Despite struggling same-store sales, Darden execs confident of Cheddar's turnaround
- Over a year and a half after Darden Restaurants acquired Cheddar’s, sales have not yet improved, declining by 1.4% for Cheddar’s during its second quarter. Same-store sales slipped 4%, partially offset by 2.6% growth in new restaurants, Darden Restaurants President CEO Gene Lee told investors during an earnings call.
- The restaurant chain has been implementing better training, hiring and retention strategies to help increase staffing levels, such as using proprietary tools to more accurately forecast business needs and properly staff restaurants to better serve guests.
- With a rise in guest satisfaction scores, executives said they expect sales to start improving within the next 12 months.
Despite another quarter of disappointing same-store sales, Darden's Lee said he was still pleased with the progress the chain has had since it was acquired in March 2017 for $780 million. Cheddar’s began replacing senior leadership in July, and Lee was particularly optimistic about guest satisfaction scores, which have been improving over the past six months.
Casual dining restaurants have struggled over the last few years due to a lack of innovation and rising popularity of fast casual. After slumping sales, several companies — including Chili’s and Applebee's — have implemented new strategies, such as Chili’s cutting down its menu to improve quality and customer service and eventually same-store sales.
The integration has been bumpy at times. Cheddar's suffered a data breach in its legacy point-of sale system, exposing the data of 567,000 customers. Darden has since replaced the system. Turnover rates began to rise and many of the Cheddar's were not fully staffed, according to the Orlando Sentinel. That has since changed.
Nearly all of the restaurants now having a managing partner or general manager, according to the earnings call.
"We’re getting close to fully staffed. We’re stopping the churn," Lee said during the call.
During high-volume periods, Cheddar's managers are now positioned at the host stand, within the dining room and in the kitchen allowing for better flow. This has helped improve guest satisfaction scores, which have continued to improve each month, Lee said. Friday and Saturday nights have specifically improved and the gap is closing on same-store sales for those restaurants, Lee said.
Additionally, Cheddar's is working to improve the culinary process to improve quality, consistency and speed of service, executives said.
Darden Senior Vice President and Chief Financial Officer Rick Cardenas told investors he fully anticipates cost benefits in the next 12 months as it gets a labor management system up and running and food waste continues to decrease. Lee said it took Darden several years to turn Yard House around, so it may just be a matter of time before Cheddar's too starts to show sales improvements.
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