Olive Garden Could Make These 8 Drastic Changes Soon
The activist hedge fund that published a 294-page manifesto against Olive Garden's menu and management last month just scored a huge victory.
Olive Garden parent company Darden Restaurants, which had initially defended itself against Starboard Value's attacks, has decided to elect all of the hedge fund's nominees to its board.
That means that Olive Garden could see some major changes in the coming months.
We've outlined some of the possible changes below, based on the main criticisms from Starboard's presentation.
1. Olive Garden could start serving more authentic Italian dishes and cutting back on its use of fryers.
In the presentation, Starboard criticized Olive Garden for serving dishes that are "astonishingly far from authentic Italian culture, such as burgers and fries, Spanish tapas, heavy cream sauces, more fried foods, stuffed cheeses, soggy pasta, and bland tomato sauce."
"We believe many customers find [these dishes] extremely unappealing," Starboard wrote.
Here are some examples of the menu changes that the firm found unacceptable.
Starboard slammed Olive Garden's inconsistency concerning the presentation of certain menu items.
Here are some examples:
The "Crispy Parmesan Asparagus" looks particularly unappealing, the hedge fund said.
Darden is spending tons of money remodeling its restaurants instead of improving customer service, Starboard said. The company is spending up to $600,000 per restaurant on renovations.
"Why would Darden spend money to attract customers into the restaurant, only to disappoint them with more the same underwhelming food and poor service?" the firm questioned.
In the graphs below, Starboard compared Olive Garden's Yelp and Facebook reviews to those of its competitors.
Starboard called Olive Garden's menu design "confused."
As an example, Starboard wrote, "Olive Garden recently introduced a high-quality, healthy trout dish that is generally prepared well, but by loading half of the oversized plate with bland and mushy pasta, Darden has . . . contradicted the 'healthy' image of the dish."
Olive Garden was widely criticized for its recent logo change. Starboard said the alteration was costly and unnecessary, and it won't change customers' perception of the brand.
The change is an example of how Olive Garden management is "out of touch with their core customer," Starboard wrote. It's expected to cost the company an estimated $42 million to update signage at all of its restaurants, according to Starboard estimates.
"Signage is irrelevant at this moment and is another example of capital misallocation — again this is the same strategy that failed for Red Lobster," the firm wrote.
Starboard said the breadsticks have "lost their quality taste."
"The lower quality refined flour breadsticks served today are filled with more air and have less flavor (similar to hot dog buns)," Starboard wrote.
7. The chain could start salting its pasta and mixing sauce into its dishes, instead of just ladling it in a heap on top of the noodles.
"Shockingly, Olive Garden no longer salts the water it uses to boil the pasta, merely to get a longer warranty on its pots," Starboard wrote. The hedge fund also claimed that the pasta is overcooked.
8. The chain could lower its prices.
Starboard said Olive Garden is "alienating" customers by raising its prices to offset declining traffic.
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