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Gene Lee, CEO of Olive Garden parent Darden Restaurants Inc., questioned the longevity of widespread off-premise dining.

Darden’s Gene Lee remains skeptical off-premise boom is ‘sticky’

CEO of Olive Garden, LongHorn parent says consumers will want to get back into restaurants as COVID-19 eases

Darden Restaurants Inc., which has remained an outlier among casual-dining companies in declining to jump into the third-party delivery pool, is skeptical that post-pandemic customers will continue to pursue those off-promise occasions as often when the COVID-19 crisis wanes.

“I don’t think it’s as sticky as everybody thinks it’s going to be,” said Gene Lee, CEO of the Orlando, Fla.-based casual-dining company, during a Monday session at the 23rd annual ICR Conference. Darden owns such brands as Olive Garden and LongHorn Steakhouse.

Lee was asked about the proliferation of virtual brands that use excess casual-dining kitchen and labor capacity and delivery avenues.

“This off-premise dining {experience} is not going to be as sticky as a everybody wants it to be,” Lee said. “The consumer is telling us more and more they want to get back inside the restaurant.

“They are tired of eating restaurant food in their homes,” Lee continued. “They want to get back out and socialize with their friends.”

Lee said Darden is unlikely to create virtual brands to live on third-party platforms

“I think brands matter,” Lee said. “You just can’t create a brand out of thin air and compete as effectively against a brand that has 30 years of history, that’s been spending $150 million in advertising.”

That doesn’t mean Darden concepts won't capitalize on food to go. “We’re definitely going to be a curbside-deliverer,” Lee said.

Curbside delivery has changed layouts of restaurants, he noted, with parking spots dedicated at the building’s side as well spots, and future prototypes will reflect those changes. Parking will be closer to the kitchen so food will not have to be moved through the lobby, Lee added, and it should be quicker than a quick-service drive-thru, given improvements in technology such as geo-fencing alerts.

Current wait times for curbside delivery ordered online during most periods are less than 90 seconds, Lee said.

Olive Garden, especially, has found a sweet spot with large-order full-service restaurant catering, which delivered when they are $75 or more and placed before 5 p.m. the day before delivery. The average order size is $300, Lee said.

“We have no interest in small-order delivery, trying to get into that ourselves,” he said. “We recognize how difficult that is, and we don’t want to be in that business.”

After taking the financial steps needed to firm the company’s position when the pandemic was declared in March, Lee said the coronavirus restrictions gave the restaurant operating teams time to analyze the business.

“What I said to our team was, ‘This is a time to reevaluate everything that we’ve done, everything that we are going to do,’” Lee recalled. “I used the phrase: ‘Let’s right some wrongs, some mistakes that we’ve made in the past.’

When being forced to move to off-premise sales as the sole revenue, Darden streamlined its menus, simplified processes and procedures and improved productivity – a goal for five years or more.

“It was really eye-opening to us and to our operators on what they needed to do, what they really had to have, to run this business effectively and efficiently,” he said.

Lee noted that the pandemic’s impact on restaurant closures has not led to a similar impact on real estate costs.

“I still think it is going to weaken here, but right now it is firmer than what I thought it would be,” Lee said. “There not as many bidders for the properties today.”

For the second quarter ended Nov. 29, Darden reported earnings were $96 million, or 73 cents per share, compared to $24.7 million, or 20 cents per share, in the same period a year ago. Sales for the quarter were down 19.4% to $1.66 billion from $2.06 billion in the prior-year period.

As of Nov. 29, Darden had 1,818 restaurants, including the 874-unit Olive Garden, the 527-unit Longhorn Steakhouse and the 168-unit Cheddar’s Scratch Kitchen as well as Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

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