Brand revival plans for Olive Garden focus on four key areas: evolving the core menu, improving and simplifying operations, implementing an integrated communications platform, and reimaging restaurants.
In fiscal 2014, sales at the Italian casual-dining chain slipped 1.1%, and U.S. same-restaurant sales declined 3.4%, while Darden Restaurants’ other brands showed good growth. LongHorn Steakhouse posted a 12.4% increase in sales and a 2.7% growth in U.S. same-restaurant sales, and Specialty Restaurants, which includes The Capital Grille, Yard House and Seasons 52, reported a 25% increase in sales for the year.
In hopes of matching the success of its other brands, Darden is counting on efforts to refresh Olive Garden in a number of ways.
“In terms of food, quality not surprisingly is what guests want most, and freshness drives quality more than any other attribute,” said Gene Lee, president and chief operating officer of Darden Restaurants, during a June 20 call with financial analysts to discuss fiscal-year earnings. “So, we are emphasizing food prepared with the freshest ingredients, presented simply with a sense of flair as very Italian.”
The casual-dining chain’s objectives for evolving its menu focus on reinforcing value, expanding variety and capitalizing on the convenience trend. During the company’s fourth quarter, Olive Garden introduced new menus at lunch and dinner with a lower price point and the customizable Cucina Mia menu.
“We know that this price point and the customization this offer enables is very compelling for our guests, especially millennial and value-conscious consumers,” Mr. Lee said. “We also added A Taste of Italy section, which addresses the guest’s desire to sample menu items served tapas-style. In addition, we have added seven new specialty items, including four new lighter fare entrees, buttressing areas of the menu where our guests are looking for more choice.”
The chain also is testing on-line ordering to strengthen its take-out business, which represents 8% of sales and growing. A national roll-out is expected to be completed by the end of August.
“During the testing phase when orders were placed on-line, the check average for those transactions were significantly higher than the orders placed over the phone,” Mr. Lee said. “Take-out sales in the on-line restaurants are growing greater than 10%.”
Olive Garden also added new lunch combinations with a number of mix-and-match options at a price point that is competitive with other casual-dining and fast-casual lunch options. Items include sandwiches and flatbreads, miniature pasta bowls and small plates.
“Looking at 2015, at dinner we will continue to look for ways to improve the Cucina Mia platform, and increase the number of entrees under $15 to bolster our already strong appeal to younger and budget constrained guests,” Mr. Lee said. “New better-for-you options will also be added to the menu, as well as an upgrade of our classic Italian offerings, which continue to represent a significant portion of our sales from our dinner menu.”
New grills have been installed in Olive Garden kitchens to improve the quality and consistency of grilled items.
“We also improved the quality of our proteins, chicken, steak and salmon, using higher-quality proteins in our specialty dishes is key to ensuring we continue to deliver strong value in entrees that appeal to all consumers, but especially those consumer segments that provide attractive opportunities for growth,” Mr. Lee said.
Olive Garden’s efforts to enhance customer service and simplify operations include the addition of table-top tablets and an increased emphasis on ongoing training and development.
Another key driver of the Olive Garden renaissance plan is to develop a more integrated communication platform. The chain has developed new messaging to showcase new core menu items and to reinforce its culinary credentials. A new interactive web site and social media programs also have been launched recently.
“We are increasing our investment in visual and social media tools to drive greater guest engagement,” Mr. Lee said. “And with these tools, we will provide much more in the way of regional and personal messaging through customer relationship marketing and mobile devices.”
Reimaging restaurants represents another component of Olive Garden’s brand revival. In fiscal 2014, the company reimaged the interior and exterior at one of its revitalized prototype restaurants.
“The new design is natural, up-to-date, comfortable and engaging,” Mr. Lee said. We also introduced new plateware to enhance the presentation of our food, contemporize the music, and … develop(ed) a new logo and visual identity system.”
Same-restaurant sales at the more than 300 restaurants in need of a remodel are lagging results at other restaurants by more than 2 percentage points, he said.
“Initial sales results at the remodeled restaurant are very, very encouraging,” Mr. Lee said. “The sales trends have improved mid-single-digits since the completion of the remodel and the new signs were installed.”
With more than 800 restaurants and 8,000 employees, Olive Garden’s brand renaissance is a large and complex initiative for Darden. Already, however, the company said it has seen positive, measurable results from the efforts, including preference of new menu items and an improvement in guest satisfaction scores.
“We are confident that the rate of progress will increase in the quarters ahead, as the various aspects of the plan reinforce and build on one another,” Mr. Lee said. “In fact, in June, as we have gotten past some of the year-over-year promotional mismatch we had in the fourth quarter, we have already seen significant positive trend change compared to the fourth quarter, from a same-restaurant sales perspective.”
The year was one of “significant transformation” for Darden that included not only the rebranding of Olive Garden but also the sale of Red Lobster to Golden Gate Capital for $2.1 billion.
In the fiscal year ended May 25, the company earned $286.2 million, equal to $2.18 per share on the common stock, down from $411.9 million, or $3.19 per share, in the prior fiscal year.
Sales for the year totaled $6,285.6 million, up slightly from $5,921 million in fiscal 2013.
Fourth-quarter earnings fell to $86.5 million, equal to 66c per share, from $133.2 million, or $1.03 per share, in the comparable quarter.
Sales for the quarter rose to $1,650.1 million, which compared with $1,592.4 million.
