Technology

Wingstop is leaving Olo to build its own tech system

The news sent Olo’s stock plummeting early Tuesday, though executives said it will have little impact on the business.
Wingstop has invested $50 million in a proprietary tech platform called My Wingstop. | Photo: Shutterstock

Wingstop plans to stop using online ordering technology from Olo next year and instead switch to an in-house system it has been developing for three years.

The move is a big step for Wingstop and a potential problem for Olo. The tech provider’s stock was down nearly 25% Tuesday morning, even though executives said Wingstop’s departure would have little impact on Olo's business.

The chicken wing chain has invested $50 million into what it’s calling My Wingstop, a proprietary platform that it said will strengthen its large digital business and enable “hyper personalization” for guests. 

“We are just scratching the surface on personalization, and we see this as a key part of our strategy for sustaining same-store sales growth,” CEO Michael Skipworth said last week, according to a transcript from financial services site Sentieo/AlphaSense. 

Wingstop is testing the system at some locations now and will introduce it chainwide in the second quarter of 2024. 

The news was confirmed Monday by Olo, which said Wingstop accounts for less than 3% of its total revenue and about 1,800 of its roughly 78,000 active locations, or just over 2%.

“We do not believe any change in this relationship would be material to our business,” Olo CEO Noah Glass told analysts, according to a Sentieo/AlphaSense transcript.

Still, the loss of a fast-growing, digital-first brand is a blow for the company, which offers online ordering, payments and other services for restaurant chains. Olo and Wingstop were uniquely aligned, as both share the goal of digitizing 100% of transactions. Nearly 67% of Wingstop's orders came from digital channels in the third quarter.

Wingstop is also the second high-profile chain to leave Olo in favor of an in-house system, following Subway last year. Asked whether more Olo customers might consider a transition, Glass said he had “no visibility” into those plans. But he said that Wingstop is an exception among Olo’s customers, noting that since its IPO in 2021, more than 95% have stuck with the company. 

While we've seen a few instances of brands opting to build their own technology, we view these as outliers,” Glass said. “Far more frequently, we see brands migrate from homegrown tech to Olo.”

He argued that Wingstop has the right strategy—digitizing every order—but the “wrong tactics,” because building software is expensive. He noted that Wingstop had already spent $50 million on its system, while Olo spends $90 million a year to maintain its technology across 600 brands.

“That is a case study in the economies of scale of a [software-as-a-service] platform,” Glass said. “That's not a belief. That's not even a judgment. That's just math.”

Wingstop, for its part, said it expects My Wingstop to be “cost neutral,” with ongoing expenses covered by franchisees.

The Wingstop news overshadowed another quarter of top-line growth for Olo. Total revenue rose 22% year over year; its average revenue per unit, or ARPU, rose 33%; and it added 1,000 net new locations compared to the previous quarter. On the bottom line, it had a net loss of $11.8 million, compared to $14.6 million a year ago.

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