Although dining room capacity is ramping up, off-premises has stuck fairly well at both Olive Garden and LongHorn. In the week ending February 28, off-premises mixed 37 percent at Olive Garden; that dipped slightly to 33 percent three weeks later. LongHorn’s off-premises has remained at 21 percent of sales for four consecutive weeks. Lee said he expects off-premises to fall off as more dining room space is available, but he believes the channel will still be more robust than it was pre-pandemic. At the start of COVID, new customers were driving to-go sales, and their frequency was pretty high—even better than existing customers.
All brands across Darden’s portfolio are offering curbside, and they all have the “I’m Here” feature in which restaurants are alerted to when a customer arrives. The piece of technology helped Olive Garden reach all-time highs in guest satisfaction ratings.
During the quarter, restaurants also implemented website enhancements to streamline the online checkout process. It resulted in a meaningful reduction in order abandonment rates.
Going forward, Darden is looking at some prototype changes to make it more convenient for employees to bring food to cars, COO Rick Cardenas said. Still though, a high percentage of customers are coming inside stores to pick up their order, so the company has to keep an in-restaurant type of experience for them, as well. In terms of modifications to existing restaurants, Darden is thinking about the most efficient way to make changes, whether it's in the kitchen to create more room for packaging, or nixing the idea of a side door because of guests coming through the front side.
“We’re working through that. We don’t expect to make huge, huge investments in our existing restaurants for to-go,” Cardenas said. “We do have some investments to make, but they’re not that great.”
Darden ended Q3 with 1,822 stores, including 874 Olive Garden locations and 528 LongHorn restaurants. Looking ahead, the company expects to finish fiscal 2021 with a net of 33 new restaurants. In fiscal 2022, Darden projects roughly 35 new openings and capital expenditures of $350 million to $400 million ($150 million to $175 million for new restaurants and $200 to $225 million for maintenance/refresh/tech/other).
Lee listed several reasons as to why Darden’s 2022 unit guidance isn’t higher. For one, the company dismantled its development team at the start of the pandemic. It’s spent the last 90 to 120 days rebuilding the team. However, the true limiting factor is that after the company moves past letter of intent, every step in the development process has slowed significantly.
The CEO said the slowdown has a lot to do with people working remotely and the inability to negotiate leases as quickly. The biggest hangup is permitting and getting a restaurant inspected.
“There are external factors that are limiting us being able to open more restaurants,” Lee said. “We have the letters of intent signed, we just struggle past that point. We hope that when we get to ’23 we can get to the higher end of our 2 to 3 percent. We believe our pipeline is in good enough shape to get there. There’s enough availability out there, and we’re happy with the construct of the deals.”
