Olive Garden is dropping its popular “Buy One Take One” offer this quarter, a sign that restaurant chains are willing to sacrifice some customer traffic to wean themselves off promotions.
The company is pursuing an everyday value strategy — meaning it wants customers to feel as if they’re getting a good deal on their food without a special offer, according to the chain’s parent, Darden Restaurants Inc. The Buy One promotion had let customers order one meal to eat at the table and then receive a second one for later at home.
“It may have a short-term impact on traffic,” Darden CEO Gene Lee said on a conference call Thursday. But he expressed confidence that the chain could absorb the hit.
“I’m encouraged by Olive Garden’s momentum,” he said.
The move is a gamble for a business that posted disappointing results last quarter. Both Olive Garden and LongHorn Steakhouse, Darden’s two biggest brands, posted smaller comparable-sales increases than analysts predicted.
Harsh winter weather hurt results in January and February, the company said.
Restaurants are shifting away from limited-time deals to focus on what’s available on a daily basis. Chili’s recently changed its loyalty program to always offer a free drink or chips-and-salsa appetizer.
In all, Olive Garden is cutting its promotional offers from nine to six this fiscal year, so the deals aren’t disappearing altogether. The chain currently is offering $8.99 dinners for those who dine between 3 p.m. and 5 p.m. Monday through Thursday.
It’s a time when the restaurants aren’t typically busy, management said on Thursday’s call.
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Olive Garden and other chains also are grappling with higher labor costs, one reason why they may have to cut back on aggressive promotions. Wages are climbing, and U.S. unemployment is near a record low.
To help keep workers happy, Darden plans to invest $15 million in its workforce after the U.S. tax-rate changes.
“We are seeing a shift across the industry just because companies are trying to absorb labor inflation,” said Mizuho Securities analyst Jeremy Scott. “The concern is the short-term impact.”