Olive Garden: The Comeback Kid?

 

olive garden

 

 

Olive Garden has been beat up over the last few years, but it looks like they are making a comeback with some small changes.

 

The company was recently taken over by a hedge fund, who made some changes that are resulting in an increase in same store sales of 2.2% this quarter. This follows a small increase the quarter before that, making for the first time the company has shown consecutive increases in sales since 2010. Could it be the rebirth of Olive Garden?

 

The changes are interesting; while they seem small, they seem to be making a big impact. Back in September, the hedge fund group provided a game plan of how to reverse the death of Olive Garden, and have implemented some of those changes, which in part are attributed to the turnaround. Some of the changes include:

 

1. Bring on the salt! One complaint was that the restaurant did not use salt when cooking pasta. This is a mistake, as it can compromise the taste of the pasta (just ask any Italian!). The company previously stated that salt was eliminated, in part, to save the longevity of the pots they used. This has since changed, according to a recent article, and salt is now used in the restaurants, thus improving the overall taste of the menu items.

 

2. Cut the portions, increase value. One feature that Olive Garden boasted about in the past were unlimited breadsticks and the “never ending” bowl of pasta. While this was seen as a good deal for some customers, it was actually hurting sales. One menu change included rolling out a three course dinner for $9.99, a move the company explains as “trying to emphasis value over sheer gluttony like its famous neverending pasta bowl.”

 

3. Cutting portions also increases revenue! By eliminating the never ending bread sticks and pasta bowls, the company is experiencing a nice side effect – dessert and alcohol sales are rising. It makes sense – if customers are not taking advantage of the “all you can eat” options, they will have more room for dessert at the end of their meal. While the article does respect the fact that increased sales in these areas can also be attributed to the improvement in the economy, it is a positive move forward overall.

 

The company is still facing an uphill battle; they are recovering from a 5.4% decrease in sales over the last year. While the gains are modest and definitely a move in the right direction, the company is still experiencing lower traffic. This is a positive indication that the company can still salvage itself and proves that sometimes small changes can make a big difference.

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