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With the news last week that Domino’s is ending its long-standing resistance to third-party delivery, Olive Garden is now the largest restaurant brand in the U.S. that can’t be found on DoorDash, Uber Eats and the like.
That is probably not going to change anytime soon, and there’s no reason it should.
Olive Garden parent Darden Restaurants was opposed to third-party delivery well before the pandemic and stood pat even as so many other brands began jumping aboard in 2020. Former Darden CEO Gene Lee just did not like the idea of paying someone else to deliver Olive Garden’s food to Olive Garden’s customers. That stance is shared by his successor, Rick Cardenas.
“We still don't like that model,” Cardenas said during an earnings call in March 2022. “We don't think it's the right thing having someone get in between us and our guests. … We never say never, but the likelihood of us getting into third-party delivery anytime soon is pretty low.”
Domino’s had some of the same reservations about third-party delivery. And yet its acquiescence to the apps always seemed inevitable. As its sales shrank last year, about $5 billion worth of pizza was being sold on third-party aggregators. There is just no way the nation’s biggest pizza chain could justifiably stay on the sidelines. And it has worked out a sensible deal: Uber Eats will list its restaurants on the app, but Domino’s drivers will do the actual delivery, giving the brand more control over the process.
Olive Garden is a different story. The 905-unit chain has been one of casual-dining’s brightest stars coming out of the pandemic, outpacing the industry on both sales and traffic. Its same-store sales were up 6.7% year over year for the 12 months ended May 28. It did that, executives say, in classic Darden fashion: By focusing on operations and food quality and the experience and atmosphere of its restaurants.
Underpinning those efforts has been an intensifying focus on data at Darden. Per Cardenas, the company is using reams of customer information to forecast things like inventory and scheduling, improve its execution and drive traffic with marketing. It would not get the same kind of data from third-party delivery customers, which makes those transactions much less attractive.
That doesn’t mean Darden is ignoring the to-go business. In fact, it has done quite the opposite. Off-premise makes up an astounding 25% of Olive Garden’s sales, which is as much or more than many of its casual-dining counterparts that do use third-party delivery. A lot of that is from pickup, but if you do want to get Olive Garden delivered, you can: You just need to order by 5 p.m. the day before and spend a minimum of $100, ensuring maximum profitability for the brand. Catering has also been growing.
“We continue to see that we're able to kind of still get overall sales growth and outperformance versus the industry, while not tapping into these other channels,” Cardenas said on an earnings call in June. “And actually, we're managing the experience better.”
That’s not something Domino’s could say about its own delivery business, which is one reason it ended up doing what it did.
Could Olive Garden be growing sales even more with third-party delivery? Almost certainly. The consensus is that customers who use the apps tend not to overlap with a restaurant’s existing customers, meaning third-party transactions are largely incremental. And most brands have learned by now that those orders can also be made profitable by hiking menu prices or adding fees.
And yet when an analyst asked last September if, given the improving unit economics, Darden might consider softening its stance against third-party delivery, Lee responded definitively: “No.”
Olive Garden has determined that the risks of farming out some of its all-important operations to other businesses is not worth the reward of more sales—even if they are just as profitable as a regular order. That tells you what Darden values, and what some of its competitors are conceding by partnering with third-party providers.
Those values, by the way, have worked quite well for the company recently: Among the top 10 casual-dining chains in the U.S. last year, Olive Garden and Darden-owned LongHorn Steakhouse were two of the three fastest-growing, with total sales up 12.3% and 15.3%, respectively.
The only other brand to keep pace was Texas Roadhouse. And it doesn’t offer third-party delivery either.