable and perhaps more profitable than the commission-heavy order volume that they're getting through marketplace channels,” Glass says. “I think that'll be an interesting trend to see over time is are restaurants doing virtual brands more and accepting orders through restaurant delivery marketplaces less?”
Some predictions call for the industry to sling-shot out of COVID into a business north of $1.1 trillion. “I believe that there are durable gains in off-premises that will continue to grow at a more normalized rate going forward,” Glass says. “And that on-premise is going to come back and be stronger than before.”