Salad and breadsticks controversy
Starboard Value’s report detailed dozens of strategic and operational issues regarding the way Darden is managed, but its criticism of how the firm handles the highly popular Olive garden salad and breadsticks promotion was such a masterpiece of nitpicking that it actually went viral on the Web.
Fittingly, Darden Restaurants, Inc. (NYSE:DRI) responded to SV’s criticism that its endless salad and breadsticks promotion creates food waste by taking the high road. Darden’s reply simply and effectively highlighted that the promotion “conveys Italian generosity and our salads have the highest loyalty rating of any menu item based on the menu satisfaction surveys we conduct“ [emphasis Darden’s].
Key points in Darden’s rebuttal of Starboard value’s report
The main points in Darden’s rebuttal of the SV report focused on the Olive Garden Brand Renaissance, pointing out that:
- New menu items offer greater value, expanded variety, and are leading increased demand from key customer segments such as millennials
- New technology-enabled online ordering is currently rolling out and already boosting take out business
- Overall guest experience and satisfaction scores are trending up
- Testing of tablet technology is underway with positive results
- LongHorn Steakhouse is exhibiting strong tremendous growth with same-restaurant sales beating the industry average by 3.8% in 2014 and guest totals topping the industry averages for the 19th consecutive quarter as of first quarter 2015
- Specialty Restaurants continue strong unit growth and superior same-restaurant sales growth.
- Cost saving efforts have led to SG&A expense planned at less than 9.0% and total G&A spend of around 5.0%, with the possibility of further reductions.
The overview of the Darden Restaurants, Inc. (NYSE:DRI) rebuttal report closes with a not-to-subtle zinger directed toward Starboard: “As Starboard’s plan adopts many of these Darden initiatives as its own, we are pleased that Starboard agrees with the actions we are taking to reinvigorate restaurant performance, reduce costs, and drive growth. Darden’s recommendation of a new Board, a new independent Chairman, new Board committees, and a new CEO will lead to substantial, positive change.”
