Reporter's Notebook
Darden board members spent time waiting tables

Darden board members spent time waiting tables

This post is part of the Reporter’s Notebook blog.

After they won their seats last fall, the 12 new, Starboard Value-backed members of the board at Darden Restaurants didn’t just show up at headquarters. They all spent time in the restaurants. Working.

That included Jeff Smith, the CEO at Starboard who became chairman at Darden. He said on Bloomberg television this morning that he waited tables.

“Every single board member took a night and worked inside the restaurant,” Smith said. “It wasn’t undercover. Everyone knew. We were operating with the manager of the restaurant, walking around. I was waiting on tables, greeting guests, serving food in the kitchen. All of us did that.”

The reason, he said, was simple: “All of us wondered, how are we going to make good decisions inside the board room without knowing what’s happening inside the restaurants,” Smith said.

Smith said he found out that employees were doing a good job, and that they care about the company — and it’s up to the board to give those employees the opportunity to succeed. Thus, the company changed its menu, adding items like sandwiches made from the company’s breadsticks.

Smith is not the only investor who won a proxy battle and then worked inside a restaurant to get a sense of how things are going. More than a few executives over the years have put an apron on and got to work to learn more about the business, and what’s needed to fix sales.

But it does show the lengths to which the new board is going to make changes at the big casual dining operator in the months since Starboard won the proxy fight, taking all 12 seats on the company’s board. (A 13th board member, Bill Simon, had previously been on the board and was added in October after the election to add some certainty to the transition.)

The board overhaul was unprecedented, and the changes — which also included a new CEO, Gene Lee — were major.

Smith said a couple of other things on the Bloomberg appearance:

Don’t expect a split of the company anytime soon. Activists, including Starboard, pushed a spinoff of some of Darden’s seven brands during the proxy fight. But for now, any change in Darden’s restaurant ownership will wait. Smith said the company is focused on its priorities, which include improving operations and revenue, and deciding what to do with the company’s real estate holdings. “We have to get our goals accomplished,” Smith said. “There are only so many you can have.”

Olive Garden is working on non-customer-facing issues to save costs, including contracts for things like linens and landscaping, and have “found some opportunities,” said Dave George, the brand’s president. George added that customers are dining out less on a deal right now, and are more likely to order appetizers, desserts and more expensive wine. This has generated “little add-on sales,” he said.

 

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