Olive Garden Might Be Struggling. Here's What To Know
Darden Restaurants informed investors and analysts on March 24 that they will have to lower their expectations. As CNBC covered, the company was supposed to bring in $2.51 billion in revenue but only managed $2.45 billion. Moreover, same-store sales for Olive Garden, which is Darden Restaurant's most profitable brand, only grew by 29.9%, not 36.7%. This is despite having record-breaking sales in December.
It appears that the restaurant's business continued to be affected by COVID-19. Raj Vennam, the Chief Financial Officer of Darden, explained that because Olive Garden was both an eat-in location and had an older demographic that was more at risk than other brands in the company's portfolio, it was particularly susceptible to disruptions caused by the pandemic (per Restaurant Business). In fact, the rest of the restaurants owned by the company performed reasonably well. It was only Olive Garden that proved to be a heavy burden to their profit margin.
Olive Garden struggled before COVID-19
However, despite Raj Vennam's explanations for Olive Garden's failure to grow as much as investors would want, the brand faced difficulties before COVID-19. Yes, Snopes disproved the rumors that Olive Garden was closing in December of 2020, but those very rumors may be attributed to a general feeling that Olive Garden might not be doing as well as it had in the past.
As CNN noted in 2021, the casual dining market of which Olive Garden is a part has yet to recover from the 2008 financial crash, as it appeared people didn't want to spend $20 for an entree when fast casual brands like Chipotle were cheaper. This fed into the second issue. Fast casual brands could pivot to delivery and take out in a way that a casual Italian diner could not, so while the delivery market grew thanks to the double-edged sword of delivery apps, casual dining floundered. "The writing was already on the wall before Covid that this was not really going to be a model of the future," Sam Oches, editor of QSR magazine, said. And yet, even with smaller than expected sales growth, Olive Garden pushes on.