Investor picks breadstick battle with Olive Garden
NEW YORK (AP) — Olive Garden is hurting itself by piling on too many breadsticks, according to an investor that's disputing how the restaurant chain is run.
In a wide-ranging critique, the hedge fund Starboard Value says Olive Garden restaurants lack training and discipline and that servers bring too many breadsticks to tables at a time. That leads to waste — and cold breadsticks, Starboard says.
The investor notes that the official policy is to provide one breadstick per customer, plus an extra for the table, but that servers don't stick to that.
The document is part of Starboard's push to take control of the board of Olive Garden's parent company, Darden Restaurants Inc. Darden, based in Orlando, Florida, has come under fire for failing to fix an ongoing sales decline at Olive Garden despite a revamped menu and marketing. In the latest quarter, Olive Garden's sales fell 1.3 percent at established locations.
Darden said in a statement that its "Olive Garden Brand Renaissance" is already underway. It said it will review Starboard's plan, but noted that "upon initial review, we believe many of the brand and cost optimization strategies are already being implemented across our company and are showing results."
Part of Olive Garden's troubles stem from the growing popularity of places like Chipotle, where people feel they can get food comparable to a sit-down restaurant for less money.
But Starboard also criticized Darden's management of Olive Garden, including its "outdated" advertising strategy, which it said focuses too heavily on TV ads. It also took issue with the chain's new logo, quoting a tweet by a restaurant analyst that said it looked as though it was written like "a second-grader's cursive practice."
Among Starboard's other complaints in the document issued Thursday were Olive Garden's failure to salt the water used to boil its pasta and its liberal use of salad dressing, which it said drives up costs. To reduce labor costs, Starboard said Olive Garden should use an outside supplier for its soup bases, rather than cooking them from scratch.
As for Olive Garden's popular breadsticks, Starboard noted that quality seems to have declined and compared them to hot dog buns.
Darden did find success recently, however, with a promotion that charges customers $100 for seven weeks of unlimited pasta. The stunt gained widespread media coverage, and the 1,000 unlimited pasta passes Olive Garden made available online this week sold out in less than an hour.
The company's annual meeting is scheduled for Oct. 10, when shareholders will get to vote on who gets control of the board of directors.
Follow Candice Choi at www.twitter.com/candicechoi