According to one investor, Olive Garden hurts itself by handing out too many of its breadsticks.
In a critique that was close to 300 pages, Starboard Value, the hedge fund, says the restaurant chain lacks discipline and training and that its servers bring too many of the restaurants breadsticks to the table, which lead to cold breadsticks and waste.
The investor noted that the restaurant’s official policy was to provide each customer with on breadstick, plus one extra for the table. However, Starboard has said that servers bring more, which leads to breadsticks often times not being eaten or getting cold and stale.
The hedge fund does not want to stop the unlimited breadsticks, but rather more control in doling them out.
Management of Darden Restaurants, the company that owns the Olive Garden chain, admits that after only 7 minutes the quality of the breadsticks deteriorates, said Starboard.
The document lays out how Darden could improve performance.
The critique is part of a push by Starboard to take over control of the board of directors of Darden’s. The board has been criticized for Olive Garden’s falling sales. In the most recent quarter, sales at Olive Garden dropped 1.3% at its established restaurants due to less traffic.
In a statement, Darden said its brand renaissance is underway already. It told investors it would review the plan made by Starboard, but said a number of their strategies are in place and are already showing results.
Part of the troubles Olive Garden has stem from the increased popularity in restaurant such as Chipotle, where diners feel they receive comparable food to sit down restaurants at prices that are much less expensive.
However, Darden’s management of its Olive Garden chain was also criticized by Starboard. Including calling is advertising strategy outdated, saying it focused too heavily on television commercials.
The hedge fund also took issue with the new logo of the chain saying it looked similar to the cursive practice of a second grader.
Among other complaints by Starboard were the failure of Olive Garden to salt its water where pasta is boiled and how liberally it uses its salad dressing, which it claims increased costs.
To lower costs of labor, Starboard says the restaurant chain should use an outside supplier for soup bases instead of cooking all from scratch.
It noted as well that only 8% of total sales from Olive Garden are from alcohol, while other restaurant chains specializing in Italian food get twice that amount.
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