Darden’s most recent quarter was certainly something to write home about, with systemwide same-store sales up 2.4%, including 2% at Olive Garden and 7.5% at LongHorn Steakhouse.
Chief executive officer Rick Cardenas and chief financial officer Raj Vennam painted a bit more color on those results during the annual ICR Conference this week in Orlando. LongHorn, which represents about 25% of the company’s revenues, has benefitted from years of work and investments that pre-dated COVID. Cardenas said the company eliminated price-point promotions, for instance, and shifted those marketing dollars to “put more food on the plate and talk about quality.”
“Then, over time, we didn’t have to talk about quality because everybody knew. Over time, we weened off the communication and put more on the plate per dollar than everybody in the space,” he said. “We also invested in the team and have record low turnover and a great experience. When consumers find value, it’s not always what you pay, it’s what you get for what you pay, and we think we’ve hit the sweet spot.”
Meanwhile, Olive Garden is seeing a tailwind from its delivery pilot with Uber Direct, a partnership that was announced in December. Cardenas said the integration has gone well and has been expedited. He added that because Olive Garden is using Uber Direct and not going through Uber’s marketplace, the brand can keep its pricing and simply add a delivery fee. As the test continues, Darden is working to ensure operational and systems integrations are seamless and that has been the case so far.
“We believe operations will be straightforward because we already do curbside delivery and Uber drivers come to those spaces,” Cardenas said. “The system has worked really well, really quickly. As the pilot moved forward, we heard from operators that this should be in every Olive Garden. When operators say ‘go,’ that means it’s doing well and not complicated. That’s what got us to go a little quicker.”
Darden’s fine dining business, which represents about 10% of revenues and includes Ruth’s Chris Steak House, Eddie V's Prime Seafood, and The Capital Grille, experienced a more challenging quarter, with same-store sales down nearly 6%. But, executives are optimistic about the business, with Vennam noting that the segment is correcting itself after a post-COVID bump.
“Coming out of COVID, there was a significant increase in fine dining, and it was probably aspirational guests who don’t typically come to us. We have shed most of them and adjusted,” he said. “We are seeing an improvement and we’re happy with the retention we’re now seeing. We’re at a place where that extra infusion is behind us, and we can build from there.”
Like many restaurant companies, Darden is reporting a stronger consumer base in recent months, including more visits from the $50,000 to $100,000 annual household income demographic. The company is also bullish because of the advantages realized from the integration of its two newest brands – Ruth’s Chris and, more recently, Chuy’s – bringing its platform to 10 total brands.
“We have unprecedented scale in the space and are twice the size of our nearest competitor. That gives us more opportunities with G&A (general and administrative costs), people, and the supply chain,” Cardenas said. “And because of our scale, we have other advantages, like data and insights.”
“And we can leverage our scale to continue to get cost efficiencies,” Vennam added. “We price below inflation and are still able to grow margins because we simplified, streamlined, and improved productivity. Pricing below inflation and the competition is the way for us to continue to grow the business. We’re not changing our strategy on that.”
Contact Alicia Kelso at [email protected]
