Cautious isn't necessarily a bad approach, but delivery is a growing business for many competitors and it may be costing Olive Garden to be so slow to adopt.
— Erika Adams
Olive Garden isn’t announcing any national delivery partnerships anytime soon.
According Eugene Lee, CEO of parent company Darden Restaurants, there are still “significant hurdles” to work out before Olive Garden will roll out delivery on a national scale. Lee said he’s holding back for several reasons: the execution on delivery hasn’t met the right standards yet, the path to sustainable incremental growth at scale isn’t clear yet, the economics of delivery for restaurants aren’t viable, and Olive Garden wants to be able to have control over its own customer data in any potential partnership.
“Those are the things that we need to really work through in order to get to a place where we can partner with one or two of these organizations,” Lee explained on the company’s most recent earnings call.
These concerns are not unique to Olive Garden — every restaurant operator wishes that the economics of third-party delivery services worked more in their favor — but Lee and his team are unique in being very slow to adopt on delivery until those issues are cleared up.
While being cautious is not necessarily a bad approach, the company could be losing out on potential sales while it waits for delivery services to offer a better deal. Olive Garden’s current off-premise business, which includes delivery, catering, and takeaway orders, was up nine percent in the past quarter. It now accounts for 14 percent of total sales, which is very strong in comparison to competitors. There’s some discrepancy between brands in what constitutes off-premise sales, but for Dine Brands, to-go orders account for 6.5 percent of total sales, and at Chipotle, digital sales account for 8.8 percent of total sales.
Since off-premise sales are strong even without a comprehensive national delivery partnership, it speaks to the potential business that Olive Garden has yet to fully tap into.
“I think if the consumer continues to grow, Olive Garden’s off-premise sales could go to 20 percent,” Lee said on the call. “How we get to that is still yet to be determined.”