Olive Garden drops prices again -- big mistake
The chain's discount plan failed spectacularly last year, but parent company Darden is desperate to bring in more traffic.
Oh, yes, back in December, when we first referenced the price war nobody's winning. For a chain so eager to shed its Tuscan, bottomless-pasta-and-breadsticks image, Olive Garden is quick to take the discount route that has failed it so mightily in the past.
In a call with analysts, Darden chief exec Clarence Otis said getting more customers through Olive Garden's stripped-down gates is a must, even if it means cutting into profits. "We need to do what we need to do," Otis said.
The chain clearly needs to do something.
After a couple of miserable quarters, sales at Olive Garden rose 2.2% in the past three months. Growth has been painfully slow, however, which forced Darden to add low-calorie options to Olive Garden's menu and change its slogan from "When You're Here, You're Family" to the more fast-paced "Go Olive Garden."
When those moves didn't work, Darden replaced Olive Garden's president in an effort to boost results.
Yet Olive Garden keeps focusing on 2012, when it misjudged consumer appetites by offering a 2-for-$25 three-course meal deal that was almost immediately undercut when competitors including DineEquity's (DIN) Applebee's, Brinker Restaurants' (EAT) Chili's and Bloomin' Brands' (BLMN) Outback Steakhouse offered 2-for-$20 meal deals or $10 entrees.
Analysts warned Darden against entering a price war as early as December. With the company blatantly ignoring those warnings, we'll once again trot out the math that makes its upcoming price cuts and those of its competitors unsustainable.
According to the Census Bureau, spending at food and drinking establishments is up 4.3% so far this year. At casual dining establishments, however, spending has dropped by between 1% and 4% each quarter since spring of 2010.
When such restaurants aren't offering $10 meal promotions, the paying public doesn't find them all that cheap. The cost of dining out rose by 2.3% over the past year, according to the consumer price index, which puts it ahead of the 1.4% overall rate of inflation.
Under those circumstances, a customer paying $10 for a promotional deal would be paying 20% to 40% more when the price rises to $12 or $14 a few months from now. But even if those lower prices remain in place, they don't guarantee customers will keep coming back.
"What happens is that after (value promotions) have been in place for a while, consumers no longer perceive them to be a deal," Bonnie Riggs, a restaurant industry analyst at NPD Group, told AdAge last year.
Olive Garden has been down this road before, but its selective amnesia is taking it on yet another rough ride.
The prices are still to hi, salad and soup should be $6..00 ALWAYS just not lunch ..GOT IT
Note to the OG: Use simple, fresh ingredients. The microwave should never be the main cooking appliance. You may want to try fewer menu items.
At several Olive Garden in the Southwest, the restaurant and the dishes are dirty. The pasta fagiole soup is good but too salty. The breadsticks are too salty. The salad's dressing is too salty. I ordered other food, the outside was hot, the middle cold - microwave? The mints at the end of the meal are doled out as if they were gold and the wait staff's attitudes range from perfunctory to downright surly. There was a shooting in the parking lot of one of ours not too long ago. All of this or even one of these on my list does not make it a pleasant dining experience.
When they start doing price wars on food, it usually means the quality of the food goes WAY down in order to keep profits up.
I have always liked the Tuscan look of Olive Garden so I think they shouldn't waste money on architechal details but prepare better and fresher food at a good price If the food and dining experience is worth it(they need a kids sections in the back of the restaurant ) they most people do not mind spending a little more
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