The most-challenged areas for Darden are the lower-end brands where average check isn’t as high and volume tends to be higher. But Lee said, "There may not be enough service workers to staff every restaurant in America, but there's enough service workers out there to staff Darden's restaurants"
President and COO Rick Cardenas, who was announced as Darden’s new CEO Friday, believes that’s because of the company’s “incredible employment proposition.”
“When we make it an offer, people accept it, and that’s a great thing,” Cardenas said. “… As it relates to future need to increase our minimum guaranteed wage, the number that we have right now, $12, is the right thing for us. We’ll continue to monitor that and see where we need to increase wages on a market-by-market basis.”
Although Darden will continue to focus on restaurant and guest-facing technology to ease operations, Cardenas said the brand doesn’t plan to implement any innovation that would reduce the number of bodies needed.
“We’re a full-service restaurant company,” Cardenas said. “We’re going to maintain that to provide the service that our guests expect. We will bring in technology to help that, but not necessarily replace.”
Even with staffing issues, sales improved in Q2 for each of Darden’s restaurant segments. Olive Garden saw average weekly sales of $94,187 in the second quarter, versus $72,913 last year and $90,871 two years ago. Longhorn Steakhouse earned $78,330 in average weekly sales, up from $59,621 in the year-ago period, and an increase from $66,867 in Q2 2020.
For fine dining (Capital Grille, Eddie V’s), it was $164,859 in Q2 against $100,926 in 2021 and $147,668 in 2020, and for other business (Cheddar’s, Yard House, Seasons 52, Bahama Breeze), it was $101,489 versus $71,107 and $99,653.
Same-store sales lifted 61.6 percent at fine-dining concepts year-over-year, followed by 42.9 percent for other business, 31.2 percent for LongHorn, and 29.3 percent for Olive Garden.
Olive Garden’s experienced profit of $235.1 million in Q2, a boost from $175.1 million last year and $190.3 million in 2020. For LongHorn, it was $83.6 million, against $66.3 million in 2021 and $71.9 million in 2020. At the fine-dining brands, profit was $39.7 million, up from $20.4 million and $30.4 million the past two years, and for other business, it was $62.3 million, an increase from $39.2 million and $47.7 million.
Olive Garden ended Q2 with 879 restaurants, followed by LongHorn (539), Cheddar’s (172), Yard House (85), The Capital Grille (61), Seasons 52 (44), Bahama Breeze (42), and Eddie V’s (27).
Darden saw total inflation of 6 percent in Q2, including hourly wage inflation of almost 9 percent. The brand responded with 2 percent pricing in the quarter. Pricing in the back half of the fiscal year will approach 4 percent, resulting in a full-year fiscal 2022 increase of just under 3 percent.
CFO Raj Vennam said the increase covers most of what Darden considers structural and long-lasting impacts of the current inflationary environment, while it absorbs short-term effects. So far, restaurants haven’t received much resistance from guests.
“We continue to look at opportunities to manage costs better, and we’re focused on doing some of that before we taking pricing, but with that said, we preserved a lot of flexibility, and we’re tapping into some of that,” Venamm said. “We do believe we have more dry power if needed.”
In fiscal 2022, Darden projects 35 to 40 restaurant openings, $425 million in capital spending, inflation of roughly 5.5 percent, EBITDA between $1.55 billion to $1.6 billion, and total sales of roughly $9.55 billion to $9.7 billion.