Olive Garden’s Take-Home Deals Drive Off-Premise Sales
Off-premise sales are growing double digits for Darden Restaurants’ Olive Garden and Longhorn Steakhouse brands.
In its Q1 2020 earnings call with analysts, Darden Restaurants Inc. reported total sales from continuing operations were $2.1 billion, an increase of 3.5%. Same-restaurant sales increased 0.9% and diluted net earnings per share were $1.38.
A closer look reveals a mixed bag of results for its restaurant brands that include Cheddar’s Scratch Kitchen, which posted a sales decrease of 5.4%, and Seasons 52 and Bahama Breeze, both which posted sales drops of 4.2%. A full earnings statement is available.
Strong marketing that taps into the dine-at-home trend has helped drive sales at Olive Garden, which posted a sales increase of 2.2% for the quarter.
The brand launched a successful Buy One Take One promotion, where dine-in customers get a meal to take home, and has added $5 take-home entrées to the everyday value lineup. “It has been met with strong guest demand, and it will be a catalyst to continue to grow the off-premise business,” said CEO Gene Lee in an earnings call with analysts.
Driving off premise sales, through its website and mobile app, is a priority for Olive Garden. During the quarter, digital sales grew by more than 30% and represented approximately 40% of to go sales.
Overall, off-premise sales grew 12%, representing 14% of total sales. “Olive Garden remains a truly iconic and broadly appealing brand and the team is doing an excellent job of focusing on this strategy and competing effectively,” said Lee.
Digital Sales Jump
Sister brand LongHorn Steakhouse reported sales increase of 2.6%, digital sales grew almost 50% and represented more than one-third of total to-go sales for the quarter. To date, half of the locations have added a dedicated to-go area. “These actions led to continued improvement in guest satisfaction scores for order accuracy and timeliness and helped to drive to-go sales growth nearly 12%,” said Lee.
To Go business is strong for both Olive Garden and Longhorn. Darden has not signed on with third-party delivery. “Our job is to create a compelling off-premise experience ... with so much value that the consumer is willing to come and get it," said Lee. "That seems to be working for us and we're going to continue to focus on that."Lee also boasted about the LongHorn workforce. The brand’s “retention rates continue to even get better despite the tight labor market. Team member turnover during the quarter was 68% compared to approximately 120% for casual dining, and management turnover during the quarter was 13% compared to approximately 36% for casual dining.
“We know that engaged team members provide better guest experiences, and the LongHorn team's ongoing focus on retention and culture building is a key driver of the strong business performance,” said Lee.
A stable workforce will contribute to stronger bottom line for Cheddar's Scratch Kitchen. Lee admitted “there's still a lot of work to do, but the progress the Cheddar's team has made operationally and their improved HR metrics are encouraging. Now that they feel they're moving in the right direction from an operation and staffing perspective, they will begin to increase their working media spend,” said Lee. The brand is expected to ramp up marketing of its $5.99 lunch specials to drive traffic.
Consumer No So Confident?
Regarding consumer confidence, Lee said, “…I personally believe that there's some uncertainty entering into the consumer, and it's impacting their confidence” adding that “there's nothing structural that we see that's changed out there,other than there appears to be a little bit more uncertainty today.”
For Darden, this means “We need to continue to create compelling guest experiences and come up with -- and reinforce our value propositions,” explained Lee. “...We have to think about how we're going to market our smaller brands, and how do we advertise those brands in different channels, and become more effective and compete more effectively. I think that's an important change that we need to make in the upcoming quarters.”
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