Olive Garden bosses have revealed they will increase prices this year despite lackluster sales, angering the very customers they are trying to attract.
Darden Restaurants, owner of Olive Garden, said the beloved Italian chain’s same-store sales – or sales at locations that have been open at least a year – fell 1.5 percent in the quarter that ended Nov. 26. May.
In response, executives said they will raise prices 2.5 to 3 percent not only at Olive Garden but across its entire huge portfolio of restaurants, including LongHorn Steakhouse, Ruth’s Chris Steakhouse and Yard House.
This decision comes despite the overall company increasing sales 8.6 percent to $11.4 billion in fiscal 2024, driven primarily by LongHorn Steakhouse’s outperformance.
Customers on social media said Olive Garden is going in exactly the wrong direction and should “read the situation,” especially since years of sky-high inflation have reduced people’s ability to spend on things like dining out.
Olive Garden was an underperforming asset in Darden Restaurants’ portfolio during the fourth quarter, with the Italian chain declining 1.5 percent in comparable sales.
The move to increase prices is not new, as Olive Garden already raised its menu by 1 percent last year.
It appears to be doubling down on charging more, even as executives admit that food inflation is hitting its less well-off customers.
‘Consumers in general are concerned about inflation and increasingly about the labor market. And what we’re seeing are some behavioral changes that we had already started to see,’ Darden CEO Rick Cardenas said on the call.
Darden Chief Financial Officer Raj Vennam said the sales decline was due to a pullback from those with lower incomes, while customers with deeper pockets are coming to Olive Gardens at the same rate or more.
But Cardenas said Darden-owned restaurants won’t accept discounts like other fast-food chains have done.
“We’re not going to do things to buy sales, even with the increasing discounts our competitors are doing,” he said.
A large majority of Americans now say they rarely eat at fast food restaurants because of inflation and consider eating out a luxury out of their reach.
Given these facts, Olive Garden choosing to raise prices even further is confusing and frustrating to many.
One person wrote on X: ‘Olive Garden is raising prices because food inflation has reduced the number of people eating out. Can anyone explain this logic (?)’
Another wrote that the restaurant “might just close.”
Another person reacted Tik Toksaying that Darden’s C-suite executives are “tone deaf.”
“If you’re losing foot traffic and customers and you realize that consumers are struggling, it might not be the best time to brag about raising prices,” he said in the video.
“The board needs to start looking for a new executive team and a CEO and CFO who are not so tone deaf.”
Darden Restaurants CEO Rick Cardenas (left) and CFO Raj Vennam were called “tone deaf” on social media for their joint decision to raise prices at all restaurants as inflation remains a persistent struggle for low-income families.
Chili’s, another casual dining establishment, is going in a different direction than Olive Garden. In addition to offering daily all-day happy hour at some locations, Chili’s offers a ‘3 for Me’ meal for $10.99 that includes a drink, appetizer, and an entree.
Applebee’s also targets the crowd looking to spend less money on a night out. Specifically, it wants to woo couples with its “2 for $25” deal that includes two main courses, an appetizer to share, or two side salads.
Restaurant chains have been under pressure to cut prices for months, especially as grocery store prices have risen at a slower pace.
It seems that this summer, fast food joints are finally giving in to consumer demands, with McDonald’s introducing a $5 meal on Tuesday.
Wendy’s is offering a $3 breakfast combo for a limited time, while Burger King is bringing back its $5 Your Way Meal for summer.
Even casual dining chains most similar to Olive Garden are testing discounted combo meals.
Chili’s, in addition to offering happy hour daily and all day at some locations, is offering a ‘3 for Me’ meal for $10.99 that includes a drink, an appetizer, and an entree.
Applebee’s hopes to attract couples with its ‘2 for $25’ deal that comes with two entrees, a shareable appetizer or two salads.