It took four days for Darden Restaurants (DRI) to reply to a sweeping condemnation of just about every facet of its flagship Olive Garden chain by the major shareholders at an activist hedge fund. But perhaps the delay is understandable: Starboard Value’s revival plan (pdf), which concerned itself with breadstick waste and unsalted pasta, weighed in at nearly 300 pages. Darden’s reply (pdf), at just 24 pages, argues that the fixes to the Olive Garden’s woes are already under way.
“We’re not planning to deviate from that plan,” says Darden spokesman Bob McAdams of the Italian restaurant’s so-called Brand Renaissance. “We believe it’s showing results.”
While the company’s general view is that many Starboard complaints are already being addressed, Olive Garden’s parent company did defend itself against a few specific points:
Speak no ill of our mighty breadsticks and salads. Criticism of the uneaten breadsticks and overabundant salads misses what Olive Garden sees as “an icon of brand equity since 1982.” The items convey “Italian generosity.”
Turning the corner on food quality. While Darden seems to acknowledge that efforts to improve profit margins did take a toll on the food, the company says it has made “significant investments” over the past year to improve the quality of the beef, chicken, and seafood.
Remodeling restaurants is quite necessary. The hedge fund reserved particular contempt for the new logo and the expense of replacing the signage at thousands of restaurants. But if Starboard wants Olive Garden to feel more authentically Italian, remodeling the restaurants needs to be part of the solution: “Guests feel the remodel is even more Italian than before, because of the wine cues and Mediterranean colors,” the presentation states. The remodeled restaurants also have more traffic, booze sales, and a higher average check, according to Darden.
The waiting isn’t the hardest part. Starboard blasted the time it took to turn over empty tables, a phenomenon known as “false waits.” That’s when guests are told their table isn’t ready to make a restaurant seem busier and possibly boost sales at the bar. Olive Garden’s false waits are “now at historic lows” (although that doesn’t mean gone), and Darden says guest complaints about this are also “the lowest they have ever been.”
The takeout packaging is green(er). No, the packaging is not actually durable enough to be dishwasher safe. But hey, it’s “a more sustainable alternative to Styrofoam.”
