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Two years ago, it looked like a long shot that Olive Garden would ever offer delivery in my lifetime.
“We never say never,” said Rick Cardenas, CEO of Olive Garden parent Darden Restaurants, during an earnings call in March 2022. “But the likelihood of us getting into third-party delivery anytime soon is pretty low.”
At the time, 900-unit Olive Garden was one of the few restaurant chains not doing small-order delivery. It didn’t like the economics of the service, and it was hesitant to interfere with its own $1 billion to-go business. Most of all, the operations-obsessed casual-dining brand was loath to entrust its pasta and breadsticks to a middleman.
So while most of the industry joined forces with DoorDash and Uber Eats in search of at-home customers during the pandemic, Olive Garden stood pat.
Fast-forward a couple of years, and, well, what do you know? Olive Garden is partnering with Uber for on-demand delivery. Customers apparently just wouldn’t stop asking for it. And the chain could use the boost: Its same-store sales have been negative in each of the past three quarters.
And while there’s a sense that Olive Garden had no other choice but to give in to delivery, the chain is doing it in the most Olive Garden way possible. That is to say: deliberately, and in a way designed to protect the brand at all costs.
First and foremost, customers will only be able to order delivery from Olive Garden’s website and app. The brand won’t be listed on the Uber Eats marketplace.
This benefits Olive Garden in a couple of ways. First, it gets to keep all of the data from its delivery orders, which will allow it to keep in touch with those customers. Were it listed on the marketplace, that information would go to Uber.
It also gets to control the ordering experience. And it won’t have to pay an additional fee for a marketplace listing, which helps its margin on delivery orders.
Indeed, the company said on its earnings call last week that Uber delivery orders will have the same margin profile as its pickup orders. Customers will cover the extra cost via a delivery fee of about $7—a $5 flat charge, plus 5% of the order total.
“That was important,” Cardenas said. “Olive Garden does about $1 billion in sales in to-go. And so if we were to transfer quite a bit of that to a third-party marketplace without that charge being borne by someone other than Olive Garden, it would have been a big, big margin disruptor unless it was hugely incremental.”
Customers will also be asked to tip. But, in another unusual wrinkle, part of the tip will be shared with Olive Garden employees—a possible first for this kind of arrangement.
And the chain is sparing customers from at least one of the indignities of delivery. While many restaurants mark up their prices for delivery to help offset the costs, Olive Garden’s prices will be the same across channels. That transparency was important to Olive Garden, Cardenas said.
In another win for customers, Cardenas confirmed that the entire Olive Garden menu will be available for delivery— though the chain’s customary bottomless breadsticks and salads obviously won’t translate.
The deal was also crafted with operations in mind. Delivery drivers will pick up orders outside the restaurant, as part of Olive Garden’s regular curbside flow. For employees, handling a delivery order will be no different than any other to-go order. This will also prevent drivers from congregating in the lobby and mucking up the dine-in experience. And Olive Garden has the option to turn delivery off to prevent the kitchen from getting overwhelmed.
Put it all together, and you have a channel that should nab incremental sales from convenience-driven customers without hurting Olive Garden’s operations or margins. That’s the hope, anyway.
Cardenas declined to put a number on the sales the chain could see from delivery, but said estimates from Uber are “pretty big.” The chain will pilot the service at about 100 restaurants starting later this year. It will then expand to every U.S. location that offers curbside pickup, and possibly other Darden brands.
The one drawback to the deal is that Olive Garden is likely leaving some sales on the table by not joining the Uber Eats marketplace or those of other delivery apps. But the chain clearly values its operations and customer experience more than the extra juice those platforms would provide.
It also may not need them as much as smaller operators. As the biggest casual-dining chain in the country, Olive Garden has significant brand awareness and marketing muscle, including a 17 million-member e-club. “We think a lot of this is going to build over time, and we do have options to market it,” Cardenas said.
Other restaurants, including the few remaining delivery holdouts like Texas Roadhouse and In-N-Out, should keep a close eye on what Olive Garden is doing. If it works, it could be a blueprint for brands that want the benefits of delivery without all the sacrifices.