Instead of charging into delivery with the rest of casual dining, Olive Garden is angling for more off-premise business through new initiatives aimed at boosting takeout and expanding its catering potential, parent company Darden Restaurants revealed this morning.
The Italian chain has just opened a new prototype in its hometown of Orlando, Fla., that sports a dedicated takeout area, Darden CEO Gene Lee told financial analysts. He would not divulge details, but commented, “We’re learning a lot from that.” He added that outfitting stores with a separate takeout area could boost the volume of stores already doing in excess of $1 million in to-go sales.
About 40% of Olive Garden’s casual steakhouse sister chain, LongHorn Steakhouse, already sports a dedicated takeout area, Lee noted.
Olive Garden is striving to grow its catering business by changing the requirements for orders. The $100 minimum has been dropped to $75, and customers can now place an order until 5 p.m. for delivery the next day. Previously, a lead time of 24 hours was required.
Lee noted that the catering changes are essentially a way for Olive Garden to offer delivery to couples, since $75 is not much of a reach for two entrees and sides. Right now, catering orders average $300, he said.
“We want to focus on that more than trying to move a $15 entree,” Lee told financial analyasts. “And so again, we're watching what's happening.”
He acknowledged that Olive Garden continues to test conventional delivery. “The results aren’t compelling enough that we’re running out to do something with it,” he said.
He repeated his objections to small-order delivery, saying, “I’ve seen margin destruction from it.”
Lee noted how some competitors are trying to preserve their on-premise margins by shifting more of the cost of delivery to the customer. “I'm just a little uncomfortable with that” he said. “That has to be proved out to me over time.”
His comments came about a week after archrival Brinker International announced that its Chili's Grill & Bar chain was dropping its long aversion to delivery and forging a systemwide deal with DoorDash.
Olive Garden’s to-go and catering sales collectively rose by 9% during the fourth quarter ended May 26, to 15% of total sales. The chain’s same-store sales rose 2.4% for the quarter, despite a 0.4% slip in guest counts.
Results for Darden’s seven other casual-dining brands were mixed for the three-month period. Positive comparable store sales were posted by LongHorn Steakhouse (3.3%), The Capital Grille (2.9%) and Eddie V’s (2%). Comps were negative for Yard House (-3.2%), Seasons 52 (-2.1%) and Bahama Breeze (-1.9%).
The biggest decline was posted by Darden’s most recent acquisition, Cheddar’s Scratch Kitchen, whose comps fell 3.2%. Lee said he was nevertheless encouraged by that brand’s Q4 performance, noting its profits and guest counts had increased from the prior quarter.