Olive Garden has done well with its first-party delivery. | Photo: Shutterstock.
Darden Restaurants on Thursday reported a quarter full of positive sales, including strong results at its flagship Olive Garden, where same-store sales rose 4.7%.
At least part of the reason for that performance was the company’s decision more than a year ago to start offering first-party delivery through the Uber Direct service. Delivery now accounts for 4% of Olive Garden sales and “about half” of those sales are incremental.
“This channel attracts younger, more affluent guests who crave Olive Garden at home, value convenience and order more frequently,” CEO Rick Cardenas told analysts. “These guests have a higher check average than dine-in guests.”
Just don’t ask about whether the company would use third-party delivery.
“The two big third-party delivery providers know what our concerns are on third party and, you know, as long as we get a solution for those concerns, then we would look at it,” he said. “Wouldn’t make sense for us not to look at it. But we really do have some concerns, and they know what they are.”
Darden has historically been a major skeptic of third-party delivery and one of its last holdouts.
But delivery has grown rapidly over the past several years, even amid an otherwise difficult period for the restaurant industry, as those more affluent customers opt for convenience over affordability.
That has prompted some of the historically skeptical companies to end long-held holdouts. Domino’s, too, has started marketing its delivery services on the third-party providers’ apps.
Domino’s uses the services in the opposite manner as Olive Garden and Cheddar’s. It provides the actual delivery and uses the apps to market its pizzas, which enables the pizza chain to control the actual delivery process, something it can do thanks to its massive roster of drivers.
Olive Garden instead opted to use Uber drivers to deliver items like lasagna or Fettuccini Alfredo but is keeping ordering of those items on its own website and mobile app. That way, it controls the marketing and data and doesn’t have to discount items to get customers’ attention.
The company in theory could get more customers by using third-party apps, which have evolved into online restaurant marketplaces, which is why Domino’s uses them. But Darden has expressed concern about data sharing and other issues.
Cardenas had earlier told analysts that the concerns his company has with the service “can be solved” and would make them think harder about being on the platforms. “But we like the Uber Direct platform the way we have it, and it’s doing a really good job for us, and it’s not causing a lot of challenges for our restaurants,” he said in March, according to a transcript on the financial services site AlphaSense.
Nevertheless, delivery has helped Darden’s concepts attract different types of customers and build takeout sales.
The company has generated these sales almost through osmosis. “We didn’t do any marketing in Q2 and we’re at 4%,” Cardenas said. “I think that would increase if we do some more marketing and get more people into it.
“If we want to drive that up, we have some options on the marketing side.”
Cheddar’s, which has a relatively strong takeout business, has already started using Uber Direct. Yard House is about to add delivery. As for LongHorn, it is taking a wait-and-see approach.
“It’s something that LongHorn is learning from the other brands to see if makes sense for us to go onto Uber Direct,” Cardenas said. “If it does, we’ll start testing it.”
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Restaurant Business Editor-in-Chief Jonathan Maze is a longtime industry journalist who writes about restaurant finance, mergers and acquisitions and the economy, with a particular focus on quick-service restaurants.
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