Olive Garden parent Darden Restaurants Inc., which announced a new delivery deal with Uber Direct, expects to the pilot program to help make better use of customers’ time, executives said Thursday.
Orlando, Fla.-based Darden, which released earnings for the first quarter ended Aug. 25, is working to better respect the time customers devote to dining, said Rick Cardenas, Darden's president and CEO, in an earnings call.
“We know we can do a better job of evaluating our guests' time, and that was a central theme of our general manager conferences last month,” Cardenas said. “We believe we have an opportunity to drive incremental sales over time by capturing the quicker meal occasions. The opportunities vary by brand, and it is something each brand team will continue to focus on over the long term.”
Cardenas said the pilot delivery program, which will begin with about 100 Olive Garden restaurants, will supplement the brand’s existing large-party catering, which is handled in-house.
But customers “have been asking for small-order home delivery options and delivery guests in general continue to show they're willing to pay for the convenience,” he said.
Olive Garden plans to protect the in-restaurant experience, Cardenas said, “as drivers will pick up orders curbside in the same manner our guests do today. It also enhances the takeout experience by giving guests the option to have someone else pick up their order.”
The two-year agreement with Uber also gives Darden the ability to extend it to other brands in its portfolio, Cardenas said.
“This delivery-as-a-service further enhances the takeout experience for our guests, which is why we will have the same everyday value menu price for dine in, pickup, or delivery,” he said. “The added cost for delivery will be transparent to the guest, and with Uber's technology platform guests will be able to track their order all the way to their delivery address.”
Cardenas said Darden sees the Uber deal “as an incremental long-term sales driver.”
“This is a first-party delivery, not third-party delivery marketplace,” he explained. “It will take time for us to build sales. We intend to roll it out initially only at Olive Garden to learn, and will pilot at a limited number of Olive Garden restaurant locations in the second quarter. Assuming a successful pilot, we plan to begin a phased rollout to all Olive Garden locations that currently offer curbside to-go. We expect that to be complete before the end of the fiscal year.”
Darden worked to keep the fee low, he added. “We've got two parts of it,” Cardenas said. “One is just kind of a delivery fee, which is around $5 for every order, and then 5% of the entire order. On a typical Olive Garden order, it'll probably be somewhere around $7 to have their food delivered to them versus picking it up themselves, and then not including the tip.”
Delivery has been “a lot stickier than we thought it would be,” Cardenas said. “We thought that over time consumers would see how expensive it is, and kind of pull back on that, but it's been fairly sticky. There are consumers that want the convenience of having something brought to them versus coming to get it. This is not a lunch or dinner, this is a need state for convenience. It's a different occasion.”
The delivery deal will allow Darden to pick up some new sales occasions, Cardenas added.
“Not every delivery order will be incremental, but there are consumers who have wanted Olive Garden delivered for small order for years,” Cardenas said. “We know that there will be some incremental sales out of this.”
Cardenas said that the 100-unit pilot would run through the holidays. “And then if all the systems and everything works, then that's when the [systemwide] rollout will start.”
For the first quarter ended Aug. 25, Darden reported net earnings of $207.2 million, or $1.74 per share, up from $194.5 million, or $1.61 per share, in the same period a year ago. The company reported sales of $2.487 billion, up from $2.477 billion in the same period a year ago.
Same-store sales in the first quarter were down 1.1% companywide, including a decline of 2.9% at Olive Garden, an increase of 3.7% at LongHorn, a decline of 6% in the fine-dining division, and a decline of 1.8% in its other business.
As of Aug. 25, Darden had 2,040 restaurants, including 923 Olive Gardens, 577 LongHorn Steakhouses, 181 Cheddar’s Scratch Kitchens, 88 Yard House units, 82 Ruth’s Chris Steak House restaurants, 68 Capital Grilles, 44 Seasons 52s, 44 Bahama Breezes, 29 Eddie V’s, and four Capital Burgers.
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