Olive Garden's Investors Are Coming For Your Free Breadsticks ... - Vox

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VoxVox logoOlive Garden’s investors are coming for your free breadsticks. But they’ve got bigger problems to solve.

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Olive Garden’s investors are coming for your free breadsticks. But they’ve got bigger problems to solve.by Danielle KurtzlebenSep 12, 2014, 6:00 PM UTC

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Fun fact: Olive Garden serves 675 million to 700 million of its breadsticks every year. As hedge fund Starboard Value pointed out this week, that’s three for every guest that comes to the restaurant.

That information comes from a presentation made by the fund, which is an investor in Darden Restaurants, Olive Garden’s parent company. Starboard and Darden’s current management have been fighting for control of the company over the past year, and shareholders will eventually vote on who will be in charge of the board, the Wall Street Journal reports.

If Starboard has its way, it will make a number of changes to cut costs but also improve food quality: for example, it would introduce lower-quality to-go packaging, boost alcohol sales, and salt the pasta water, as enumerated in a nearly 300-slide presentation, segments of which Business Insider has posted. In addition, servers will initially provide one breadstick per guest, only providing more if people ask.

Altogether, Starboard estimates its changes will save $114 million (only $4 million to $5 million, for the record, will come from the breadstick reforms).

But what's more important is that cutting waste isn't going to solve the bigger problem that Olive Garden and its midscale-dining peers face: people just would rather go elsewhere. Olive Garden's same-restaurant sales fell by 1.3 percent last quarter, Reuters reports today.

The trend isn’t specific to Olive Garden. This chart from the Motley Fool shows that last year, casual and midscale restaurants saw traffic fall slightly, while quick-service restaurants (“QSR” in the table below; generally refers to fast-food eateries) were flat. Meanwhile, fast casual (Chipotle, Panera) and fine dining had by far the fastest growth.

Source: Motley Fool

The problem for casual and midscale restaurants like Olive Garden, Red Lobster, and Applebee’s is that they occupy a gray area between two things customers clearly want right now: fast-casual and fine dining.

Fast food restaurants have been evolving to look more fast-casual — McDonald’s is testing a “build-your-own-burger” concept, in which customers can add high-quality ingredients like caramelized onions and thick-cut bacon to burgers, as NBC Chicago reports. The question for a restaurant like Olive Garden may well be which direction to go — whether to move towards fancy, pricier food or quick-serve food … the latter of which would probably really cut down on the breadstick waste.

Update: The full slideshow, as posted on the Wall Street Journal website, shows that Olive Garden has stopped salting its pasta water to expend the warranty on its pots.

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