Olive Garden parent to raise hourly wage to $10 and offer $17M in bonuses

Dive Brief:

Olive Garden parent Darden Restaurants announced Thursday that starting March 29, every hourly employee will earn at least $10 per hour including tipped income, according to the company's Q3 2021 earnings release. The company will raise this wage to $11 per hour in January 2022 and $12 per hour in January 2023. On average, the company's hourly employees earn more than $17 per hour.
The company is also putting $17 million toward one-time bonuses for hourly restaurant workers, CEO Gene Lee said in a statement.
These wage updates are intended to attract and retain talent, Lee said. The restaurant company has already invested $200 million since the start of the pandemic to fund paid sick leave, emergency pay and paid time for workers who receive the COVID-19 vaccine. Olive Garden's sick leave plans were already in the works before the coronavirus crisis.

Dive Insight:

Darden's wage hike comes as the restaurant industry begins to bounce back from 2020's disruption, with many operators poised to hire now that their businesses have stabilized.

In February, restaurants and bars added 286,000 jobs according to U.S. Department of Labor data, a marked improvement from December, when restaurant job losses climbed to 327,000. Restaurants could also soon experience elevated traffic levels as vaccine rollouts across the country reach more consumers and diners spend their stimulus checks. According to Bloomberg Intelligence analysis, the $1,400 stimulus payments that are being distributed could boost restaurant sales by low-to-mid single digits for up to seven weeks.

This impending uptick in competition for restaurant employees, along with the predicted spending surge at eateries, make it imperative for chains to deepen loyalty with existing employees. Restaurants across the country are also having trouble finding employees with unemployment benefits, including an extra $300 per week and risk of exposure to COVID-19 keeping workers at home. Darden's track record of progressive pay policies over the past year, combined with higher wages, could help prevent turnover and entice new workers to apply to its restaurants.

Darden's personnel investments haven't hampered its growth, either. The company announced Thursday that it expects to open 33 net new restaurants in 2021, and company revenue beat analyst expectations at $1.73 billion, a 26% decline from the year-ago period. The company is also bullish on its Q4, predicting sales of $2.1 billion. The company also launched a $500 million share repurchase program.

Other major restaurant chains are also betting that investments in hourly employees will be necessary for their future success. Starbucks announced in December that within the next two to three years, all of its workers will earn $15 or more per hour. McDonald's CEO also said in January the company is doing "just fine" in the 29 states that have increased minimum wage rates beyond the federal level of $7.25, which could minimize operator fears over the impact of higher wages on menu prices and diner response.