Sample Research Paper On Olive Garden Financial Problems
Olive Garden is a chain of the Italian restaurant founded under Darden Restaurant Inc., the restaurant unit of General Mills Inc. It started in 1982 in Orlando. It experienced rapid growth as there were over 100 restaurants by 1989. As of 2012, 45% of the total revenue by Darden Restaurant was attributed to Olive Garden. Today Olive Restaurant has over 800 restaurants all over the world.
It is inspired by the Italian hospitality (Cinotto 254). The dishes offer an aspect of modern Italy, combining America and Italian dishes to make American-Italian cuisines. The chain of restaurants is well known for their exquisite award-winning wine list that keeps guests coming for more (Cinotto 254). The restaurant has exciting foods and drinks that are unique; thus making it special compared to other hotels.
In a Darden Conference in 2011, the management announced that it had plans to establish over 200 new Olive Garden restaurants to expand the chain. There are also plans to enter new territories such as Asia and Middle East. It is to capture the developing client base for Indian foods. The developed North American client base was to enable this expansion (Lewis 169). The idea of expanding their branches has been welcomed well throughout the world. This plan will make the restaurant huge profits since they will operate in a large market base.
However, this has this has drastically changed in the recent years. There has been a staggering decrease in the amount of revenue it produces (Gaynor 193). It is the same case with Red Lobster, a sister restaurant under the Darden restaurant Umbrella. Investors are seeking new ways of stopping their dismal performance. The hedge fund Barington Capital Group that owns 2 % of Darden is heading the move (Gaynor 193).
Barington Capital Group seeks to divide Darden Restaurant Inc. into three parts. The first part includes the falling Olive Garden and Red Lobster and the second include the rapidly growing restaurants like The Capital Grille and Longhorn Steakhouse. Lastly, the third part includes the real estate arm of Darden Restaurant Inc.
They claim that Darden may collapse due to the two falling restaurants based on the proposal they submitted. By separating those from the main unit, Darden would have more chances of serving and growing. Barrington believes it can raise the value of one share of Darden from mid-$40 to between $71 and $80 by doing the separation.
They argue that Olive Garden has reached its full maturity. It cannot compete with the upcoming restaurants under Darden. There has been a decrease in the amount of revenue that Olive Garden produces over the last three-quarters. The amount of revenue that the new restaurants produce surpasses it by a large margin. Moreover, Olive Garden is losing money based on the one-year average same-store sales. It is together with Red Lobster.
The customers no longer go for the promotional offers. There has been a decrease in the number of guests and the average check count per guest. The average amount of money spent by one guest has declined. Barrington also claims that Darden has not prioritized their core products that bring them more income. An example of this is Olive Garden’s Italliano Burger, which is being sold at $9.99 rather than the main meals that the restaurant sells Italian main dishes that the restaurant serves.
Cinotto, Simone. Making Italian America: Consumer Culture and the Production of Ethnic
Identities. , 2014. Print.
Gaynor, Gerard H. Decisions: Finding Your Way through the Maze. Oxford: Wiley-Blackwell,
Lewis, Pamela S. Management: Challenges for Tomorrow's Leaders. Mason, OH:
Thomson/South-Western, 2007. Print.