This is far from the first case of shareholder uprising in the hospitality industry. In May this year, McDonald’s was targeted over the pay of its CEO Donald Thompson. But, in the ongoing saga of Darden and its investor Starboard, it is the attack on the chain’s culinary standards that have attracted the attention of the media.
In a presentation, released last Thursday, the investor group at times resembled an angry Trip Advisor reviewer as it criticised the chain’s “tasteless pasta” and dilution of its Italian heritage.
“If you google ‘how to cook pasta,’” it said, “the first step of Pasta 101 is to salt the water.”
It slammed the chain’s “lapsed discipline” over its unlimited breadstick policy, which it said had become “renowned” over the past 10 years. By over-providing free breadsticks, food-waste was increased and breadsticks went cold, reducing margins and profitability and harming the guests experience.
Darden, which owns Olive Garden, Long Horn Steakhouse, Capital Grille and other restaurants, has struggled against the rising competition of growing chains, such as Chipotle, recently reporting a loss of $19.3m for the last three months. But, it insisted in a counter presentation on Monday, it has already taken steps to revive the fortunes of its brand.
In a statement it said, “The Olive Garden Brand Renaissance is well underway, and the improvements we are seeing in guest satisfaction and traffic trends reinforce our confidence in Olive Garden’s potential.”
One such marketing ploy, launched on 8 September, was the introduction of the unlimited dining pass, which, according to the company’s Twitter feed, sold out within two hours.
It offered 1,000 customers the chance to buy a pass for $100 that would allow them to eat as much pasta as possible until November 9.
Battle of the Board
Starboard’s overall aim is to see the board replaced. It has already been offered four Starboard backed seats by Darden, but has argued that the board will need a complete turnover.
Darden has resisted, saying that such an upheaval could damage its programme of changes. But, according to Reuters, analysts believe a Starboard dominated board is a strong possibility.
Janney Capital Markets analyst Mark Kinowski is reported to have said in a note to a client, “We continue to believe the activists are likely to gain a majority of board seats, which if it happens should be a meaningful catalyst for change.”