There’s a statistic unfolding in the COVID-19 vacuum that fascinates Noah Glass. The digital conversation for restaurants in 2020, and well before it, centered on delivery. How aggregators disrupted the space. Whether transactions were incremental. The balance of hyper-marketing and long-term viability, and the tug-of-war over guest data. On a base level, it’s easy to figure why. Domestic channel sales climbed nearly 75 percent last year. Delivery’s share doubled, according to Rabobank—a financial services company that believes delivery sales will run 40–80 percent higher in 2022 than 2019, even when the pandemic (potentially) settles.
Yet the buzz, in some respects, is broader than present reality. Delivery remained just 8 percent of the industry’s overall transactions in Q2, per The NPD Group. As Glass, the CEO of the cloud-based, on-demand commerce company, pointed out, “92 percent is non-delivery.”
More so, however, is the makeup of that digital transaction and how it’s shifting prior narratives. Of that total, digital delivery represented 6 percent, whereas digital overall was 17 percent. So where is the other 11 percent flowing from? The confines of “non-delivery digital.”
Ten percent of that definition, unsurprisingly, comes from takeout. But, for the first time, the industry is witnessing 1 percent of its transactions moving to digital on-premises. This is a major shift, Glass says, considering restaurants generate some 60 billion transactions in a typical year.
In the past, you’d be talking mostly kiosk ordering. Now, though, QR code ordering at brands like bartaco and Bluestone Lane Café have joined in, where guests can scan from the table and use the same front-end experience of a web app or mobile platform to place an order and pay, with servers or runners bringing the food out.
“This all factors into what we have described as our new ambition of getting to digital entirety where Olo has the ability to touch every transaction, add value to every transaction, and derive revenue from every transaction,” Glass said Tuesday during a conference call. “And we're seeing those behaviors by consumers and also, of course, by operators offering those new modes of ordering coming out of 2020, but remaining offerings that are made available in 2021.”
Olo, which went public in mid-March, has been at the heart of a changing industry over the past 18 months. You can see it in the balance sheet. Olo’s total revenue jumped 48 percent, year-over-year, in Q2 to $35.9 million as platform revenue climbed 53 percent to $34.5 million. Gross profit was up 42 percent to $28.5 million, or 80 percent of total revenue.
More telling, Olo exited the period with roughly 74,000 locations active, a 30 percent lift. It deployed a number of brands onto its platform in Q2, including Potbelly, which converted from a legacy tech stack. Jack in the Box also used Olo’s Dispatch product module to augment its proprietary digital ordering system. Olo powered Wingstop’s introduction of virtual brand “Thighstop,” and, notably, added Grubhub as a new Olo Rails partner, which enables the integration of digital orders directly into the point-of-sale of “tens of thousands of restaurant brand locations.” Smoothie King has been piloting this engagement between Olo and Grubhub. Glass said the brand reported a reduction in errors flowing into restaurants and an ease of use in syndicating menu and price content out to Grubhub, as the chain was doing with other aggregators already using Olo Rails.
Rails is the Olo solution that allows restaurants to publish menus, prices, and location information on participating third-party marketplaces. So now orders placed by guests on Grubhub’s app or website will be injected directly into the order stream. It’s essentially a way to kick the multiple digital ordering tablets found in some kitchens today.
“This new partnership with Grubhub means that although customers can now utilize Olo Rails to operationalize and manage all major national digital ordering aggregators, Caviar, DoorDash, Grubhub, Postmates, Seamless, and Uber Eats in addition to the regional and local aggregators that are meaningful to operators in specific geographies,” Glass said.
Additionally, Olo completed development of the mobile app version of Serve, a white-label branded ordering experience. Brands are now able to offer feature parity with the Serve web experience and offer an app version of their digital presence without the need for large custom mobile app budgets, the company said.
Overall, the story unfolding at Olo is that of the customer progressing through COVID stages. As dining rooms began to reopen in Q2, digital sales proved durable. What this demonstrates, Glass said, is the industry’s digital transformation is not just about delivery—but all ordering modes and across all service models: delivery, drive-thru, table service, and takeout.
Olo continues to serve this evolution in different forms. As Potbelly did, Papa Murphy’s, Brinker International and Bloomin’ Brands replatformed to Olo in the past because “leading restaurant brands can no longer simply check the box and have just any digital ordering solution,” Glass said.
It’s Olo’s belief SaaS wins over homegrown and closed proprietary software (Olo’s open partner ecosystem features some 100 restaurant tech partners).
Glass said Olo is working to address the issue concerning delivery driver availability as well. “Although Dispatch, our delivery as a service solution, provides a nationwide network of more than two dozen delivery service providers, or DSPs, covering 97 percent of our customers' U.S. store locations, Dispatch's ability to provide redundancy and increased driver availability is highly differentiated and create substantial value for our customers,” he said.
And it’s also going after major enterprise brands, such as Jack in the Box and Subway (which is using Rails), with one product module introductions. Glass said initiating the customer relationship helps Olo showcase broader options later on. “I think what's exciting is we view that as an opportunity or a way in which we can service the [quick-service restaurant] segment, which is a great growth opportunity for Olo. But also, what that presents is an opportunity for additional upsells,” Glass said.