Is Darden's Olive Garden Stepping Up?

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There's no denying that Darden Restaurants' (NYSE: DRI  ) Olive Garden chain is in the midst of tumult. The Italian eateries have not generated positive store traffic in some time. Extreme weather in parts of the U.S. can take some of the blame in recent months, but the fact is that Olive Garden has aged poorly as a concept. Consumers are more discerning, and the rise of food television has activated the inner critic within a population that was previously much easier to please (big portions and low cost). Much of Darden's strategy has been to update the appearance and change the menu. Is that enough?

Getting warmer
A few months ago, I wrote a satirical piece about Olive Garden's attempt to tap into craft burger mania -- one of the many trends that Americans have been eating up. The burger was an ill-fated idea, and has clearly done little to energize same-store sales, which in the recently ended quarter dropped a few points more. Of course, the burger wasn't the lynchpin of Olive Garden's turnaround strategy, but it suggested a highly uncreative management team.

Since then, the menu innovation has expanded, and in the right direction. Starting with the food may not be the most economical decision for the company, but it is certainly the most important in the long run. Olive Garden hasn't budged its external appearance yet (both physical and in the branding world), but its apparent commitment to getting back on track with its customer base is a good sign. The menu improvements feel connected to Olive Garden's history of affordable Italian-style dishes that appeal to mainstream middle-market American families. Yet now, the new items seem to address the market's newfound foodie status.

LA Weekly recently did a taste test of new items, including a small-plated shrimp and polenta dish, with accouterments such as capers (ooh!) and green olives. While eaters' opinions of the dish will likely vary, it's important to recognize that the test kitchen seems interested in maintaining the theme, or at least the relative style, of cuisine that Olive Garden was built upon and is widely known for. The article also mentions a chicken dish over kale (ahh!) and cannellini beans. Average Americans have read about kale, and their neighbor has lost weight recently and eats and drinks exclusively kale. Kale is good. And this dish, with just enough oil to make it delicious no matter what happens, is similar to the pile of pasta and sauce that made Olive Garden one of the top restaurant destinations of the 90s.

Sure, this is a bit tongue-in-cheek, but Olive Garden via Darden seems to be improving its grasp of what it means to be a middle-market chain restaurant in 2014. We want the same things as always -- delicious food at reasonable prices -- but we also want to identify with the next day's cooking segment on Good Morning America.

Finishing off the article, and the meal, Olive Garden rewarded LA Weekly's trial eater with a new salted tiramisu.

Will it translate?
Darden management had warned about another round of sluggish (read: negative) sales growth, especially for the Red Lobster and Olive Garden chains. But that's too shortsighted for those interested in the company's ability to turn around. Look for more signs of a genuine effort to revitalize the brands. Darden didn't become the top full-service chain restaurant operator in the world by accident. Management can do this if it put its minds to it. 

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Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 31, 2014, at 3:50 PM, Howdie wrote:

    All chain restaurants with more than 50 outlets suck.

    Give it up. Shut them down.

    Yardhouse is still good but cap it at 50 and then come up with something else good

  • Report this Comment On March 31, 2014, at 8:00 PM, ScamuelJones wrote:

    Olive Garden is the restaurant chain (with their owners the Darden Group) that hates the U. S. A. and its capitalist system by refusing to let the American flag be displayed in their restaurants (and along with Red Lobster and Longhorn Steak Houses) are scum hypocrites who make money from the capitalistic U. S. system while showing their commie loving and socialist sympathies by hating the U. S. flag. I will NEVER in my lifetime set foot in any Darden owned commie restaurant! Let them take their restaurants and go operate them in their socialist loving countries like Russia and China! Let the flag haters go where they will be appreciated!

  • Report this Comment On March 31, 2014, at 8:01 PM, ScamuelJones wrote:

    Boycott the Olive Garden U. S. flag hating restaurants!

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Michael Lewis

Michael is a value-oriented investment analyst with a specific interest in retail and media businesses. Before coming to the Fool, Michael worked with private investment funds focusing on deep value and special situations. Currently living in the media capital of the world--Los Angeles, California.

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9/4/2015 4:01 PM
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Darden Restaurants… CAPS Rating: ***