Employees of Darden Restaurants, Inc. (NYSE:DRI) have waded into the fray between the company and Starboard Value LP. They aren’t choosing sides, but they are providing a third perspective—one that investors should consider because it could create a domino effect that ends up destroying Darden Restaurants.
Restaurants without diners = no value for investors
A major labor rights organization is speaking on employees’ behalf. A spokesperson for the organization says they aren’t thrilled with either Starboard’s suggestions or what Darden management has been doing recently.
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They don’t think either of them are on the right path and says that Starboard’s suggestions will make matters worse for employees. As a result, they could could also make matters worse for investors. While investors are worried about their money and want to thrust cost cuts onto employees, morale may dip so low that the customer experience will greatly decline.
Where there are no customers, there is no money to be made, and if there’s no money to be made, there is no value to unlock for anyone. In fact, Darden may have trouble keeping wait staff because they simply won’t be able to afford to work there.
Problems with Starboard’s proposal
Lauren Jacobs, national organizing director of ROC United, explained the issues they have with Starboard’s proposal in particular. The firm wants to lay off up to 1,600 workers from Olive Garden and Longhorn, ROC United estimates. It also wants to shift some workers to part time and put more work on servers.
She also expressed concerns about Starboard’s suggestion to sell off Darden’s real estate portfolio to a real estate investment trust and spin off the company’s specialty restaurant group.
Starboard, Darden should be ashamed
Jacobs told ValueWalk in an interview that Darden and Starboard should be ashamed of themselves. She says it’s “shameful” that they don’t recognize the value provided by the workers.
“Starboard talks about unlocking value. What about the value of the 150,000 people that make these businesses run every day, what about their value and recognizing that and acknowledging that and honoring it?”
Restaurant Opportunities Centers United works with restaurant workers like those at Darden and tries to change the industry, pushing for the use of sustainable food and also standing up for workers in the industry. They’ve been working with employees at Darden for a little over three years now, speaking out on their behalf for labor rights.
ROC United addresses issues like the extremely low wages workers get. Wait staff members receive as little as $2.13 an hour plus tips in some states and less than $5 an hour plus tips in many states. And what the average person doesn’t realize is how little those tips add up to be at the end of the day, making wait staff jobs into minimum wage jobs.
Also there’s a horrible history of raises in the industry, with many workers getting a raise of less than 5 cents an hour. Darden Restaurants is especially important. It represents a significant force in the industry because it is the nation’s biggest full service restaurant company.
ROC United dares Starboard, Darden
Starboard Value recently reached out to Steve Gazzo, the employee who began circulating the petition on behalf of Darden workers, offering to set up a meeting with him and some employees. Gazzo responded by saying they would be happy to sit down with them and with representatives from Darden Restaurants and ROC United. He said they would like to present the views and concerns of the employees.
They are still awaiting a response to find out when they will meet. In the meantime, Jacobs has a challenge for both parties. Will they address these issues at that meeting, if it ever happens?
“I really dare either party to explain to us all the workers, 150,000 of them, how it is when they are cut to part time hours and unable to pay rent and unable to put food on the table for their own families and are worked to the bone, how they expect those folks to come in and provide that stellar service every day that the diners expect.”
Employees respond to the battle with Darden
Gazzo’s petition has sparked a massive response from employees. Here are just a few of the recent comments made:
“I have been with the company for almost 6 years. I have put in my two week notice. I do NOT feel valued or paid nearly enough. It is wrong that if I work 4 bar shifts and just 1 server shift in a week that my paycheck be only $12 dollars. When I ask the managers about it, they say I made tips so get over it. Oh you mean the $7 dollars off bar top and the $31 off tip share. Yeah $39 in a 8 hour work day total makes up for only receiving [sic] a $12 paycheck.”
“While i’m [sic] grateful for the job, I have seen a steady decline in the treatment of team members (including managers) by the company. When tip share was implemented I saw anxious parents worrying about picking up second jobs and mortgages not being paid. BOH raises are laughable: literally nickel and dime. I stopped serving because I can’t even pretend to believe in the product & it’s grossly overpriced. Thankfully my days at the OG are numbered. . It is one bridge I look forward to burning.”
“I have been busing [sic] tables at the OG for two years. I work very hard but it doesn’t seem like it’s worth the effort. 5 dollars and [sic] hour and tip share…it’s tough making it from week to week. Don’t get me wrong, I love my job and the people I work with, but I feel like I’m just thrown under a bus. 16 dollars for a plate of pasta and I get 5 dollars from the company an hour then I get paid out of the servers [sic] tips? Are you Serious?”