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Off-Premise Sales Grow 9% at Darden

Darden’s same-restaurant sales overall for the quarter increased 2.2%, as the company reduced its dependence on promotional events and looks to integrate Cheddar’s into the company.

For the fourth quarter and fiscal year ended May 27, Olive Garden’s total sales increased 3.7% to $4.1 billion. Olive Garden’s momentum was a result of the company’s strategy to drive frequency among its core guests, according to CEO Gene Lee, citing the success due to continued simplification in its restaurants, and commitment to improving convenience by focusing on the off-premise experience.

“Our simplification efforts have allowed us to reduce our promotional calendar, enabling our management teams to spend their time focused on execution,” said Lee. “The promotional calendar simplification enables us to increase our marketing efforts beyond limited time offers and into long-term growth drivers.”

By simplifying promotional efforts, cost savings were found in the training of employees and in the supply chain.

“Our belief is that we, as restaurateurs, sometimes get bored with our own messaging faster than the consumer does when you look at the frequency of our consumer,” stated Lee. “We believe this was a really important move in our simplification effort and had no impact on our overall same-restaurant sales for the year or the quarter.”

Off-premise sales grew 9% and represented 13.8% of total sales for the quarter, a percentage that the company could get to 20%. “How we get that, that still yet to be determined,” said Lee. “We are focused right now on large party catering, over $100 with 24 hour notice. We like that business. And we’re being very well received by the consumer set.”

The company has tests going on with third-party delivery services, with significant hurdles it needs to work through so delivery services enhance the company’s brand.

“Can it be flawlessly executed for our guests and our team members? Can we create a sustainable incremental growth at scale that’s additive to our company? Can we agree on viable economics? And lastly, can we ensure that we own the data?” Lee asked.

Those are the questions Lee wants answered before Darden partners with any organizations. The company currently has over 400 restaurants participating on a local basis with some type of delivery service.

The company is focused on how to grow same-store sales at Cheddar’s, which has now fully transitioned to the Darden proprietary point-of-sale system. Same restaurant sales declined 4.7% for the quarter, as original company restaurants were down 3.3% and acquired franchise restaurants 7%.

The company is concentrating on staffing up restaurants as well as scheduling more effectively, employees learning how to use company tools to improve operational effectiveness and simplifying to improve sales. The company expects it to take a year for Cheddar’s employees to become proficient on these new tools that will improve productivity.

“Right now these restaurants on average do over 6,000 guests a week. I want to delight those guests with a great experience and that’s our focus. This is a complex operation that must be simplified in order to improve execution. The team is making progress quickly, but we need to test these changes to ensure we get the desired outcome,” stated Lee.

“The turnover rates are too high. We’re not fully staffed [to] make meaningful improvement in the overall guest experience,” stated Lee.

Lee said the company is going through “acquisition indigestion” with Cheddar’s at the exact same time that it had with LongHorn Steakhouse 10 years ago.

“I’ve got a very long-term approach to this,” he stated. “I look and I understand that we are going to have some issues as we integrate brands. We moved a little faster with integrating into our systems. We think that was helpful. Hopefully that will play out that we’ll recover a little bit quicker.”

For the full story, go to this week’s Food Institute Report.