Can a Burger Save Olive Garden?
Dec 7th 2013 9:00AM
Updated Dec 7th 2013 9:02AM
Somewhere between the endless bread sticks and bottomless salad bowl, don't be surprised if you find yourself chowing down on a burger at Olive Garden.
Darden Restaurants' struggling casual dining chain added a hamburger to its menu this week. It's not just a regular burger. Olive Garden's Italiano Burger comes loaded with prosciutto, mozzarella cheese, arugula, and marinated tomatoes in a bun dressed up with a garlic aioli spread. Parmesan garlic fries accompany the sandwich.
This may seem like a big departure for the Italian restaurant that prides itself on its signature pasta dishes and European flair, but desperate times call for desperate measures -- even if it means hopping on the gourmet burger trend that injects some Americana into the concept.
Sales haven't been exactly hopping at Olive Garden these days. Comps slipped 4% at the chain in Darden's latest quarter. It's not a new development. U.S. same-restaurant sales declined 1.5% at Olive Garden in fiscal 2013 after sliding 1.2% in fiscal 2012.
We're in an economic recovery, and Olive Garden can't seem to grow its sales. Adding a high-end burger -- even if it's one dolled up in Italian hams and ingredients -- isn't necessarily a bad idea. Unfortunately, it's not likely to work.
Darden's sister concept Red Lobster tried to appeal to more than just seafood lovers by updating its menu late last year. Landlubber staples including pork chops and a parmesan-crusted chicken pasta were added to its offerings. If folks were avoiding Red Lobster because they didn't like seafood or had a shellfish allergy, they now had new reasons to go along with their friends testing their guts' mettle during the endless shrimp promotion.
It didn't work. Red Lobster's comps fell 2.2% in fiscal 2013, and it kicked off fiscal 2014 this summer by posting a 5.2% decline in same-restaurant sales.
One can always argue that Olive Garden and Red Lobster aren't alone. There are several casual dining chains just getting by these days. Consumers have traded out of casual dining, opting for the fast casual trend that delivers casual dining-quality food but with the quick service and convenience of fast-food chains. It's not a surprise that two of this year's hottest IPOs -- gourmet sandwich maker Potbelly and pasta twirler Noodles & Co. -- happen to be in the fast casual category. Why wait an hour for a table service pasta dinner when Noodles & Co. can get you in an out in half the time? Won't the same cruel math sting Olive Garden with the Italiano Burger? As original and tasty as it may seem, most gourmet burger joints or an upscale sandwich shop like Potbelly will get you fed and out the door in a fraction of the time that it takes to order at Olive Garden, wait for the food, and then flag down the wait staff to cash out.
Analysts see Darden growing its sales in the mid-single digits in the year ahead, but that's largely the result of expanding its smaller concepts that are holding up better than Olive Garden or Red Lobster. Wall Street sees Potbelly and Noodles & Co. growing their top lines at double-digit rates.
There's nothing wrong with Olive Garden trying to expand its potential audience by wooing burger buffs, but it better know that it still had a bigger problem that a single sandwich can't fix.
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The article Can a Burger Save Olive Garden? originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.