4 surprises behind Olive Garden’s big quarter

After Olive Garden posted a 2.6% rise in same-store sales for the quarter ended Nov. 27, one of the highest increases in casual dining to date, executives of parent company Darden Restaurants revealed some surprising whys yesterday. 

It was all about innovation, said CEO Gene Lee. But he wasn’t talking about the latest high-tech gizmos or apps. Rather, he cited these four advances, some on unexpected fronts.

The “big innovation, the big breakthrough” has been re-engineering the lunch menu to offer a full-service experience for the bargain price of $6.99, said Lee. The key was uncoupling Olive Garden’s signature promise of unlimited breadsticks, soup and salad to provide a choice instead of all three. Now guests can pick a sandwich or other lunch item and either the “bottomless” soup or salad.

“For $6.99, you can get an eggplant parmesan sandwich and all the soup or salad that you want,” Lee told financial analysts. Ditto for a meatball sandwich.

“That, to me, has been the biggest innovation in Olive Garden and has really changed the whole complexion of lunch,” said Lee.

Patrons who want a more elaborate meal have $7.99, $8.99 and $9.99 options, but the lunch menu has been recast to offer the four pricing options.
 

Sales generated through the chain’s OG To Go program increased year over year by 21% during the quarter, Lee noted. One factor was the development of a Create Your Own Pasta Station for at-home or in-office situations. The option apparently functions as a mini buffet, enabling members of a group to get exactly the pasta and sauce combinations they want. Lee did not reveal the specific sales impact of the Create Your Own Pasta innovation.

He mentioned that Olive Garden is testing ways of getting single orders to customers’ homes or offices. The chain already offers deliveries of large catering orders. “We could be developing our own network that could handle the one-off deliveries,” he said.

Lee mentioned that the chain is mindful of the many ways consumers could be provided with eat-at-home options. “It's all the way to, ‘Could you actually build a kitchen in a warehouse district and deliver in a major city out of that?’”

He also served up the tidbit that Olive Garden’s off-premise sales are highest on Valentine’s Day.

Darden has completed 40 of the 160 bar refurbishments for which it’s earmarked capital, and expects to finish the rest within the next six months, though it wasn’t clear from Lee’s statements if all of those facilities are in Olive Gardens. 

In instances where the bar is upgraded, traffic has increased by an average of 3.5%, Lee said.

“Industry turnover continues to increase,” Lee said in response to a question about labor. “Darden's team member turnover in the second quarter actually declined slightly.”

The reason, he said, has been an intense focus on “a strong employment proposition,” which he termed “a competitive advantage.”

He did not divulge details, but noted, “We've been working for a year with our restaurant teams and changing the processes and procedures on how we hire, how quickly we do it.”