Can Fancier Salads and New Pastas Save Olive Garden?

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Earns-Darden Restaurants
Associated Press/Steven Senne
Change is coming to Olive Garden, and it is starting at the top of a bottomless salad bowl.

According to the Orlando Sentinel, the struggling chain has been emailing customers in its home turf of Central Florida to give them first dibs at trying upscale toppings on the salad bowls that accompany every meal. Options include Italian meats and cheeses and roasted tomatoes and capers.

The plan is simple: Olive Garden's been peddling essentially the same unlimited salads and breadsticks for decades and its menu could use a refresh. Sure, some people like them, but the equally iconic Cheddar Bay biscuit wasn't enough to save Olive Garden sibling Red Lobster, which parent Darden Restaurants (DRI) is looking to either spin off or sell after several uninspiring quarters.

Olive Garden also is testing greater pasta customization in the Orlando area, according to the Sentinel. With its new Cucina Mia options, guests can choose between several new shapes of pastas, sauces and meat toppings.

Darden Family Feud

Darden also owns LongHorn Steakhouse, Bahama Breeze, the Capital Grille, Seasons 52, Eddie V.'s and Yard House. All of those grew, sales-wise, at the individual restaurant level in Darden's latest quarter, but the same can't be said for the two flagship concepts that make up 70 percent of its business.

Same-restaurant sales declined 0.6 percent at Olive Garden and 4.5 percent at Red Lobster in Darden's most recent quarter. The quarter before that, Olive Garden checked in with a disappointing 4 percent decline in comps. That's especially disappointing because just a few months earlier Darden was forecasting flat to slightly positive same-restaurant sales growth.

One way or another, Darden will let Red Lobster go in a few months. It announced in December that it will try to unload the chain in a sale. If it can't smoke out a buyer, it will carve the seafood chain out from its empire of roughly 2,100 restaurants and distribute shares of Red Lobster as a standalone company. That's a white flag of surrender, and it also means that Olive Garden will carry a bigger load in shaping Darden's financials in the future.

Salad Days and Menu Missteps

Back in December, Darden announced that it would shave $100 million a year in capital expenditures by scaling back expansion. It will open new locations for its smaller concepts at a slower pace, and it's suspending new unit growth entirely at Olive Garden.

This is a clear threat to Olive Garden. Darden doesn't want to invest more money than it has to in the country's largest casual dining Italian chain until it turns things around. Given Darden's emphasis on saving money, it's a safe bet that Darden isn't planning a costly makeover to spruce up the restaurants to make them more modern or inviting.

If Olive Garden sticks around, it's going to have to win back customers with menu changes, such as last year's Italiano Burger (just as a year earlier, we saw Red Lobster beef up its non-seafood offerings). Don't be surprised if you see Olive Garden tweaking its menu more often this year. Letting Red Lobster go is a public admission that Darden isn't going to put up with a chain -- no matter how big it is -- if it's starting to fade in popularity.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our newsletter services free for 30 days.

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popepaulg

Another observation concerning regional tastes: Hasn't anybody ever noticed that the restaurants out West serve too many dry and acidic wines? Yes, acidic wine goes with grilled steak, but it is not the only wine that goes with grilled steak. Anjd grilling is not the only way to cook a steak. And not every customer is a cowboy. Why would anybody want to order dry and/or acidic wine, in a desert, or during a drought? Why would anybody want to order food which goes with dry and/or acidic wines, in a desert? Sometimes, we need to be alert to the times when we paint ourselves into a corner. Some other suggestions: Open Early, serve breakfast, offer take-out, and offer meeting room sales with WiFi and business support services, and catering sales. And sell a few specialties to Supermarkets, to increase brand-awareness. And stop trying to make all of your profit by over-charging for wine. When something does not work, the fact that it is an industry fad or a business fad, will not make it work.

February 27 2014 at 12:17 AM Report abuse rate up rate down Reply
popepaulg

The restaurant business was never easy, and nowadays, it is harder than ever. High property taxes and high energy costs have taken a toll. Deficient Aggregate Demand ("Weak Economy") is bad for the restaurant business. The decline of business travel is bad for the restaurant business. But some wounds are self-inflicted. For example, both Cracker Barrel and Long Horn Steakhouse have great-tasting food, but the plates are too thin, and the food goes cold too quickly. Menu planners also have to learn that some foods are so personal that you have to offer variety to your diners. For example, BBQ ribs which Westerners like, seem to be too dry to Easterners. And the Westerners complain that Eastern-style ribs are too sweet and too fatty. And for another example, I have never had good Chilli, except for the Cincinnati kind. The classic example of problems from individual differences in taste, is New York versus Chicago Hot Dogs or Pizza. The best place to start making practical changes, is to collect and study customer complaints, and then figure out how to fix those problems. Beyond that, there are also problems which are typical in the restaurant industry, such as portion control, and menus which are too lengthy, which in turn, have adverse effects upon inventory control. Security (employee theft and identity theft) are also common problems. Locations in older communities, sometimes have parking problems. It is a tough business, even under the best of circumstances.

February 26 2014 at 11:59 PM Report abuse rate up rate down Reply
holdonmcgroin

From my perspective there are a few things they need to do first: hire a staff that can actually think and speak intelligently, teach that staff to actually speak and not mumble, clean the urine out of the carpet, and add simple addition and subtraction to the employee qualifications list. After those things are successfully completed, they can start on getting rid of their stale menus ... and stale food for that matter.

February 26 2014 at 10:35 AM Report abuse rate up rate down Reply