Why Darden Kept Olive Garden and Dumped Red Lobster

Darden Restaurants (NYSE: DRI  ) has been running a victory lap with investors, bragging about how it just dumped the Red Lobster business for a cool $2 billion despite the fact that the chain is shedding customers and profits. But the same could well be said for Olive Garden, and yet Darden is determined to try to turn that restaurant around. 

Olive Garden suffered a 6% decline in customer traffic in March. Source: Darden Restaurants.

In the video below, Fool contributor Demitrios Kalogeropoulos discusses a few reasons Darden has a better shot at reviving Olive Garden than it did with Red Lobster. For one, food costs trends are much kinder on the Italian restaurant chain, given that seafood prices are climbing while bread and pasta costs are shrinking. Darden's management can also engineer an easy win by remodeling the Olive Garden locations that badly need a facelift, which will bring sales growth levels for that group back in line with the rest of the chain. And finally, while Red Lobster tends to attract a narrow demographic of diners, Olive Garden is more popular with exactly the demographic showing the most growth in the casual-dining sector. Watch the video below for Demitrios' full take.

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  • Report this Comment On June 29, 2014, at 12:32 PM, 2bitcoins wrote:

    They do not care about Olive Garden! They got rid of Italian music and the manager says it is from corporate, contact them and gave suggestions and all they do is send a gift card. Months later same music, my aunt has nice music and I contacted them again stating if it is from corporate why have different styles of music? The copy and pasted the same response. Olive Garden salad tastes old and the food is not that great, plus overpriced, bread sticks are over rated. Service is ok. Not to mention they got rid of the awning so the people bake in the sun waiting for a table. Went to Longhorn and it is great atmosphere, great music, great food, at great prices, the service is better. Salads are made on the spot vs at the factory and shipped.

  • Report this Comment On June 29, 2014, at 4:05 PM, kennyhobo wrote:

    I like Olive Garden, occasionally. They don't take reservations so they are not a second choice venue on the weekend. You go during the week which only happens rarely due to schedules. You can't count on Olive Garden, so you don't go.

  • Report this Comment On June 29, 2014, at 4:35 PM, FauxItalia wrote:

    Olive Garden is the Fast Food of "Italian" food, and how anyone can eat there is beyond me. They fill you up on bread and lettuce, first. All their dishes are nothing but tasteless "pasta" (flour & water), sauces jammed with cheap, greasy thickeners. The music is usually so loud you can't even hear yourself talk. It is way overpriced. This is not "Italian Food", which, if you go to an authentic, neighborhood Italian restaurant, you will find dishes lovingly cooked and mouth-watering with much history. This is cheap food with a high price. The last time we went I was surprised (or maybe not) to see the menu had been scaled back and really not much of a choice or variation - most of the dishes were much the same, just ingredients shuffled around. Stay home if you want to fill up on bread and salad. If you want to pay $ for Italian, go get Italian.

  • Report this Comment On June 29, 2014, at 5:48 PM, beartr wrote:

    Olive Garden needs to go away, it's not real Italian food, worse than other chain restaurants

  • Report this Comment On June 29, 2014, at 7:58 PM, yseta46 wrote:

    So, I've eaten at OG a few times. It's ok, but when I want REALLY AUTHENTIC food, there are several REALLY GOOD local Italian restaurants here in the Portland, Oregon area that I prefer. Including REAL Italian desserts, and atmosphere, and music. And I TILL don't pay way too much for the whole meal.

    However, when I want some fairly good, reasonably priced seafood, I've gone to RED LOBSTER, especially when I want lobster. I've received several Darden gift cards, good for both locations, and ALWAYS chose RL -- especially on our wedding anniversary and my birthday.

    So I probably won't be going to OG anymore. Hear that, Darden investors?

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Demitrios Kalogeropoulos

Demitrios covers consumer goods and media companies for, as well as broader moves in the economy.

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8/28/2015 4:02 PM
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Darden Restaurants… CAPS Rating: ***