Darden has managed to keep 99 percent of its restaurants open during the COVID-19 crisis, but remarkable conditions have taken a heavy swipe at sales.
For the fourth quarter to date through April 5, the casual-dining operator’s same-store sales are down 39.1 percent compared to last year. Comps gained 3 percent, then declined 0.2 percent, 20.6 percent, 75.2 percent, 74.9 percent, and 71.2 percent for the first six weeks of the quarter, respectively.
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How they’ve tracked week-by-week and brand-by-brand, however, provides a deeper look into how one of country’s most successful operators has battled back. The drop-off, mid-March, would be difficult to rival at any other juncture in restaurant history. And like many concepts nationwide have witnessed, COVID-19 struck Darden’s fine-dining segment especially hard. Datassential recently reported, from a survey of more than 400 operators, that nearly half of fine-dining brands have shut their doors and sales, on average, dropped 82 percent. Also, 72 percent of the fine-dining respondents said they laid off 75 percent or more of their staff. Only 4 percent said they’d avoided cuts so far.
Darden’s full portfolio includes Olive Garden, LongHorn Steakhouse, The Capital Grill, Cheddar’s, Eddie V’s, Bahama Breeze, Seasons 52, and Yard House. Here’s how those segments are faring.
Same-store sales
Olive Garden
- Week ending March 1: 3.1 percent
- Week ending March 8: Flat
- Week ending March 15: –18.7 percent
- Week ending March 22: –71.1 percent
- Week ending March 29: –64.7 percent
- Week ending April 5: –59.7 percent
- Quarter to date (April 5): –34.5 percent
LongHorn Steakhouse
- Week ending March 1: 4.6 percent
- Week ending March 8: 3.1
- Week ending March 15: –15.9 percent
- Week ending March 22: –69.2 percent
- Week ending March 29: –75.3 percent
- Week ending April 5: –71.9 percent
- Quarter to date (April 5): –36.4 percent
Fine dining (Capital Grille and Eddie V’s)
- Week ending March 1: 2.1 percent
- Week ending March 8: –4 percent
- Week ending March 15: –27.7 percent
- Week ending March 22: –85.4 percent
- Week ending March 29: –87.9 percent
- Week ending April 5: –89.1 percent
- Quarter to date (April 5): –47.5 percent
Other business (Cheddar’s, Seasons 52, Yard House, and Bahama Breeze)
- Week ending March 1: 1.2 percent
- Week ending March 8: –2.8 percent
- Week ending March 15: –27.5 percent
- Week ending March 22: –87.5 percent
- Week ending March 29: –94 percent
- Week ending April 5: –92.1 percent
- Quarter to date (April 5): –50.1 percent
Despite these expected red numbers, Darden has managed an impressive pivot at its leading brands.
CEO Gene Lee, who revealed earlier he’s forgoing his base salary to aid the company, said in a statement all of Darden’s chains have enhanced to-go offerings. It’s enabled Olive Garden to double off-premises business and LongHorn to triple to-go mix.
Here’s a look at how dramatic the change has been.
To go sales per restaurant
Olive Garden
- Week ending March 1: $16,191
- Week ending March 8: $15,500
- Week ending March 15: $14,942
- Week ending March 22: $20,549
- Week ending March 29: $34,524
- Week ending April 5: $39,133
LongHorn
- Week ending March 1: $6,517
- Week ending March 8: $6,406
- Week ending March 15: $6,210
- Week ending March 22: $9,153
- Week ending March 29: $17,361
- Week ending April 5: $19,858
As far as how, Olive Garden has taken a few key steps. Firstly, it brought down the threshold of its own fulfilled delivery program. It used to be $75 and above. That number is now $40 in most states. California, Oregon, and Washington still set the bar at $75. Olive Garden also waived delivery fees.
The brand is offering carside pickup and catering pickup. For the latter, there’s a $40 minimum and 15 percent delivery fee up to $500 (5 percent for every dollar thereafter). Olive Garden said it’s fulfilling next day lunch delivery if customers order by 5 p.m. the previous day. The company adds a complimentary chafing kit and will set up, if needed.
Olive Garden recently introduced a Buy One Take One ToGo offer for $12.99—a play on the popular Buy One Take One deal where customers get a meal to bring home with their dine-in order. Now, they can do just that, but with to-go service.
Customers get to pick from a list of classic entrées, like Cheese Ravioli, soup or salad, and then “Tomorrow’s Entrée,” which is freshly prepared, packaged, and chilled. The “Today’s Entrée” (meal they play to eat after pick up), arrives hot and ready to go. Breadsticks are included as well.
Select locations are also offering wine and beer to-go, where permitted by law.
Meanwhile, LongHorn is running Family Meal Deals where people can choose a big, sharable entrée, a jumbo-sized salad, and four sides. It starts at $9 per person for a family of four (bread and butter included). LongHorn has opened up its curbside service, too.
What else is going on
Darden introduced a permanent paid sick leave program early March and closed its dining rooms March 20, when it began operating in a to-go-only capacity.
Since, in an effort to support hourly employees who have not been scheduled while dining rooms are closed, Darden unveiled a three-week “Emergency Pay Program.” The paid sick leave policy allowed workers to gain one hour of paid sick leave for every 30 hours on the job, starting with the past 26 weeks. The update enabled new employees to build sick leave as soon as they started, with a pay rate based on the employee’s 13-week average.
“Meanwhile, our hourly restaurant team members who are still working will receive an additional payment to help cover unexpected costs, such as transportation and child care, incurred as a result of the current situation,” Lee said.
He added Darden has significantly reduced expenses, including marketing, and deferred nearly all of its capital spending, which includes opening new restaurants. Additionally, it is making adjustments at the “Restaurant Support Center,” to match its currently operating model.
The company announced Tuesday it plans to furlough some of its 1,000 support center employees (20 percent or so) and reduce pay for remaining staff. Senior executives are taking a 50 percent reduction in addition to Lee’s full salary forfeit.
Darden has furloughed roughly 150,000 hourly employees so far. They’re eligible for the aforementioned Emergency Pay Program, which offers up to three weeks of pay based on their previous 13-week average.
“The challenges of this unprecedented situation are far from over. However, I remain confident that the strength of our portfolio, the power of our competitive advantages and the resiliency of our people will enable us to successfully navigate our way through it,” he said.
Darden said Tuesday entered into a $270 million term loan credit agreement to maximize financial flexibility and further bolster liquidity as a precautionary measure. The term loan was fully drawn April 7 and matures April 5, 2021. It carries a current interest rate of LIBOR plus 300 basis points. It also includes a provision that allows Darden to request an increase of up to $100 million in borrowings at the election of existing or new lenders.
Bank of America, N.A., served as administrative agent for the new term loan credit agreement. BofA Securities, Inc. and U.S. Bank National Association served as joint lead arrangers and joint bookrunners as well, while U.S. Bank National Association served as syndication agent and Truist Bank served as documentation agent.
Darden added, based on its performance through April 5, it has not used any of the cash proceeds from the previously drawn $750 million revolving credit agreement. With the additional funds from the term loan, Darden now has more than $1 billion in investible cash on hand.
At recent weekly sales levels post the transition to a to-go-only format, Darden’s ongoing weekly cash burn rate is about $25 million, including capital expenditures and not including an additional changes to net working capital.
