Why Darden Doesn’t Plan to Enter Third-Party Delivery in a ‘Meaningful Way’
In a quarterly earnings call with analysts, Darden Restaurants CEO Gene Lee detailed why the parent company of Olive Garden and Cheddar’s Scratch Kitchen isn’t planning a nationwide expansion of third-party delivery.
The company will continue to test third-party delivery, Lee said, as he listed a litany of reasons why the company isn’t gung-ho about a wider rollout.
“…For us there is significant hurdles that we still have to work through,” said Lee. “We’re not sure that it enhances our brands. We’re concerned about how it’s executed. We’re concerned if they can create incremental growth at scale. We’re not happy with the economics. We still have the issue of the data. And lastly, we have to get our arms around how we protect the profitability of our large and growing current off-business premise, which would be difficult to deal with.”
Off-premise catering orders are a growing part of the company’s business, currently accounting for 13% of sales and growing around 13%. The company has in-house delivery for catering orders $100 or more, placed 24 hours in advance. It “is a very, very good business for us with a great check average and incredible satisfaction scores,” said Lee.
Catering orders are a growing part of Darden’s business. “We could see Olive Garden get to 20% off-premise sales over time,” he added.
However, the company isn’t exploring expanding its in-house delivery for smaller orders. “Right now, we have no interest in delivering a $10 meal … to an individual household,” explained Lee. “That’s just not a business that we think we want to be involved in right now.”
Instead, Darden will turn its attention to growing its catering business and offering individuals a compelling reason to order carryout online through Olive Garden ToGo.
“Our goal… is to create a compelling offer to that consumers, so they are still willing to come pick it up at our restaurant, and our growth in this business is reinforcing that we are doing a good job with it,” said Lee.
The company is looking at ways to reduce friction through technology, and Olive Garden in particular is doing an “exceptional job” with packaging, and on time and correct orders continues to improve, he added. “So, we're feeling really good about where we are at,” said Lee.