A Hedge Fund Manager Delivered An Epic Takedown Of Olive Garden's Endless-Breadsticks Strategy (DRI)
Activist hedge fund Starboard Value wants Olive Garden to axe its unlimited salad and breadsticks.
On Friday morning, Starboard published a 294-slide presentation outlining its transformation plan for Darden Restaurants, the parent company that owns Olive Garden and Longhorn Steakhouse, among other restaurant brands.
Starboard currently owns about 8.8% of Darden.
As you'd expect from a presentation this long, Starboard outlines more than a few ways for Darden to maximize profit and turn around its business, and Olive Garden's unlimited salad and breadsticks is just one of the firm's targets.
Starboard sees an opportunity to save up to $5 million per year by rethinking Olive Garden's staple promotion, with Starboard writing that:
- Most customers don't eat all the breadsticks.
- The breadsticks deteriorate in quality after sitting just seven minutes on the table.
- Servers won't return to the table as often when they put out more breadsticks than are needed.
Some other gems from Starboard's presentation include the revelation that Darden uses non-standard to-go packaging at its restaurants and that takeout packaging at Olive Garden is dishwasher safe.
Less food waste, more profit.
Darden's food costs are among the highest in the industry.
And higher food costs haven't meant better food.
The unlimited breadsticks promotion has been executed terribly.
Darden could save $5 million a year on breadsticks.
Unlimited salad is also a huge waste of food.
Promotions haven't really made the company money.
Darden's to-go bags are almost a luxury item.
And Darden's to-go containers are custom sizes.
Starboard thinks Darden can save up to $42 million on food.
Olive Garden's takeout packaging is dishwasher safe.
Starboard sees an opportunity to improve Darden's costs by $114 million.
Now that you've seen what a hedge fund thinks about one company...