UPDATE: This story has been updated to include a comment from Olo and additional details on its motion to dismiss DoorDash's complaint.
Third-party delivery service DoorDash is seeking $7 million in damages from online ordering company Olo for allegedly charging DoorDash higher fees than it assessed other providers, a breach of an agreement between the two.
The dispute between Olo and its most important partner comes to light just weeks after Olo debuted on the New York Stock Exchange with a soaring initial public offering. Olo provides online ordering, delivery integration and other technology services for restaurant chains.
DoorDash began working with Olo in March 2017, using its Rails and Dispatch platforms that connect restaurants to delivery providers. At the time, Olo said in a so-called most-favored nation clause that it would never charge DoorDash higher transaction fees than what other providers were charged.
But after DoorDash acquired one of those other providers, Caviar, it allegedly discovered that Olo had not honored that pledge, and had been charging Caviar fees that were "significantly lower" than those it was charging DoorDash, according to documents filed with the New York Supreme Court on Tuesday.
"For more than three years, Olo has overcharged DoorDash—inflating its own revenues by collecting from DoorDash tens of millions of dollars more than what DoorDash should have paid had Olo honored its [most-favored nation] bargain," DoorDash said in the court documents.
DoorDash accused Olo of using the additional revenue to burnish its financials in advance of its IPO.
Olo called DoorDash's allegations "baseless" in a comment provided to Restaurant Business.
"Despite all of DoorDash’s litigation rhetoric, the evidence speaks for itself. Olo will not comment further on ongoing litigation. Olo looks forward to continuing to work with DoorDash for the benefit of the restaurant industry," the company said.
DoorDash sued Olo over the issue in October, Olo disclosed in its IPO prospectus. Olo said in the prospectus that the allegation was without merit and planned to "vigorously defend it."
Olo responded in February with a motion to dismiss the complaint. It says the companies renegotiated their original fee agreement in November 2017 and dropped the most-favored nation clauses.
In its latest filing, DoorDash asked the court to deny Olo's motion to dismiss the complaint. The news was first reported by Financial Times.
DoorDash is Olo's largest and most important partner. In 2020, revenue from DoorDash accounted for 19.3% of its overall earnings, according to Olo's IPO prospectus.
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