New Food Delivery App Olo Challenges DoorDash With Promise of Lower Prices

A new player has entered the food delivery market, aiming to undercut established giants like DoorDash with a promise of transparency and lower costs. Olo, which launched on October 20, offers pickup and delivery services, touting a model that eliminates the high commission fees charged to restaurants by competitors. This launch comes as DoorDash itself finalized a significant acquisition of Instacart, a move that some experts predict could lead to increased prices for consumers.

Olo currently partners with over 250 national and regional restaurant brands, including Five Guys, Waffle House, and Dave’s Hot Chicken. While this is a fraction of DoorDash's approximately 615,000 partnerships, Olo's core appeal lies in its pricing structure. The app claims to offer menu prices identical to those in the restaurant, without inflated markups or hidden charges. Its revenue model relies on a single 5% "network fee" and standard delivery fees for delivery orders. Crucially, Olo is commission-free for restaurants, a significant departure from platforms like DoorDash and Uber Eats, which can charge restaurants between 15% and 30%.

This commission fee often compels restaurants to raise their prices on delivery apps to offset costs. By eliminating this, Olo aims to provide direct savings to consumers.

However, the app is not without its potential drawbacks. A closer examination by The Post reveals concerns regarding data privacy and convenience. While Olo advertises itself as free of sponsored ads, its privacy policy indicates that certain user data may be shared with advertisers to facilitate marketing and targeted advertisements on third-party platforms. This means that while ads may not appear directly on the Olo app, users could encounter targeted ads elsewhere based on their Olo activity.

DoorDash has also faced scrutiny over its pricing practices. The company previously held a patent for a system designed to detect "user agitation," potentially used to adjust pricing based on a customer's perceived impatience or urgency. This patent has since been abandoned.

To assess Olo's claims, The Post conducted a comparative test. An identical order from Five Guys – a cheeseburger, fries, and a drink – was placed through both Olo and DoorDash. Olo charged $24.81, including a $1.09 network fee and $1.93 for tax, though delivery was not available for this specific order. In contrast, the same order through DoorDash amounted to $40.87. This significant price difference highlights Olo's potential to offer considerable savings when delivery is available.

Despite its pricing advantage, Olo faces challenges in market penetration and operational scope. The app's limited selection of restaurants and a smaller network of delivery drivers compared to DoorDash's extensive base of over seven million independent contractors could impact user convenience and availability. Additionally, the absence of features like dedicated "restaurants" pages, common on competing apps, may affect customer discovery.

Rich Pleeth, CEO and co-founder of Finmile, a logistics and operations intelligence firm, suggests that Olo's success will hinge on its ability to consistently deliver on both price and convenience. "The comparison needs to happen at checkout," Pleeth stated. "Olo says it removes menu markups, but delivery fees still apply. Compare the same basket, to the same address, including fees and any offers or membership benefits."

While Olo may not dethrone DoorDash as the dominant delivery app, Pleeth believes it could carve out a niche, potentially becoming a preferred option for at least one night a week. "If your favorite restaurant is there and the same order costs less, that’s a concrete reason to try it," he noted. "When you’re browsing for something different, restaurant choice and an app you already know may matter more."