Darden Restaurants (DRI) has endured another disappointing year in which its main restaurant chain, Olive Garden, suffered continued deterioration. Same-store sales at the Italian restaurants declined 3.4 percent for the 12 months ended May 25, the biggest drop in three years. Executives reiterated a commitment to “brand Renaissance.” One important element of the plan: an increased focus on takeout.
Full-service casual dining has been a sore spot in the restaurant industry as so-called fast-casual chains including Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) have stolen consumers with the promise of speedy, high-quality food at lower prices. Darden Chief Executive Officer Clarence Otis Jr. said on a conference call that the company faces “increased competition not only within full-service dining but also with the emergence of attractive new segments, new dining segments like fast casual, and elevated innovation within traditional quick service.”
Olive Garden is implementing several changes to win back its customers—but unlimited salad and breadsticks aren’t going anywhere. Here’s a look at the plan:
More takeout customers. Takeout accounts for only about 8 percent of Olive Garden’s sales. But the to-go ranks are growing, and the chain will roll out online ordering by the end of August. In test restaurants online orders helped increase takeout sales by 10 percent, in part because customers’ average checks were higher than orders taken over phone.
Faster service. Darden is also testing a lunchtime guarantee “to ensure our guest with a time constraint can count on Olive Garden to provide a quick lunch experience,” said Chief Operating Officer Eugene Lee. To do this, the chain is simplifying operations through efforts like “sauce consolidation,” which means kitchens will keep fewer prepared sauces on hand and differentiate them when cooking each dish instead.
Smaller lunch portions. It’s a big change for a place known for “never-ending pasta,” but Olive Garden’s promoting its Taste of Italy small-plates menu, which includes items served “tapas-style.”
Along with these changes will be marketing initiatives to target millennials and what the chain identifies as “multicultural households.” Last year, Darden launched a similar Spanish-language advertising campaign for Red Lobster, although that chain—which has since been sold to Golden Gate Capital—didn’t manage to improve its sales.