Turnaround report: Olive Garden slammed, McDonald’s ‘streamlining’ & other updates

Olive Garden learns to curse in Italian

The American-born chain was given a comprehensive review of Italian hand gestures after parking its new food truck in Boston’s North End, epicenter of the city’s large Italian population and the restaurants that feed them. They all but sent a vest-wrapped fish to the chain, saying its Disney-fied food had no place in a true outpost of the Old Country, with palates that know the real thing. The Olive Garden mobile was there to spotlight the chain’s new breadstick sandwiches, which were blasted by local restaurateurs and residents in a tide of media reports. They noted that the “breadsticks” used for the new sandwiches—actually torpedo-shaped soft toasted breads—are a far cry from true Italian bread and an insult to their heritage.

McDonald’s adds a post to its flatter structure

McDonald’s has vowed to pare down its hierarchy, but the need to bolster the infrastructure has apparently distracted it from that mission. It followed recent bombshell announcements of two C-level hires with the creation this week of another post on that level, chief field officer, with oversight of four U.S. zones encompassing 14,000 units. The job is being filled by Karen King, formerly chief people officer. McDonald’s said the job she replaced will be filled, which means the corporate structure is growing by a net gain of one.

A cash injection warms a deep-freeze victim

Private equity companies were once tarred as marauders intent on slashing restaurant companies to their bones and then selling the skeletons at a profit—think pirates in nice suits. But now they’re increasingly viewed as saviors who provide the growth capital and other resources to fuel a forward surge. Saladworks, a regional chain in desperate need of some pulse-quickening, can only hope its P.E. buyer is packing a syringe of straight adrenaline. 

Early signs indicate that the needle is being uncapped right away. The 29-year-old concept was purchased out of bankruptcy by Centre Lane Partners, which has vowed to invest $2 million in the chain, above and beyond the $16.9 million purchase price. New CEO Paul Steck told Philly.com blogger Joseph DiStefano that the working capital will be used to expand the staff to 22 people, from the current 15. Steck also detailed plans to update pretty much every feature of the 108-unit chain, from the look of the stores to the takeout packaging and technology. 

The brand also plans to upgrade its ingredients bars through the addition of organics, artisan cheeses, antibiotic-free chicken and quinoa.

Saladworks has been in a cryogenic freeze because of a struggle for control between founder John Scardapane and one-time Burger King franchisee Vernon Hill, who plowed $11 million into the chain.

Olga’s heads back to basics

The latest restaurant chain to put its name on the turnaround wish list is Olga’s Kitchen, a chain that preceded Zoe’s and Roti Grill in selling Mediterranean food. The 45-year-old concept filed for bankruptcy protection this week, another victim of letting aggressive growth blur the concept’s image, according to local press assessments. It was in the midst of a drive to add dozens of stores in a new fast-casual format.

Surviving management says the problem was a unit-level flaw that crushed margins. They did not say what that issue was, but insist it’s been corrected. “The reason we filed for bankruptcy is to restructure the debt or to potentially sell the company,” COO Michael Kosloski told the Detroit Free Press.

In the meantime, the 28-unit concept will focus on the basics, Kosloski said.

The asterisk to Cosi’s negative comps

The struggling sandwich concept posted a 2.2 percent increase in comparable sales for company-run restaurants for the five weeks ending June 1, but systemwide sales were just a hair short of flat, at 0.9 percent. The reason: same-store sales for franchised units tanked by 7.3 percent.

The setback was slighter than it might appear, CEO RJ Dourney told investors. Most of the decline was attributable to just three franchised stores, he said. Dourney added, “we are aggressively managing the situation.”


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