Olo, the online ordering provider used by big chains like Shake Shack and Dutch Bros, is considering a sale. It has been approached by interested buyers and has brought on a financial advisor to explore the idea, according to Bloomberg.
It comes after plenty of gossip that Olo could eventually be acquired, or perhaps do some acquiring of its own. The company’s technology is well-regarded and it has a client list of more than 750 restaurant chains. But its stock price has struggled since its 2021 IPO. And there are some gaps in its offering—notably a POS system—that stand in the way of it being a truly “all-in-one” provider.
Olo changing hands would be a big shift in the restaurant tech landscape due to its sheer size: $29 billion in sales flowed through the platform last year, which was in the same ballpark as Starbucks. It has a market cap of about $1.2 billion.
Here’s a look at some potential buyers. Note: These are based entirely on speculation, conversations with people in the industry and my own analysis.
A POS provider
The Bloomberg article mentions both Toast and Oracle, each of which could make sense for different reasons.
Toast is a large POS provider that has historically served mom-and-pops but is making a concerted push upmarket. It just signed a deal with Applebee’s, for instance.
Olo could help Toast solidify its position in that market, and it would give Toast some bonafide enterprise-grade software to sell.
The same argument could be made for other big restaurant POS providers like PAR, NCR and Square. But for whatever reason, Toast’s name seems to be coming up the most.
Computing giant Oracle, meanwhile, could use Olo to expand its restaurant vertical, which includes the Micros POS system it acquired in 2014. Oracle is one of the largest tech companies in the world and routinely makes strategic acquisitions.
DoorDash
The delivery service has been floated as an Olo suitor. Buying Olo would extend its business into more ordering channels.
The company already owns more than two-thirds of the food delivery market, per Bloomberg Second Measure. With Olo, it would add a big piece of the first-party online ordering market as well, plus a small but growing number of card-present transactions via Olo’s payment service, Olo Pay. That means a lot more revenue (and data) for DoorDash.
The one potential snag is that DoorDash is in talks to buy Deliveroo, the U.K.-based delivery service, for $3.6 billion. Does it have the appetite for another deal?
Shift4
Shift4 is always one to watch, given its recent buying spree. Last year, it acquired three restaurant tech companies, Revel, Focus POS and Appetize. Its M&A strategy is focused on both improving its own tech offerings and getting in front of new customers for cross-selling purposes.
Olo could check both the tech and customer boxes for Shift4, which could have a particular interest in Olo Pay.
Shift4 is in the midst of closing its biggest deal yet. In February, it announced the acquisition of Swiss payments service Global Blue for $2.5 billion.
Private equity
PE firms have taken an interest in restaurant tech as the industry has rapidly digitized coming out of the pandemic. They may see an opportunity in Olo to either bundle it into a platform with other food tech services or cut costs and resell it. Olo has consistently grown revenue but has not turned an annual profit since going public, though it narrowed its losses considerably last year to less than $900,000.
PE may also view Olo as undervalued, as its stock is down about 75% since the IPO. But that could also make it a risky bet, especially given higher interest rates and broader economic uncertainty.
Wild cards
It’s difficult to talk about tech M&A these days without mentioning Wonder, the fast-growing food hall/delivery company that has scooped up Blue Apron, Relay, Grubhub and Tastemade in a matter of 18 months. It has a path to becoming a major player in the online food world, and adding Olo would certainly help its cause.
The question is whether Wonder is big enough to do it. Its previous acquisitions add up to about $840 million, and Olo would likely fetch more than that. Wonder was valued at $3.5 billion as of 2022, and has raised a total of $1.5 billion to date.
Here’s another dark horse candidate: CloudKitchens. The ghost kitchen company run by Uber founder Travis Kalanick may value the order data Olo collects across 750 brands and 86,000 locations. CloudKitchens could use that data to inform its real estate strategy or fuel the creation of virtual restaurant brands through its Future Foods division.