Olive Garden's Parent Company Is No Closer to Finding a Delivery Partner

Darden Restaurants reported positive net sales for its top brands during the company’s second fiscal quarter of 2019.

The restaurant group’s eight chains, which include Olive Garden, Longhorn Steakhouse, and Cheddar's Scratch Kitchen, combined for $1.97 billion in total sales for the period ending Nov. 25, an increase of 5 percent. Same-store restaurant sales additionally grew 2 percent, according to the company.

Darden’s flagship brand, Olive Garden, posted its 17th consecutive quarter of same-store sales growth, up 4.9 percent. New restaurants accounted for 1.4 percent of that increase, Darden said. Check average also jumped by 4.3 percent at the subsidiary, thanks to price hikes on its Never Ending Pasta program.

Olive Garden's guest count, however, declined 1 percent. Darden CEO Eugene Lee credited the drop in foot traffic to the restaurant running fewer promotions over the quarter. Olive Garden all but limited incentives over the three months to its Buy one, Take One Dinner and Never Ending Pasta Bowls deals. While it's possible the strategy could have discouraged customers from dining at the chain, Olive Garden found customers willingly traded up for pricier options on the menu, which also helped boost average checks.

“With the demand environment being strong, it was a good opportunity for us to remove some of the incentives so that in the future, if need be, we can add it back in,” Lee told analysts on Darden’s earnings call this morning.

A Standstill on Delivery

Olive Garden’s off-premise sales grew 10.3 percent in the quarter, according to Lee. The segment now accounts for nearly 15 percent of the chain’s total sales. And yet, Olive Garden is nowhere closer to finding a delivery partner than it was six months ago.

“I have really no update on third party [delivery],” said Lee. “I'll say the economics of this has to change along with the execution. The satisfaction of the guests is not great using these services. And we're focused on creating a great off-premise experience for our consumer."

Back in June, Lee told investors he’s holding back on a nationwide delivery partnership for multiple reasons, primarily that Darden wants to own its customer data in any agreement. Yet the move could happen sooner rather than later. Olive Garden continues to test delivery in select restaurants across the country, as customer satisfaction for its own services fail to improve. The chain still encourages customers to pick up orders, rather than have them delivered.

"Satisfaction of our consumer using that experience [takeout] is really high," said Lee. "And so at this point, we have no additional update really on third-party."