Red Lobster went from buy to build and back to buy. | Photo: Shutterstock
Build or buy? It’s the eternal question in restaurant tech, and one that will probably never have a definitive answer other than “it depends.”
That said, it’s always worth noting when a restaurant decides to switch sides.
Red Lobster became the latest brand to do so last week, when it announced that it is replacing its homegrown online ordering system with an off-the-shelf product from Olo. The seafood chain previously used Olo for online ordering from 2017 to 2023, but then left to develop its own program.
It did not last long. Last May, Red Lobster filed for Chapter 11 bankruptcy, emerging with a new owner and leadership team that have made quick work of transforming the business, including its tech strategy.
CMO Nichole Robillard, who joined Red Lobster in October, said the chain decided to build its own online ordering because it wanted something more innovative and forward-thinking than what Olo could offer at the time. But it turned out that maintaining such a system required a lot of resources, as well as constant attention to security, infrastructure and integrations. Reconnecting with Olo will allow Red Lobster to use those resources elsewhere as it continues its comeback effort.
Also, she said, Olo has improved its product in the interim.
“I don’t look at this so much as a return to Olo as a leap forward, because the Olo ecosystem has evolved so much,” Robillard said.
Red Lobster is the 14th customer to ditch a homegrown system for Olo since the tech company went public in 2020, said CEO Noah Glass. Several of them have been so-called boomerang clients, meaning they left Olo and later came back.
Most of these brands came to the same realization as Red Lobster: It’s expensive to build and maintain technology on your own. “When that happens, it’s very validating,” said Glass, who founded Olo 20 years ago as an order-ahead app for mobile phones.
Olo has added some new features to its online ordering product since it last worked with Red Lobster. That includes passwordless login, which has led to a 7.5% increase in conversions; one-click reordering; and AI-powered recommendations that suggest things a customer might like based on their past orders.
Robillard said that it will allow Red Lobster’s digital experience to be more streamlined and personalized.
Olo has also since launched a first-party catering system, Catering+, that Red Lobster will be using as it looks to expand its nascent catering business.
Catering is a huge opportunity for restaurants. It currently accounts for 7% of all restaurant sales, or about $70 billion, and is expected to grow to 12.5% by 2032, according to Expert Market. Glass called it “the new gold rush” in the restaurant industry.
“It would be crazy not to be fishing in that pond. There are a lot of people who are biting there,” he said.
Catering orders are also larger and more profitable, and they double as a way to get new customers to try your food.
Red Lobster will also be using Olo’s sentiment analysis tool, which allows it to aggregate, analyze and respond to customer feedback in real time. The chain previously had a tool that allowed it to respond to reviews, but there was no way to parse the signal from the noise.
“We’re actually going to be able to mine the feedback, to look at clusters of comments and get some themes that we can start to address and bring action in the restaurants,” Robillard said. For instance, customers have been asking Red Lobster to bring back certain menu items, and the chain is now revisiting some of them as a result.
The new tech strategy is part of Red Lobster’s effort to be more relevant post-bankruptcy. It has revamped its menu and marketing and is also focusing on its digital experience, which Robillard said will get a boost from Olo.
“It allows us to put the focus in the hands of the experts and allows them to bring best-in-class offerings to us as we are building out the rest of our business,” she said.
While Red Lobster’s boomerang is an endorsement of the “buy” philosophy, there are still companies choosing to bet on themselves. Wingstop and Subway have each left Olo in recent years to develop in-house alternatives, for instance. Wingstop spent $50 million on its proprietary My Wingstop system, which it says will unlock a new level of customer personalization and help it reach its goal of 100% digital orders.
More recently, the 33-unit Crust Pizza Co. has been touting a total tech rebuild of its own. It’s in the process of replacing its Toast POS with a homegrown version, complete with a mobile app and loyalty program. The Texas-based franchise believes that building its own tech will give it more flexibility as it grows.
Ultimately, there’s no right or wrong answer to the build vs. buy question. As someone who just tried planting his own grass, only to end up with a yard full of weeds, I am newly receptive to the idea of hiring someone else to do things for you.
Now, had my lawn come in thick and healthy, I’d probably be extolling the virtues of the DIY approach.
Like I said earlier: It depends.
