DoorDash has filed a breach of contract lawsuit in the state of New York against Olo, claiming the restaurant software platform overcharged for services and did not honor DoorDash’s preferred vendor status. The lawsuit seeks $7 million in damages, but Olo has filed a motion to dismiss the claim.
Olo operates a platform that allows restaurants to directly access DoorDash’s network of delivery drivers. The arrangement reduces the fee restaurants pay for delivery. DoorDash and Olo have had an arrangement for payment of services since 2017, and DoorDash claims revenue from DashDash “accounts for almost 20% of Olo’s revenue.”
DoorDash’s lawsuits states that Olo gave DoorDash something called most-favored-nation status, meaning Olo’s fees “shall be no higher than for any other comparable or competitive delivery platform provider.” DoorDash said it learned that DoorDash was being charged more for delivery than other companies when it acquired Caviar.
“Olo breached the implied covenant by failing to disclose to DoorDash that it was charging other delivery platform providers fees less than those being charged to DoorDash,” according to a court filing. “Olo concealed this information from DoorDash.”
Olo launched an initial public offering that raised $450 million for the company and valued the tech platform at $3.6 billion. Olo denies the allegations in the lawsuit. The company says the contract between Olo and DoorDash was modified in November of 2017 and that removed DoorDash’s favored status. Olo argues that DoorDash was aware of the changes to the contract and asked the court to dismiss the lawsuit. Olo also claims that Cavair was not a direct competitor of DoorDash and thus the two companies are not comparable.
DoorDash argues that Olo intentionally misrepresented the terms of the contract and did not inform the company about the rates being paid other delivery services. DoorDash said it would not have signed the terms of the current contract if Olo has disclosed that DoorDash’s rates were higher than other delivery companies.
“Olo misrepresented to DoorDash that its rates were equal to or better than those charged to its competitors and concealed the fact that DoorDash’s competitors were receiving better rates,” DoorDash claims in the lawsuit. “Olo engaged in this pattern of deceit to induce DoorDash into signing and renewing the agreements and extract from DoorDash more money than it would have if Olo had told the truth.”
DoorDash said the fee structure was designed to “maximize revenues for (Olo’s) IPO” and thus Olo “cheated its largest business partner.” It is not not known when the judge will rule on Olo’s motion to dismiss.