Darden, the parent company of a range of popular full-service restaurant (FSR) brands including Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen and others, continues to opt out of the delivery game, despite widespread demand for the channel.
Darden President and CEO Rick Cardenas argued on a call with analysts Thursday (Sept. 22) discussing the company’s first-quarter financial year 2023 results that, by deciding not to invest in delivery options, the company protects itself from the negative impact on margins that would otherwise come from ongoing on-premise traffic challenges.
“With margins being basically the same for us on off-premise versus on-premise, because we don’t have that delivery charge, we’re OK wherever [the on-premise/off-premise mix] is,” Cardenas said. “Our dining rooms in some of our brands aren’t back to pre-COVID levels, [but] it’s being offset in most of our brands by to-go.”
In the quarter, off-premise sales accounted for 24% of Olive Garden’s total sales, 14% of LongHorn Steakhouse’s and 13% of Cheddar’s Scratch Kitchen’s. Yet, competitors have been growing their off-premise channels to include wider delivery coverage.
Bloomin’ Brands, the parent company of Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar, announced last week (Sept. 15) a partnership with number-three aggregator Grubhub to offer delivery from all its brands, a collaboration that includes 1,000 restaurant locations and 700 virtual locations. By steering clear of delivery marketplaces, Darden is losing these occasions to competitors.
Research from the July edition of PYMNTS’ ConnectedEconomy™ series, “The ConnectedEconomy™ Monthly Report: The Rise of the Smart Home,” which drew from a May survey of a census-balanced more than 2,600 U.S. consumers, found that 43% order food for same-day delivery from aggregators every month. Plus, more than half of those aggregator customers make purchases once a week or more.
Get the study: The Rise of the Smart Home
In not being available through these channels, Darden misses a significant sales opportunity. Darden has been holding fast to this strategy for years, arguing that to do otherwise would be antithetical to the unit economics of the business.
Related news: Darden Eschews Third-Party Aggregators To ‘Drive Profitable Sales Growth’
Certainly, delivery can be costly for restaurants, and some brands have found that accepting delivery orders strains capacity, hampering their ability to fulfill orders via higher-margin channels to customers’ satisfaction.
Some brands have found a happier medium, accepting delivery orders when they have the capacity and shutting down these channels when they do not, though this method risks creating frustration for customers who grow used to come to expect delivery from a given brand only to find that it is not available when they want it.
As Savneet Singh, CEO and president of PAR Technology, told PYMNTS’ Karen Webster, “Your system needs to be smart enough to say, ‘Let’s turn off our Ubers and Door Dash,’ or ‘Let’s send out messaging saying you ordered on our app, expect that order to take 90 minutes,’ i.e., maybe don’t order now. That ability to slot orders, to throttle orders, to dynamically manage your kitchen, all that needs to come together.”
See also: Back of House Goes Front Burner as Smart Kitchens Cook Up Better Restaurant Experiences
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