The price of the fettuccine Alfredo at Olive Garden could get a little pricier this year. But the restaurant chain’s never-ending breadsticks and salad will remain never-ending.
Darden Restaurants, which owns Olive Garden, Longhorn Steakhouse and other chains, reported quarterly earnings Thursday. Sales across the chain’s eight restaurant properties came in at $2.45 billion — below Wall Street’s expectations but up by 41.3 percent over the same quarter last year. Sales at Olive Garden, whose restaurants account for about half of Darden’s annual revenue, were up by 30 percent.
But restaurant margins are thin and operators are running out of wiggle room as costs climb. “We’ve been trying to hold off on pricing as much as the inflation would have dictated,” said Rajesh Vennam, the chief financial officer of Darden Restaurants. “As inflation creeps up, we’re going to have to try to manage through that, but it’s going to be a combination of pricing and productivity initiatives.”
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Darden raised prices by 3.7 percent during the last quarter, and company executives said the increases will continue throughout this year, to a total of just over 3 percent.
So far, sky-high gas prices and bigger grocery bills haven’t diminished consumers’ desire to have someone else do the cooking. Online and in-person restaurant traffic was up by 2 percent in February from January, and spending at restaurants was up by 8 percent from the same time a year ago, according to NPD Group, a market research company.
“Looking ahead, we should see seasonal demand start to heat up in March and COVID-related concerns diminishing,” David Portalatin, an NPD food industry adviser, said in a statement. “The wild card will be how consumers respond to ongoing inflation, including $4-plus per gallon gasoline.”
Olive Garden expects customers to respond by hitting the bottomless supply of breadsticks, salad and soup. The company kept the breadsticks and the salad on its menu through the pandemic, even as it pivoted to takeout and next-day delivery, so long as orders were $50 or more.
Albert Barreda, an associate professor in the hospitality department at Missouri State University, said there’s a good reason for that. It keeps people coming back.
“You as a customer have the perception that you are eating something similar to a family meal or food you can cook at home,” he said. “They have created this perception that you will be full and very satisfied and they are giving you something for free.”
While the food isn’t free, all-you-can-eat buffets are slowly returning to entice diners looking for something extra. Buffets were close to a $5 billion business in 2019, according to NPD Group. And they’ve been facing a steep climb back. Even with Covid cases way down, people remain wary of all that food sitting out in the open and customers serving themselves.
“Covid-19 has had a devastating impact on the restaurant industry and our segment, specifically,” Lance Trenary, CEO of Golden Corral Corp., a buffet restaurant chain, told NBC’s TODAY Food last year. “We will forever operate differently as a result, but I have no doubt that there is still a place for buffet dining.”
Golden Corral has stayed with the “no touch” buffet service it adopted during the pandemic. Staff members still serve guests to prevent the spread of germs and viruses.
In Las Vegas, where buffets were once as common as casinos, Wynn Resorts reopened its buffet last year. But it took some of that space for a hot pot restaurant. And Red Rock Resorts’ new Durango Station casino will focus on driving revenue through slot machines and gaming tables, its CEO said. There are no plans for a buffet.