Darden Leaves Off-Premise Demand Untapped in Favor of Dining Room Customers

Darden Restaurants, the parent company of Olive Garden and Longhorn Steakhouse, as well as a number of other full-service restaurant brands, remains resistant to many of the technologies and strategies helping restaurants succeed in the competitive digital ordering space, such as digital loyalty programs and delivery options.

The company announced on Thursday (Sept. 23) that for the quarter ending Aug. 29, 27% of Olive Garden sales and 15% of Longhorn Steakhouse sales were off-premise, with digital accounting for 60% of these sales. This mix is well below the average for table-service restaurants on the whole.

Data from PYMNTS’ 2021 Restaurant Readiness Index, created in collaboration with Paytronix, found that only 36% of sales for chain restaurants with table service were generated via on-premise channels, for indoor and outdoor dining. In fact, nearly 60% of sales for chain restaurants with table service came through digital channels, suggesting that Darden is lagging in this area.

“We stopped the test of loyalty right when COVID started,” Darden President and Chief Operating Officer Rick Cardenas told analysts on the call, noting that the company’s focus at the time was on the recovery of its restaurants. “We haven’t decided to even test again … What we don’t want to do is provide a loyalty program that provides a discount to the highest U.S. consumers, so if we have a loyalty program, we’ll work on something that’s different.”

He added that the company is not interested in a solely points-based loyalty program, though he conceded that, pre-pandemic, the company was “seeing positive trends” with its loyalty test. At this point, it has become the norm for major national or multinational restaurant chains to offer rewards programs, incentivizing frequent purchasing and gathering data about their loyal customers, making Darden’s resistance surprising.

Related news: QSRs’ Lagging Loyalty-Reward Investment Hurts Innovation and Sales

Still, the company made its digital channels easier to access in the quarter by expanding its payment capabilities. The company added Apple Pay and Google Pay capabilities to the Olive Garden website. Cardenas noted that 25% of digital transactions in the quarter were paid for using digital wallets.

Currently, Darden is unable to fulfill the demand for its off-premise channels, a situation that leadership takes as a sign that it must “throttle the off-premise business,” according to Darden’s Chairman and CEO Gene Lee, limiting the number of orders it will accept in favor of allocating labor toward fulfilling on-premise orders. He added, “We know we have excess demand, but we’ve got to be able to service the dining room and service the off-prem.”

Overall, the company saw its total sales increase 51% year over year to $2.31 billion, with Olive Garden sales up 37%, Longhorn Steakhouse up 47% and fine dining skyrocketing 85%. Darden sales were up 8% on a two-year stack, suggesting that the company is performing above pre-pandemic levels.

The Restaurant Readiness Index found that about a quarter of all orders came from online delivery orders or third-party platforms such as DoorDash or Grubhub. Asked if Darden has reconsidered its resistance to making its restaurants widely available on delivery platforms in light of reports of the channel’s increasing profitability, a company executive responded simply, “No.”