business

DoorDash Accuses Software Company Olo Violating a Contract by Charging It Too Much

Bloomberg | Bloomberg | Getty Images
  • Food delivery app DoorDash is accusing software company Olo of breach of contract, fraudulent inducement and concealment, according to documents filed with the New York State Supreme Court.
  • DoorDash told the court that it was overcharged by Olo, which had promised the delivery app that its fees "would never be higher than the fees charged to any other delivery platform provider."
  • DoorDash accounts for almost 20% of Olo's revenue.

Food delivery app DoorDash is seeking "tens of million of dollars" in damages from its partner, software company Olo, accusing it of breaching a contract and fraudulently overcharging it.

Olo is a software company that helps restaurants like Shake Shack and Chili's manage its online orders. The firm made its initial public offering on the New York Stock Exchange in mid-March, expanding its presence at a time when online food ordering is surging. Its stock soared 39% on the first day. However, Olo's stock fell 7% in trading Wednesday, at one point sinking to its lowest level since its debut, as further details of its litigation with DoorDash were disclosed in court documents on Tuesday at the New York State Supreme Court.

DoorDash told the court that it was overcharged by Olo, which had promised the delivery app that its fees "would never be higher than the fees charged to any other delivery platform provider." The two companies formed a partnership in 2017, and since then, the delivery app accounts of almost 20% of Olo's revenue. That contract runs until March 2022.

"To maximize revenues for its IPO, Olo cheated its largest business partner," DoorDash stated in the legal document.

DoorDash claimed that it realized it was being overcharged after it acquired another food delivery provider Caviar in 2019.

When DoorDash allegedly confronted Olo with evidence of these breaches, it said that Olo told the company that the clauses "simply disappeared after six months through a minor contract addendum addressing only the fees themselves and that DoorDash never had any right to the lowest fees."

Olo also previously claimed that it did not consider Caviar a competitor to DoorDash because Caviar's clients are restaurants in a higher price range than DoorDash's.

Olo disclosed the disagreement between the companies in its S-1 filing with the Securities and Exchange Commission in February. It said that DoorDash is seeking "damages in excess of $7.0 million."

In the court filing Tuesday, DoorDash said the actual amount could higher, possibly "tens of millions of dollars" if Olo had honored its agreement.

On Wednesday, Olo said, "DoorDash's allegations are baseless." It declined to comment further on the ongoing litigation, saying that the "evidence speaks for itself."

The Financial Times was the first to report on DoorDash's latest filing with the court.

Copyright CNBCs - CNBC
Contact Us