Olive Garden defends its unlimited breadsticks, salad strategy

September 15, 2014, 7:32 PM UTC
Photo Courtesy: Getty Images / Bloomberg / Daniel Acker

Darden Restaurants, owner of Italian restaurant chain Olive Garden, says its unlimited breadsticks and salad dressings are working out just fine with consumers.

The casual-dining restaurant operator is on the defensive after investor Starboard Value LP last week disclosed a very detailed, nearly 300-page slide presentation that gave details of a potential turnaround plan for Darden’s Olive Garden chain. Among the complaints: Olive Garden was serving too many breadsticks (resulting in food waste), adding too much dressing to its salads, and not serving enough alcohol. Among the most egregious complaints: Starboard lamented Olive Garden wasn’t adding salt to the water used to cook the pasta, asking “How does the largest Italian dining concept in the world not salt the water for pasta?”

Darden (DRI) fired back this week, saying in a 24-page slide presentation that Starboard’s suggestions are “not based on reality.” Darden said Olive Garden’s breadsticks and salads convey “Italian generosity,” adding that its salads have the highest loyalty rating of any menu item based on the internal satisfaction surveys the company conducts. Darden also says alcohol sales are increasing, while the average check sizes are higher at remodeled locations.



(Graphic by Analee Kasudia, Fortune.com)

“After reviewing Starboard’s proposed operating plan, we believe Darden’s current initiatives, which are already delivering encouraging results, address the majority of Starboard’s suggestions” said Darden President and Chief Operating Officer Gene Lee. “We are also troubled by certain Starboard suggestions for Olive Garden that we believe would undermine progress that is improving both food quality and guest experience.”

Though Darden touted Olive Garden’s new menu offerings, technology investments meant to speed up ordering-taking, and satisfaction scores that are improving, recent results show the chain is still underperforming. U.S. same-store sales slid 1.3% at Olive Garden for the latest quarter, trailing all other formats owned by Darden, including LongHorn Steakhouse and The Capital Grille.

Starboard, which is the second-largest investor in Darden with a 8.8% stake, is aiming to overthrow the entire 12-director Darden board with a slate of its own. Darden has advocated for its own slate of board director nominees — which includes four candidates proposed by Starboard — at an annual shareholder meeting that is due to be held on Oct. 10.

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