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Olive Garden same-store sales rise on scaled-back promo strategy

Olive Garden same-store sales rise on scaled-back promo strategy

But traffic dipped slightly amid fewer value-driven offers

Same-store sales at Olive Garden rose 3.5 percent in the fourth quarter, driven by higher average check as the brand scaled back on value offerings, parent Darden Restaurants Inc. said Tuesday.

Average check was up 4.3 percent for the quarter ended Nov. 25, the company said, as Olive Garden pushed out fewer promotions, focused on improving menu mix, and increasing the price of the Never Ending Pasta Bowl for the first time in five years.   

Traffic was down 0.8 percent in the quarter as a result of the strategy, an impact company executives said they had anticipated as a result of the strategy.

“As industry sales continue to improve, we made the strategic choice to further reduce our incents during the quarter, recognizing it would likely put pressure on our same-restaurant sales and traffic,” Darden CEO and president Gene Lee said during the second quarter earnings call. “[This] enabled us to build a stronger guest base and contributed to our margin improvement.”

Instead of focusing on price-based promotions, Olive Garden pivoted instead to improvements in culinary value, such as adding 50 percent more chicken to its chicken alfredo dish, one of the brand’s most popular entrées.

Meanwhile, Cheddar’s Scratch Kitchen, which Darden acquired in April 2017, remained a problem area. The brand reported a 4-percent drop in same-store sales — the biggest comps decline in the Darden portfolio this quarter — in a continuation of a negative trend over the past several quarters.

“While I'm disappointed by the lack of progress in the top line, I am pleased with the progress that Cheddar's management team was able to make during the quarter,” Lee said. “There's still work to be done at Cheddar's to simplify the operation and consistently improve restaurant-level execution.”

Lee said during the earnings call that Darden has struggled with team retention rate at Cheddar’s and stated that it is still in the process of implementing and standardizing a staff training program and improving culinary speed and consistency.

“With this laser focus on the strategic priorities, they are seeing higher guest satisfaction scores, and those scores continue to improve each month,” Lee said. “In time, they should see better team member and management retention levels.”

Darden brands that saw same-store sales gains in the quarter were: LongHorn Steakhouse, 2.9 percent; The Capital Grille, 3.7 percent; and Eddie V.’s, 0.9 percent.

Bahama Breeze and Yard House each saw same-store sales decline 1.1 percent in the period. Seasons 52 saw a 0.8-percent dip.

For the second quarter ended Nov. 25, Darden’s net income grew 29.6 percent to $115.9 million or 92 cents per share as compared with $88.6 million or 71 cents per share in the same quarter a year ago. Net revenue increased 4.9 percent to $1.97 billion, driven by company-wide unit growth and total same-store sales increase.

Darden Restaurants Inc. had 1,762 restaurants under its eight brands as of Nov. 25.

Contact Joanna Fantozzi at [email protected] 

Follow her on Twitter: @JoannaFantozzi

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