Dive Brief:
- Wingstop, which accounts for 3% of Olo’s revenue and 1,800 of the 78,000 locations using its technology, will leave Olo’s platform for its own technology when the contract between the two expires at the end of fiscal Q1 2024, Olo confirmed on its Q3 earnings call earlier this week.
- Last week, Wingstop CEO Michael Skipworth said on Wingstop’s Q3 earnings call that the brand “built a platform with the most modern technology within our tech stack,” and will roll it out in Q2 2024,.
- Olo said the move was unusual and that it generally sees brands move from in-house tech solutions to its platform.
Dive Insight:
Wingstop began investing $50 million in its platform three years ago, Skipworth said. Given that Olo revealed its brand contracts typically last three years, its possible Wingstop has spent the whole of a contract cycle building up its tech products in preparation for departure from Olo’s platform.
Olo CEO Noah Glass said Wingstop was employing “the right strategy in that every brand should be focused on getting to 100% digital, collecting and using data to increase conversion and frequency to drive traffic. But we think it's the wrong tactics in building a homegrown software. That’s very expensive.”
Wingstop’s new platform, Skipworth said, serves the dual purpose of protecting the brand’s digital business, which now accounts for $2 billion in sales, and creating “an increased level of hyper-personalization that we believe will improve conversion retention rates and ultimately drive frequency.”
Olo was unaware of any other brands undertaking similar measures, and Glass said the size of Wingstop’s investment in in-house tech, versus’ the $90 million Olo spends to maintain and improve its tech platform is “a case study in the economies of scale of a [software as a service] platform. That’s not a belief, that’s not even a judgment, that’s just math.”
“We don’t take any enterprise brand out of our addressable market and we won’t be satisfied until 100% of them are Olo customers,” Glass said.
On the operational side of things, Skipworth framed the in-house tech solution as a win for franchisees, as it would provide “more insights and more visibility into the business within the four walls of the restaurants.”
According to Wingstop’s 2023 Franchise Disclosure Document, franchisees developing a store pay $15,581 to $23,655 for point-of-sale, back-office software, hardware and related items. The cost of maintaining that technology and its licenses comes to about $5,000 to $6,000 per year. However, it’s unclear what portion of that spend goes to Olo.
