Olive Garden has no plans to expand delivery test
- Despite off-premise sales increasing 10.3% during the second quarter of fiscal year 2019, Olive Garden isn't jumping into third-party delivery at the moment, Olive Garden CEO Gene Lee told investors during an earnings call.
- The Italian restaurant chain has been testing delivery on a small group of restaurants, but the costs have been high and the customer satisfaction low, Lee told investors.
- Off-premise, which consists of takeout and catering, represented 14.6% of the casual Italian chain's sales during the quarter.
While many restaurant chains have been turning to delivery to boost sales and keep up with competitors, Olive Garden is bucking the trend. Instead, it is encouraging customers to pick up their to-go orders. Olive Garden does offer delivery for large orders with an order minimum of $100, but it delivers directly instead of through a third-party site.
If more restaurants feel this way, it could stifle the delivery industry's seemingly exponential growth. This $35 billion market is expected to reach $365 billion in sales by 2030. Delivery is expected to grow 12% annually over the next five years, according to Restaurant Business.
Some restaurants have balked at the high cost of third-party partnerships, with some sites taking as much as 30% of the order cost. According to Fast Casual, restaurants also lose control of their branding and the direct connection to their customers, two areas that Olive Garden has been working hard to improve over the last few years.
Some restaurants have been investing directly in third-party delivery, such as Yum investing $200 million in Grubhub, which may offer more platform integration to improve some of these metrics.
At the same time, restaurants that don't offer delivery could be left as the trend grows. A little over a third of meals from restaurants are now eaten at home, and 2030, it's possible that most meals that would have been cooked at home will instead be ordered online and delivered, investment bank UBS told Forbes.
Despite these forthcoming trends, the Italian casual chain doesn't seem to be hurting by not offering delivery. Its sales rose 4.9% during the second quarter to $998 million, according to a press release. Its year-to-date fiscal year 2019 sales grew 5.6% to $2 billion. Traffic also was down by 0.8% during the quarter even though same-restaurant sales increased 3.5%.
Even though the restaurant backed off of offering promotions, it did have two successful promotions including a Buy One Take One campaign, which allows guests to order an entree and then take a second one home, and the reintroduction of the Never Ending Pasta Bowl, which allows customers to have unlimited pasta. It also offered 1,000 customers an annual pasta pass, which provides pass holder never-ending pasta for $300. It sold out in under a minute, Lee told investors. The restaurant appears to fine focusing on the things that work and improve customer satisfaction instead of throwing delivery into the mix at this time.
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