Reacting To Falling Sales: A Tale of Two Restaurants

 

olive garden mcds

 

Two big names have hit the news waves lately, and not in a positive way. Both McDonald’s and Olive Garden have been front and center in discussion of falling sales and dire situations. Olive Garden’s parent company, Darden, reported a loss of $19.3 million loss in continued operations, while McDonald’s posted its worst same store sales decline since 2003.

 

So, how are each of the restaurants working toward increasing sales and getting back on track? Each decided to take a different approach, and it will take some time to find out the success of the potential changes.

 

Olive Garden’s Partnering and Promotions: Olive Garden has worked to increase foot traffic by offering two new promotions. The first involved a partnership with Red Box, the movie rental company. This promotion included Olive Garden’s popular “Buy One, Take One” deal coupled with a free movie Rental from Red Box, under the guise of “enjoy a meal at the restaurant, then rent a movie and enjoy another meal at home.”

 

More recently, they attempted another promotion, this time more bold. Olive Garden’s Pasta Pass was an interesting concept – for $100, guests would be entitled to 7 weeks of unlimited pasta. This built on their popular “never ending pasta” promotion that has been successful before, and they thought expanding it would work well for guests.

 

Unfortunately, this latest promotion didn’t go very well. Not anticipating the popularity of the promotion, the site crashed and passes were sold out very quickly, causing customers to gripe online. Add to that the fact that some took their passes and turned to Ebay to make a profit from the passes, it was quite the fiasco. Some Ebay purchases paid way too much for passes that were basically unusable, since they were non-transferrable. Olive Garden attempted to make this right with guests though.

 

Maybe Olive Garden should take a look online for suggestions on improvement. Business Week posted an article on 10 ways the company can improve, including increasing alcohol sales, cutting back on the expensive carry out containers, and step it up with food quality. Employees would also like to share their input, as evidenced by a petition filed, which is entitled “Darden: We want a seat at the table,” signed by over 7,000 who claim to be employed by the chain.

 

McDonald’s: Trying to be like others & riding Apple’s coattails: McDonald’s is taking a bit of a different approach then Olive Garden. In realizing that speed may no longer sell, they are testing a new concept (again) in an attempt to give the customer more of what they want, and following the lead of their more successful competitors. They are testing a “build your own burger” kiosk at a handful of locations in California. These kiosks allow full customization of a burger, with over 20 different toppings and two types of bread selection, coupled with tableside delivery. Depending on how the test goes, the company may roll it out to other markets.

 

They have also released news that they will be one of the first to adopt Apple Pay, which will allow customers to pay with their iPhone. They took advantage of the release of the iPhone 6 to head to Apple stores, handing out apple slices and apple pies to build excitement and awareness.
There is speculation online that McDonald’s is offering a more customized burger experience for a couple of reasons – obviously to increase foot traffic and resulting sales, but also perhaps to be able to manage a minimum wage increase, if that should happen. Businessweek suggests that perhaps the concept is less about giving customers options and more about trying to pinpoint the “next big thing” in burgers based on customer selections of combinations over time.

 

Whatever the case, McDonald’s realizes it needs to evolve to stay competitive, but one thing it is known for is speed of service – as a recent article suggests, one of the difficulties it faces is maintaining speed of service while expanding its more complex offerings. Changing menu items too drastically or making too many changes at one can be a potential disaster in service levels, so McDonald’s needs to tread carefully. Pinpointing challenges at the test stores is the best route as the company considers expanding their offerings.

 

While the two restaurants are trying different approaches to saving sales, there are some commonalities that can be found, ones that can help determine where deficiencies are and make changes that will be beneficial and successful for the company:.

 

1. Look at the competitors, but don’t strive to be exactly like them: your business has been successful because of its unique qualities. While change is enivtable, make sure the changes enhance what you’re doing but keep true to the nature of the company.

 

2. Take a look at the extras and cut costs where possible: in the case of Olive Garden, nixing the high end to go containers will potentially save money and can be a move to cut costs, but cutting back on breadsticks? That may border on company suicide. Look carefully at the reality and the overall impact of cutting costs and where it will be most cost efficient with the least amount of impact on customer satisfaction.

 

3. Talk to your customers AND employees: they are both on the front end of your business and have great insight into your business. Instead of throwing out a myriad of options to see what “sticks,” talk to your customers to find out why they aren’t happy, and what they would like to see. In the case of McDonald’s, it may not be the lack of higher end offerings – but they won’t know unless they ask.

 

Employees handle the day to day operations and see firsthand what challenges there are, also known as sales interference. What complaints do they hear the most? What is keeping employees from being successful in terms of customer satisfaction?

 

4. Think outside the box: Olive Garden did a great job with this when they promoted their deal with Redbox. Considering partnerships with complementary companies can go along way, rather inexpensively, to gain additional sales. Similarly, focus on geography with a nationwide company. There may be changes needed in specific territories to be successful across the board. What works in Chicago, for example, may not work as well in Birmingham.

 

The fate of the two restaurants is unknown at this time, but continued loss of sales and foot traffic necessitate changes. Hopefully the two can find a good pace to improve their reputation and post an increase in sales in the upcoming quarter.

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