Olive Garden Parent Prices out Competitors, Invests in Digital Pickup Ordering

As soaring inflation has many consumers anxious about their spending, Darden Restaurants, parent company of Olive Garden and Longhorn Steakhouse, among others, is leveraging its scale to price out smaller brands.

Raj Vennam, the company’s senior vice president, chief financial officer and treasurer, told analysts on an earnings call Thursday (March 24) discussing the company’s third-quarter 2022 financial results that inflation is double the company’s assumption at the start of the year, with the trend impacting both food and labor costs.

“Obviously, we’re going to continue to look for opportunities to price below inflation,” he said. “As inflation creeps up, we’re going to have to try to manage through that, but it’s going to be a combination of pricing and productivity initiatives.”

He specified that these initiatives include simplifying operations, hiring new people and training them. Additionally, executives stated the company has been able to keep prices below those of competitors, securing customer loyalty.

“We’re still … much lower than most full-service restaurants combined over a two-year period,” Rick Cardenas, the company’s president and chief operating officer, told analysts.

Additionally, one way that the company is looking to reduce labor is by driving up the share of off-premise orders that come through digital channels. In the quarter, that share grew from 60% to 63%, with off-premise making up 30% of Olive Garden’s total sales and 16% of Longhorn Steakhouse’s.

“We would like to see the digital percentage continue to grow as part of off-premise,” said Cardenas. “It just simplifies the operation in the restaurant. There’s fewer things that the team member has to do.”

However, phone order placement will remain an option, and the company hopes that by improving digital platforms, consumers will shift to eCommerce of their own accord.

Going forward, Cardenas predicted the off-premise mix will be above pre-pandemic levels and below the levels seen in Q3. Given the challenging economics of delivery, the company only offers pickup (with the exception of Olive Garden’s large-party delivery).

“We’ll continue to make investments that we need to take the friction out of the order, pickup and pay experience so that people don’t consider getting deliverey,” Cardenas said. “We never say never, but the likelihood of us getting into third-party delivery anytime soon is pretty low.”

Research from PYMNTS’ 2022 Restaurant Friction Index, created in collaboration with Paytronix, which drew from a census-balanced survey of more than 2,100 U.S. consumers, found that 37% of restaurant customers would be more inclined to shop with restaurants that offered the ability to pick up orders without standing in line, and one in three customers said the same of curbside pickup options.

Read more: New Data Show Digital Loyalty Programs Are Key Differentiator for Top-Performing Restaurants

Moreover, the study, which also drew from a survey of a panel of more than 500 managers of restaurants across the United States, found that nearly half (48%) of all full-service restaurants offer the ability to pick up orders without standing in line, and 45% offer curbside pickup.