Following a pledge to shakeup up its value promotions, Olive Garden introduced on its Facebook page Monday a new $6.95 “Create Your Own” lunch special, which follows on the heels of a three-course, $12.95 dinner promotion introduced earlier this year.
The Create Your Own lunch is offered weekdays until 4 p.m., and the $6.95 price point may vary in Alaska, New York and Canada, Olive Garden said on its Facebook page.
Heidi Schauer, spokesperson for Olive Garden, said in an email that the limited time offer will be available through April 22. “It’s being advertised on Olive Garden’s Facebook page, email to Olive Garden Family Table newsletter list, Hispanic, digital [and] national TV,” Schauer said.
The lunch offers a choice of soup or salad, unlimited breadsticks and one of six entrees that include Olive Garden’s new Pizzaiola Calzone, or half-size versions of the concept’s grilled chicken caprese panini, grilled chicken Florentine panini, grilled steak and portobello panini, caprese flatbread or grilled chicken flatbread. Olive Garden’s dinner promotion offers a three-course meal at $12.95, which includes choice of soup or salad, one of five entrees and one of five desserts.
“While not strictly a ‘discount,’ we believe the offer represents a significantly better value for guests than the existing $6.95 unlimited soup, salad and breadsticks offer and will thus contribute some level of traffic growth,” Brad Ludington, a securities analyst with KeyBanc Capital Markets Inc., said in a note about the new lunch special.
“Though we believe Olive Garden carefully created menu items to minimize margin impact from the promotion, the promotion likely requires a meaningful lunch traffic boost to support EBIT [earnings before interest and taxes] margin in the face of the value offering,” Ludington said.
Executives at parent company Darden Restaurants Inc. said last month they had seen the 776-unit Olive Garden’s “value leadership competitive advantage” narrow compared to other restaurant brands, and the company had seen average unit volumes slip to $4.7 million in February 2012, from $4.8 million in February 2011.
Olive Garden also has seen same-store sales softness, seeing declines of 2.9 percent in the first quarter of fiscal 2012, and 2.5 percent in the second quarter, which ended in December. The company projects a same-store sales increase of 2 percent in the current third quarter, which ends this month.
Fall promotions did not meet executives’ expectations, officials said. Olive Garden had offered such deals as the “never-ending pasta bowl” at $8.95 in September and the first week of October, which was followed by stuffed rigatoni with sausage for $9.95 or stuffed rigatoni with chicken for $11.95.
“Neither promotion delivered as many guests as anticipated,” said Drew Madsen, president and chief operating officer at Darden, during a conference call with investors. “And there was more trading to the lower-priced promoted entrees than we have seen historically. This trading, combined with lower add-on sales as guests continued to manage their check, resulted in negative menu mix for the quarter.”
Darden Restaurants, based in Orlando, Fla., has 1,958 casual-dining units with such brands as Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52 and Eddie V’s.
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