Olive Garden feeding the masses despite fewer discounts

Diners are gorging themselves at Olive Garden even as the giant chain of red-sauce joints curtails popular discounts amid record-high inflation, executives said.

Owned by Orlando, Fla.-based Darden Group, the 884 family-style restaurants famous for their “Never Ending Pasta Bowl” promotion are relying less on freebies but still managing to pack dining rooms, according to the company.

Olive Garden still offers its “never-ending first course” — soup, salad and breadsticks — but the chain started to “wind off” discounting during the pandemic, Darden chief executive Rick Cardenas said on an earnings call on Thursday.

“We don’t see a need to do a deep discount promotion,” Cardenas said.

Comparable sales at Olive Garden were up 6.5% in the quarter ended May 29 while total comparable sales for the company – which also owns chop houses LongHorn Steakhouse and Capital Grille – were up 11.7%

With nearly 2,000 restaurants, Darden beat Wall Street’s expectations on both the top and bottom.

While higher costs for labor and food has dented profits at its two biggest chains, Olive Garden and LongHorn, Darden said its margins are still better than they were pre-COVID.

A bowl of pasta with meatballs.
The popular family-style chain is known for its free refills on pasta dishes, breadsticks, soups and salads.
The Washington Post via Getty Im
Olive Garden breadsticks.
Olive Garden’s breadsticks which come with most meals.
Bloomberg via Getty Images

Darden is forecasting sales to rise to between $10.2 billion and $10.4 billion with same-restaurant sales growth between 4% to 8%.

Cardenas said the company is “well staffed” and that its been able to keep its menu prices at below inflation rates. 

Diners at Olive Garden, which offers free refills on soup, breadsticks and salad, are ordering as much now as they ever have, said Cardenas, who succeeded longtime CEO Gene Lee in May.

A plate of Lasagna.
Olive Garden’s comparable store sales rose by 6.5% in the most recent quarter.
The Washington Post via Getty Im

But the free refills on pasta have quietly disappeared off of the menu, according to a report last year. Cardenas said at the time that the free carb promotion had a negative impact on profitability.

Despite fewer freebies, “We haven’t see a lot of check management at any of our brands,” Cardenas said referring to diners who might skip an appetizer, dessert or drinks to keep their tab low.

The restaurant has instead emphasized other popular menu items like its Alfredo sauce which its added to more dishes. 

The ad for “our alfredo sauce that we make in house every day…is the highest rated ad we’ve had in years,” the executive said on the earnings call.

Darden’s shares were down less than 1% to $114 on Thursday.   

Source link

Leave a Reply

Your email address will not be published.