Online Ordering Software for Restaurants w/ Noah Glass of Olo

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June 24, 2021

On this week’s episode I sit down with Noah Glass, Founder and CEO of Olo. Olo isn’t a household name, but that’s by design. They are a white label solution that powers most of the restaurant apps you have on your phone. These apps streamline ordering and specialize in supporting takeout.

While I suspect that most people would correctly guess that the majority of the food ordered from restaurants is eaten off premise, I doubt that most folks would know that takeout is 13-times larger than delivery. Olo is supplying the software products to make that happen and have been on an upward trajectory for years. They just recently IPO'd this past March.

Noah is clearly brilliant. I went a bit off my prepared questions in order to do some deep dives with him about how he operates Olo.

He shares some incredibly valuable wisdom about how they use analytics to craft their products, how to leverage a product advisory council, navigating the IPO process, and much more.

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Transcript

MPD: Welcome Noah.

Noah Glass: [00:02:19] Thank you for having me mark.

MPD: [00:02:21] Great to have you here. So I'm going to start off by actually doing your intro. I find that it's, it's better for me to brag for you rather than to have you do your background. If I miss anything, let me know. So today we have no glass. He's the founder and CEO of Olo powers.

The restaurant apps that you use when you order from your mobile phone. And they do that specifically for when you're at the restaurant to avoid the line. It's not a delivery app. Ola went public on the New York stock exchange earlier this year on St. Patrick's day. And as of this morning is worth $4.2 billion.

Noah's journey is one of the food of a food ops entrepreneur. And to be clear, he's not a food entrepreneur who is launching new food products. Delicacies or whatever Noah has spent his career advancing the operations of the food industry. And before he founded, although he started another company called , which was designed to streamline the ordering in restaurants as well.

So we're going to get the relation a little color in the relationship between those two when we get into it. But he's also, he does a lot of stuff beyond that appropriately. He's a board member at the culinary Institute of Ameri. He is a, also a board member for share our strength and know slash no kid hungry, the nonprofit fighting to make sure all children in America have access to food.

I think a noble and worthy cause. And on top of that, he's a Renaissance man. When he was an undergrad at Yale, he was both on a lacrosse team and in acapella. So he is a person of many talents. No. What did I miss?

Noah Glass: [00:03:59] I don't know if you get acapella into an intro, you've really covered all of your bases. I'm impressed by your Intrepid research mark.

Well done.

MPD: [00:04:08] Thank you, buddy. All right, let's start. So for the folks listening, would you just start off by giving an overview of Olo just to baseline.

Noah Glass: [00:04:16] Yes. So Olo is a leading on demand commerce platform for enterprise restaurants. And what that means is that we are the software platform that enterprise restaurant brands use to build their direct to consumer channels.

And this is enabling consumers to then order and pay ahead. And then have a faster experience collecting the food at the restaurant or getting it delivered to them. So you mentioned that the origins of the business are in take out and that is true. We also do have additional capabilities to enable delivery of food.

And we're now doing this for over 400 restaurant brands in 69,000 to individual restaurant locations around the United States. And also in Canada,

MPD: [00:05:03] any restaurants we've

Noah Glass: [00:05:04] heard. I'd say a lot of restaurants that you've heard of at this point restaurant brands, like five guys, shake shack, sweet green Wingstop Applebee's Chili's cheesecake factory.

We've. We've had a lot of. Brands from different segments of the industry from the fast casual segment, like five guys and shake shack and sweet green to the casual dining brands. And then most recently the kind of family, the dining brands like Denny's and I hop and others and QSR quick service restaurant brands in both of those categories.

I didn't start Olo with those as the intended audience for our platform, but it's been amazing to see how many different use cases on demand commerce has in the restaurant industry and how many different kinds of restaurants have been able to utilize it.

MPD: [00:05:59] So when I download the cheesecake factory app, that's you guys.

Noah Glass: [00:06:04] We're the platform that apps like cake, factory or websites that enable you to do an order and pay and get the food at the restaurant or get it delivered kind of experience. Those are all built.

MPD: [00:06:17] Okay. And to clarify the core problem you're solving. What's the core reason. What's the main reason I'm going to download this app regardless of what restaurant

Noah Glass: [00:06:26] it is.

Yeah. The main reason is that so much of the restaurant industry is transactions are off-premise. They are food that is consumed, not inside the four walls of the restaurant. And certainly that's been true in the era of COVID-19, but it was true long before that as well. If you look at 2019 63% of all restaurant transactions were not consumed inside of the restaurant, but were consumed outside.

And so with that, Has the way in which consumers use restaurants, it stands to reason that the ability for a consumer to order ahead and pay ahead so that their food is ready and fresh when they arrive and they can then take it with them without having to wait for it is a value to the consumer and a platform that enables you to do that better and have a better consumer experience is valuable to the restaurant operator.

Because it lets them tap into those consumers and those transactions that flow from those consumers and at the same time increase their operational throughput capacity. I hadn't heard somebody introduced me as a food ops entrepreneur, but I do like that. I think operations is a big area where our platform has been helpful in making our restaurants run better and provide better kind of digital hospitality for this new way.

MPD: [00:07:42] How big is a company today and you're a public company, so this is all stuff people can find on the web. And I interviewed private company CEOs there. They're careful about what they share, but I think yours is all out there.

Noah Glass: [00:07:54] A lot of out there I'll share the things that are out there. How has that so last year in 2020, We processed a $14.6 billion worth of food sales through our platform.

We had a revenue year of $98.4 million in 2020, and we just had our first earnings call last week and we got it to a range. But for the point of the range for 2021, we were guiding to $140 million revenue company. That's

MPD: [00:08:27] great growth. Thank you. So what's the revenue in the business and revenue model in the business.

You just said what the revenue is. And it's obviously a lot less than the food orders being purchased, which makes sense. Is it a transaction fee subscription? How are you guys structured from a revenue model?

Noah Glass: [00:08:44] We define that revenue model as transactional SAS. So there are elements to the revenue model that are typical SAS subscription fee revenue, where it's a per store per month kind of fee.

And then there's a usage based component and that's the transactional piece. So the more orders that our restaurant does, the more deliveries that our restaurant does, the more revenue Olo generates. And so it's been an exciting time for us to see just how much the industry is going through a digital transformation where we've seen year over year, doubling of order volume.

So if I look back. 2017. We processed about 50 million orders and then in 2018 and a hundred million, and then in 2019 200 million, and then last year we processed over for 500 million transactions. So over a 10 X growth in order over a three-year period, the milestone of hitting Ola order, number 1 billion since our founding in June, 2005.

Hell yeah.

MPD: [00:09:46] We when we're on the, putting my investor hat on as a VC, we see a lot of companies that come in with a SAS model, but the whole thing grail is when they get to what you call transactional SAS when they have the yeah. Baseline. But they're really participating in the revenue creation of the customer, which business line is bigger for you.

Is it SAS or transactions?

Noah Glass: [00:10:08] I think that over time, the consumption-based components of our model are inevitably going to be the larger piece of the business. So what's nice. It's a little bit of a razor and blades kind of model. The SAS subscription is the razor and then you keep selling more and more blades as the consumption-based component of the business.

And we think there are other just great examples of this in the SAS universe, to your point, companies like Shopify are very inspirational to us and he's snowflake, are very inspirational to us. As you think about a purely consumption-based model, although is something of a hybrid much more like a Shopify, although notably our transactional revenue is not from payments today.

It is from. Order volume and it's from delivery volume for those orders that are placed explicitly

MPD: [00:11:00] for delivery. So when you guys are setting out your goals for this year to grow, I guess by 50%, top line, pretty awesome. What are the things that drive that? Is it signing up more restaurants?

Is it getting more usage than the apps to product features? What do you got? What are the levers you guys think about?

Noah Glass: [00:11:20] Really the two major drivers, the KPIs of the business are number of restaurant locations, live on the platform and also our poo and our poo for those unfamiliar is just average revenue per unit.

So for Olo, we're constantly looking at how do we add more restaurant brands and important component of our business model is that when we sign a brand, it's a universally adopted across all of the stores, whether they're corporate owned or franchised within that brand. So we're going after the largest enterprise restaurant brands that are out there, that's been incredibly fun, efficient model for us and continues to be.

And then we're thinking about how do we make sure that we're driving increased utilization of the platform by the end consumer, and that's where offering things like our ordering platform to enable digital takeout. And then adding on to that, our dispatch platform, enabling delivery of orders. So that restaurants can say, even though I don't have delivery drivers, I can now meet the needs of the on-demand consumer when they want that order delivered to them at home.

That just helps to add to the utilization of the platform. It creates more value for the restaurants and at the same time, it drives more revenue for Olo. When we

MPD: [00:12:33] see really early stage founders, they. And they're really focused on the acquisition part of what you're talking about, signing the customer, but the devil is really in the details of customer success and getting penetrated through the organization.

You're successfully doing that at the enterprise level, which is one of the hardest ones I got to imagine. This is one of the hardest categories to penetrate. Given you've got franchises, you have varying degrees of sophistication. You've got geographical differences. What have you learned about customer success and penetration?

Lessons that other entrepreneurs who are focused on enterprise or land and expand strategies can take and implement their own businesses.

Noah Glass: [00:13:15] Customer centricity is really at the heart of everything that we do at Olo. It's at the heart of the products that we build. It's at the heart of the way that we engage with partners on the other side of our ecosystem, by being an open platform, but constantly being in communication with our customers at both the brand and the individual store franchisee or corporate owned restaurant manager level.

Is so important in what we do. Our tracking of this through net promoter score and broader customer satisfaction tools has been such an essential thing about our business because obviously you're getting customers to re up and renew with you at the end of a term is critically important and having a great working relationship where.

Helping to provide value and having those customers then say, I want to do more with you. I want to buy more of the product modules that you're offering. And also having those customers serve as part of that product innovation flywheel. So we have an incredible product advisory council made up of our customers that has been such a key to our success.

They're telling us the things that they see. That they believe Olo can help with. We then build those things in partnership with those customers. We sell that back to those customers in the product advisory council and more broadly. And it's just an incredible flywheel effect of product innovation that has served us well.

And it's led to, we announced as part of our S one, that when you look at our core three product modules, ordering. Dispatch, which is delivery enablement and then rails, which is enabling restaurant. He wants to take orders from third-party restaurant delivery, marketplaces like a door dash or Uber eats.

71% of our customers are using all three product modules. So the hit rate that we've had of not just launching one product that was beloved by the industry, but then innovating with our partners to get a second and a third. Hit on our hands has been awesome and it comes from that customer centricity.

So one of the things that we also focus on is a metric called net revenue retention. And we have consistently had net revenue retention of over 120%. That's huge,

MPD: [00:15:40] really easy to build a business when existing customers grow by 20% every year without additional sales. So you, you mentioned the product advisory council.

That's a great, I loved the word flywheel for this. They tell you what they need, you build it, they buy it, they tell you what they need, you build it, they buy it business grows. Do you pay those people to be on the council? How did you pull that together? How do you incentivize people to give you the Intel that you.

Noah Glass: [00:16:11] They are naturally incentivized to be on that panel because they want to provide those insights and they want Olo to build those capabilities on their behalf. That is an incredible, incredibly powerful effect. And what we've seen is that when we laid out a bold vision for what this product advisory council would be, and this is.

I think back in 2014, we first started thinking about putting this group together in a formal capacity. We said, we want people that think about a restaurant industry that will be 51% digital. And what that meant was the majority sales channel will be digital. And it was at the time of bold vision because I don't know, we were probably in the low single digit percentage of overall restaurant industry transactions that were digital.

We can come back to where we are today, but that group we identified as this is the group of thinkers that are within our customer base that are both working at the brands who will be the first to get to that 51% digital milestone. And that are innovative thinkers where they're imagining what restaurant operations will look like at that level.

And it's really a cross section of operations, folks, tech, folks of digital folks, marketing folks. It's a really great group. And then our entire Olo executive team, including our product team and our design team, but our entire executive team attends those meetings because they're that important to us as a pipeline for innovation.

MPD: [00:17:52] What's the right time for the entrepreneurs, listening, who it makes sense to have a product advisory council. What stage of the company do you set that. Is it seed series a, when can you set it up? When do people care enough to jump in?

Noah Glass: [00:18:10] For us, I think it was. And maybe this is something you can extrapolate more broadly.

For us, it was when we got to the point within our customer's businesses where it really mattered, it hadn't become truly mission critical, but it was on a path to getting to being mission critical. And that's where we knew they would be invested. They would attend these meetings. They would provide their best ideas in their own self-interest and that would benefit us and the rest of the customer base.

I don't know that it's really tied to a company's financing stage. It's really, I think, tied to that level of engagement with the customers where the customers are not just saying, I want you to build this little thing for me, or complaining about a bug in the system, but they're actually coming to you as thought partners and saying, here's where I see the industry going next from my vantage point within this restaurant brand or from other experiences that I've had.

And really have an iterative brainstorming process with you. I think for us, that was also coinciding with getting to a critical mass of restaurants within the fast casual restaurant segment. And for those less familiar, fast, casual, these are the restaurants where typically you're ordering. For a personalized meal of high quality ingredients, think Chipola think sweet green, think five guys or shake shack.

That's the fast casual segment that was the early adopting group of on-demand commerce. And we were starting to see interest outside of that. Early adopters said. So we were seeing interest from casual dining brands. We were seeing interest from coffee and snack brands from family dining a little bit from quick service restaurants that typically have a drive-through.

And we started to think about, okay, our platform is going to have a much larger. Relevant than just the fast casual segment of the industry. Let's start pulling in ideas for these other segments, from those who are seeing this as an opportunity and engaging with Olo as a result of it.

MPD: [00:20:16] So I want to dive in a little bit yeah.

Here, because in talking to you and completely off my question list here, but this is more interesting. I'm realizing that your customer success and penetration story is a big part of this game, and it's a huge challenge that entrepreneurs in the enterprise in particular, no, one's talking about it.

Everyone's talking about acquisition and revenue models, but how you get everyone to use it? Can you think of some situations and obviously no names mentioned where you had resistance from a D for adoption. There was a bunch of franchisees or people who are like never going to use it. Don't care.

How do you, how did you break that down? What's the tactical strategy? Is it sending a lot of emails? Is it pressure from management? What do you do to chip away at resistance? When you're trying to penetrate a larger organization with a lot of different decision makers.

Noah Glass: [00:21:16] It's a great question. And I think that a lot of our success has come from fishing where the fish are biting.

And what I mean by that is back to what I just said about starting with a specific segment of the industry, where we knew that our value proposition was strong and where we could create great reference accounts. So in working with five guys, burgers and fries as an initial customer, we built up a great case study of the way in which we helped five guys be just as convenient or perhaps even more convenient, then fast food competitive.

Because instead of going to the restaurant, waiting in line, instead going to a fast food restaurant and waiting in a line of cars to place an order of the drive-through, you could order ahead and pay ahead and have the food ready when you got there. And that level, the playing field terms of convenience, four or five guys, and made them as convenient as the most convenient alternative option.

We use that success to then take that story. And to your point, we did. W we actually very consciously didn't use it as the five guys story. We used it as a reference story where we described what five guys looked like in a way that made sense to other operators where they said, oh, I have those same problems.

I too have long lines of customers waiting to order and getting frustrated by the wait. I to have a restaurant that gets overwhelmed at peak times. And given what you did for five guys, the success that you were able to provide through your platform, again, as a nondescript customer of Olos I can map that on to how it could be helpful for me.

And a lot of that is customer centric selling or solution selling 1 0 1, but it was super helpful for us having great case studies out there. And having them be accessible and not a case studies where the first thing that a restaurant group would think of was I'm not like five guys. I don't sell burgers.

I sell salads, but instead, oh yeah, I have similar challenges in my business and I can understand how you were able to help them overcome that. And it creates the vision in the buyer's head about how your solution could also help them get over the problems that they're facing. And we've just done that rinse and repeat over the years.

Little baby steps into those later adopting cohorts of customers. The most recent thing that I'm really excited about is the quick service restaurant segment. Because if you can imagine, that used to be the pinnacle of convenience you would get in your car, stay in your car and pick up your order at the drive-thru in 180 seconds after placing it and be on your way.

Now that doesn't seem convenient anymore because every other restaurant lets you order ahead, pay ahead and it's ready when you arrive or even better, they delivered to you. And so now we're seeing this QSR drive through segment, really making this massive migration onto on demand, commerce and polo as a result.

MPD: [00:24:20] So for those listed in quick service restaurants, that's a fancy for fast. That's right. QSR. Yes. Why did you start this, of all the things you could do with your time? Your background is more of a traditional, well-educated academic type, student athlete coming out. How did you become food ops guy?

What was the transition?

Noah Glass: [00:24:46] I think there are two points of origin that converged to start Olo. So the first is that in high school, one of my first jobs was a pizza delivery driver. And I did that over the summer between my junior and senior year in high school and little things about the experience just stood out to me that could be made better and the internet was starting to become a thing.

And. I just imagined that there could be a better way for me to do my job as a pizza delivery driver and for the restaurant more broadly to engage with consumers than the way that it was being done strictly over the phone. So that was one thing that was, in the back of my head, if I'm connecting the dots backwards, the other thing is that.

A real smartphone geek before it was cool. I, so I love that it was one of the first people to be carrying around a Palm pilot, personal digital assistant. And I had this as something that was in my pocket in 2003, when I first moved to New York city and I was using an app called indigo. I don't know if you remember of indigo, but it was this incredible.

It wasn't called an app. Then it was just, Palm pilot software, but it would show you all these points of interests that were near you on an interactive map that would move as you moved and you could click in and sees a GAT reviews and other interesting things about restaurants. And I just fundamentally came to believe that we were all about to have these magical devices in our pockets that were location aware, internet enabled.

And because of that, those two facts and because they were personal devices could become not just content or communications devices, but could become commerce devices and open up for all of the brick and mortar retailers out there. All of the benefits of e-commerce that they had been left in the dark on up until that point.

And those two things came together where I felt. If I, as a consumer, want to use this to order ahead and pay ahead and have a better, faster VIP experience at the coffee shop or restaurant that I go to. And also on the restaurant side and the operator side, they could do things better. They could increase their throughput capacity.

They could better serve me, their customer and increase my loyalty by having a platform like this. Now I can see it there's value on both sides of the equation, and someone's going to do this. I'm in a position at the time in 2003, where I had no debt, I had no of responsibilities in the world and I was supposed to head off to Harvard business school in the fall of 2005.

And luckily I ran into my seed investor, David Frankel, and he said to me, look, if you believe in this enough, To quit your job and withdraw your admission to Harvard business school to pursue it. I'll give you half a million dollars to get you started. And that was such a gift. It was such a conviction test for me that I felt like, yeah, this is the one time in human history.

When this is going to happen, that consumers are going to adopt smartphones. And it's the best time in my life to take a shot at something like this. So I've got to do it. I owe it to myself.

MPD: [00:28:06] Did you have any reticence about not going to Harvard business school? Pretty hard to get into HBS. Very prestigious carries with you your whole life.

How was that? How'd you make that decision?

Noah Glass: [00:28:18] It was really a knee jerk gut decision. I just, I knew that this was the right decision for me. There have certainly been dark moments, all those journey where I have revisited that moment and thought maybe I should have thought about that a little bit longer.

Maybe this was the wrong decision. I haven't felt that way in a while. I'm happy to report. I've never felt less that way than I do today. But yeah, there, there have been times when I've thought about the path not taken. One nice thing is that for the past three years, I've been able to go back to HBS virtually the last two years and teach a case study at HBS about polo and specifically about our dispatch product, which is enabling on demand delivery.

And that has. Fun and exciting and engaging with students is great. And a little taste of what that experience looked like, but also really satisfying that I still get to go to HBS and I don't have to pay for it. And

MPD: [00:29:20] I think teaching somewhere is probably more credit than attending. So you probably check the box,

Noah Glass: [00:29:27] perhaps.

I'm not sure. I really can be called a teacher. I'm like a guest, a visiting, subject matter expert or something, but I take your point. Yeah.

MPD: [00:29:38] Okay. So you mentioned the delivery bit when people are looking at this company, how do they think about competition? Are you competing with door dash?

Like where do you fit in this world?

Noah Glass: [00:29:49] I think all of the time people imagine that the restaurant industry, especially during the time of COVID has just become all delivery. That's the only thing that restaurants are doing. It's a hundred percent delivery dine-in is gone. Take out never existed. It's really interesting.

When you look at how transactions layout across the industry, I mentioned that 63% of all transactions, our off-premise. So that's interesting in and of itself, but the majority of transactions within restaurants are not consumed inside of them. Restaurants. That was true again before COVID-19 that's a 2019 statistic.

If you break that down further, It is 21% drive-through and just 3% delivery. This is 2019 again and 39%, 13 times the size of the delivery market is take out and take out is really where we play. It's our origin as a company. It's what we're helping restaurant brands to do first and foremost. But if you think about that, the plurality of all restaurant industry transactions are ordering your food.

And eating it somewhere other than the restaurant, but picking it up yourself, not through drive-through, that's an amazing thing for people, even who are students of the industry to contemplate what's happened as a result of COVID is yes. On-premise dining has decreased down to instead of 37% of the industry, just 17% of the industry take out, remains the largest.

And delivery has grown, but it's still only 9% of overall industry transactions. So we work as partners with companies like door dash with companies like Uber eats that are. Partnering with Olo in multiple ways. One to serve as a a delivery service provider in some cases where they're the ones collecting the order at the restaurant and delivering it to the end consumer as part of our dispatch platform.

And then also as partners on our rails product module, where they're getting feeds of menus from Olo, and then sending orders that originate on their apps and sites. Through Olo into the restaurant point of sale system. But because Olo is the exclusive on demand commerce partner for this critical mass of the must have restaurant content, we play this essential role in the restaurant ecosystem.

And because we're an open platform, we aspire to work with everybody that wants to engage with those restaurants. And we feel like that's the role that we're meant to play for the benefit of the industry as a whole.

MPD: [00:32:41] Do you think going forward delivery is going to be bigger than pickup? What's the, I know the trend here.

You got a bump with COVID is, the tail end. It's not over, obviously in the states, there's more work to do internationally. We have a solution to the COVID now, and that people are resuming life. Where does this go? I'm shocked by the fact that pickup is so much bigger than deliver it.

I never would've thought that it's massively bigger. So where does this go? Longer term.

Noah Glass: [00:33:17] I do think over time that there will be more delivery in the industry. I think it's interesting to look at the digital mix. So of, and I should say I'm quoting statistics here from NPD group. And that that's one of the data sources that we constantly track to see how the industry is moving.

When you look at digital sales it is 6% of overall sales that are digital delivery, and it's 12% of overall industry sales that are digital pickup. So still two to one, even when you look at just digital of pickup over delivery, I think over time more restaurants will offer delivery in house. We