3 Reasons Darden is Crushing the Competition
Darden Brands reported its Q4 2017 earnings Tuesday and, yet again, the company’s premier restaurants are outperforming the casual dining segment.
Olive Garden posted a 4.4 percent same-store sales increase—its 11th consecutive quarter of growth—while LongHorn Steakhouse reported its 17th consecutive quarter of same-stores sales growth and an increase of 3.5 percent in Q4.
Here’s a look at how Darden Brands leads its portfolio to success.
“The consumer is not as reactionary to short term incentives; they're looking for everyday value,” Darden CEO Gene Lee said in a conference call Tuesday.
Four years ago, Olive Garden didn’t have a $9.99 price point; now it does. From its "Lunch Duo" selections starting at $6.99 to its "Early Dinner Duos" starting at $8.99, Olive Garden has focused on providing long-term value for its guests and that will continue to be the case.
“We have to find ways to continue to take costs out of our business so we can keep the value equation in line with what the consumer wants,” Lee said.
At Olive Garden, take out comprises 12.5 percent of total sales and Lee envisions this increasing even more.
“I don’t believe the consumer is going to back off at all,” he said. “We’ll continue to meet that demand.”
Darden is testing third-party delivery with multiple purveyors, including Amazon, for its restaurants.
“I think the majority of focus for Olive Garden is large party delivery and large party take out ... that’s where our competitive advantage is,” Lee said.
For recently purchased Cheddar’s, Darden plans to bump up its take out numbers from about 5 percent of total sales.
Approach to growth
While Cheddar’s had previously avoided ramping up growth in established markets by citing location cannibalization, Darden will not take that approach.
Lee said the Cheddar’s is underpenetrated in its markets and that Darden plans to backfill markets to increase relative market share and drive profitability. Lee said Darden will first focus on building Cheddar’s human resources to ensure there’s a system in place to encourage new locations.
“We need to spend the next 12 to 18 months focusing on integration,” he said. “We understand the importance of getting integration correct and then growing.”