Officials at Darden Restaurants Inc. plan to overhaul marketing efforts and adjust pricing at the 754-unit Olive Garden chain, which has been wrestling with soft same-store sales recently.
Executives at Darden, which reported a net earnings increase of 19 percent for the fourth quarter ended May 29, told investors during a Friday conference call that they will adjust promotional strategies in an effort to boost sales and traffic at the Italian-themed dinnerhouse chain.
In May, Olive Garden reported a 1.1-percent decrease in both same-store sales and traffic compared with the same period in 2010.
“Advertising execution has not broken through as well as they have in the past,” said Drew Madsen, Darden president and chief operating officer.
The tactical game plan is to “adjust creative to a short-term call to action” versus past marketing that focused on long-term equity building, Madsen said.
Darden plans to make Olive Garden’s menu offerings more broadly appealing by stressing “price certainty” and value. For example, the chain rolled out Carbonara Ravioli with Chicken for $10.95 and Carbonara Ravioli with Shrimp for $12.95, while also offering new Panini sandwich deals that range from $8.95 to $9.50.
Darden’s decision to establish more predictable price points at Olive Garden mimics the strategy used at Red Lobster, which was successful at driving traffic with its $15 Seafood Feast limited time offer that debuted May 31.
Meanwhile, company officials said they plan to open 35 to 40 net new Olive Garden locations in fiscal 2012.
Overall, the Orlando, Fla.-based Darden is planning to open 80 to 90 new restaurants across its entire portfolio, which also includes Red Lobster, LongHorn Steakhouse, The Capital Grille, Bahama Breeze and Seasons 52.
Darden generated sales of $7.5 billion in fiscal 2011 due, in part, to the addition of 70 net new restaurants and a combined same-store sales growth of 1.4 percent at Red Lobster, LongHorn Steakhouse and Olive Garden.
EARLIER: Darden 4Q net earnings rise 19 percent
Red Lobster: Price certainty will be stressed at Red Lobster’s 698 units, but executives also hinted at some menu innovation and price point updates. Red Lobster is evaluating whether to make the four-course $15 Seafood Feast deal a permanent menu offering. The chain remodeled 42 restaurants in the fourth quarter, and has plans to open three to five net new restaurants and remodel 125 locations in 2012.
LongHorn Steakhouse: The steakhouse concept remodeled 37 locations in the fourth quarter and 112 for the full 2011 fiscal year. Darden executives said they plan to accelerate new unit growth in the range of 30 to 35 net new restaurants in fiscal 2012 and offer new $6.99 lunch deals. LongHorn ended the year with 354 restaurants in fiscal 2011, up from 331 in 2010.
The Specialty Group: The company has plans to open 11 new restaurants in fiscal 2012 – two Capital Grille locations, three or four Bahama Breeze outlets and five or six Seasons 52s, where executives hope to build group and event dining.
Darden officials said they will increase capital spending from $547 million in 2011 to $600 million in 2012.
Chief financial officer Brad Richmond said he expects Darden’s food costs to rise 5 percent to 5.5 percent in 2012, but 75 percent of the food bill has been contracted out to the end of the 2011 calendar year. He anticipates that commodity costs will decline in the second half of the year.
Contact Alan Snel at [email protected].
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