Lower prices, young din­ers aid Olive Gar­den come­back

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - KYLE ARNOLD

OR­LANDO, Fla. — What a dif­fer­ence three years makes for Olive Gar­den, a chain once bashed in a 300-page re­port by an ac­tivist in­vestor for poor food qual­ity and be­ing waste­ful.

The Ital­ian food din­ing chain has made a fi­nan­cial come­back with help from two un­likely sources: young din­ers and carry-out meals.

Olive Gar­den and its Or­lando-based par­ent com­pany Dar­den are now back on top of the restau­rant world, with the chain record­ing 11 straight quar­ters of samer­estau­rant sales growth. Dar­den’s stock price is at an

● all-time high and about 150 per­cent higher than three years ago.

And those elu­sive mil­len­nial eaters who were sup­pos­edly ditch­ing Olive Gar­den for hip, in­de­pen­dent restau­rants are ac­tu­ally part of the rea­son.

Chief Ex­ec­u­tive Of­fi­cer Gene Lee said that mil­len­ni­als are 30 per­cent of Dar­den’s cus­tomers, com­pared with just 24 per­cent of the pop­u­la­tion.

“Be­lieve it or not, mil­len­ni­als still want to come to restau­rants,” Lee said dur­ing a call with in­vestors last week. “People still want to come to restau­rants and have that ex­pe­ri­ence. And we’ve just got to pro­vide them the right ex­pe­ri­ence and the right value.”

Young con­sumers haven’t com­pletely aban­doned the habits of their baby boomer par­ents, said Christo­pher Muller, a for­mer Univer­sity of Cen­tral Florida restau­rant pro­fes­sor who now teaches at Bos­ton Univer­sity.

“Mil­len­ni­als haven’t stopped buy­ing homes and go­ing to sit-down restau­rants; they are just do­ing it a lit­tle later,” Muller said. “Now these younger people are start­ing fam­i­lies and that’s al­ways been Olive Gar­den’s core au­di­ence.”

While Olive Gar­den per­formed well dur­ing the re­ces­sion as con­sumers looked for value, sales dropped start­ing in 2012. The chain’s samer­estau­rant sales de­creased 10 times in 12 quar­ters be­tween 2012 and 2014. The chain was crit­i­cized for hav­ing a bloated menu and los­ing cus­tomers to fast-ca­sual chains that of­fered qual­ity food at lower prices.

Ev­ery brand strug­gles as it reaches ma­tu­rity, Muller said, and Olive Gar­den has reached that point.

But Olive Gar­den, he said, has re­bounded by be­ing ef­fi­cient, cut­ting the menu down to core pasta dishes and keep­ing prices low.

“If you look at the menu a lot of the prices are the same as they were 15 or 20 years ago,” he said.

Or­lando’s Joe Sar­rubbo, 41, said price and con­sis­tency are a big rea­son he con­tin­ues to eat there.

“I like when they have the cre­ate your own pasta bowl,” said Sar­rubbo, who works at Va­len­cia Col­lege.

Sar­rubbo said the stu­dents he works with are drawn to the low prices as well, even if they might pre­fer in­de­pen­dent restau­rants.

In the past three years, Olive Gar­den has also in­tro­duced a se­ries of low­priced menu items, in­clud­ing un­lim­ited soup, salad and bread­sticks for $7.

“Olive Gar­den is re­ally after that value con­sumer,” Lee said. “[Cus­tomers are] look­ing for ev­ery­day value, and that’s some­thing that we con­tinue to pro­mote.”

Mean­while, Olive Gar­den’s com­peti­tors in the Ital­ian food din­ing seg­ment have strug­gled. Ro­mano’s Mac­a­roni Grill is clos­ing restau­rants.

Carrabba’s Ital­ian Grill, based in Tampa, saw its same-restau­rant sales drop 2 per­cent in the first quar­ter com­pared with a year ago.

By com­par­i­son, Olive Gar­den sales were up 4.4 per­cent in its most re­cent quar­ter com­pared to the year be­fore.

Muller said other sit-down restau­rants have strug­gled to stand out, es­pe­cially bar and grill style eater­ies.

Olive Gar­den launched a re­model of its old­est restau­rants in 2014. The chain has con­tin­ued to re­model many of its restau­rants. Newer restau­rants are also get­ting re­freshes that ex­pand the bar area and up­date some of the in­te­rior el­e­ments.

Lee’s strat­egy since tak­ing the lead at Dar­den three years ago has been to sim­plify op­er­a­tions, cut costs and use the com­pany’s buy­ing power to keep prices low for con­sumers.

Olive Gar­den has also seen an in­crease in its take­out busi­ness while much of the in­dus­try grap­ples with third-party de­liv­ery.

In the last quar­ter, take­out busi­ness was nearly 13 per­cent of Olive Gar­den’s to­tal sales. Take-out or­ders are also up 58 per­cent in the last years.

Still, he said com­pe­ti­tion from new play­ers such as Ama­zon Restau­rants and Uber Eats have Dar­den on alert.

“We con­stantly sit around here think­ing about how does Ama­zon have an im­pact on our busi­ness,” Lee said. “Our re­search tells us that guests still want to come to restau­rants.”

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