Olive Garden Undergoes 'Brand Renaissance' as Investors' Criticism Intensifies

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Olive Garden Undergoes 'Brand Renaissance' as Investors' Criticism Intensifies
Image credit: Darden Restaurants, Inc.
3 min read

After announcing a new menu last week, Olive Garden revealed yesterday that it is launching a new logo and remodeling restaurants. However, investors still do not believe that Olive Garden’s parent company, Darden Restaurants, is doing enough to turn the tables at the struggling chain.

Olive Garden’s new logo represents a cartoony new take on the old version. The remodeling also attempts to project a fresher, cleaner image, with updated exterior, lobby and bar, and dining room. The chain plans to remodel 75 Olive Gardens in fiscal 2015 and 125 to 150 restaurants in fiscal 2016 to 2017.

 "The Olive Garden brand renaissance is underway,” said Clarence Otis, Darden’s CEO, in a statement.

Related: How Baskin-Robbins Is Trying Not to Disappear

But the promised brand renaissance is not enough to satisfy investors.  Barington Capital Group, which owns about 2 percent of Darden, has urged the parent company to split more completely, with Olive Garden and Red Lobster in one company and higher-growth chains such as LongHorn Steakhouse and the Capital Grille in another company. "Darden's deteriorating financial performance and decision to continue to separate Red Lobster without pursuing opportunities to monetize its valuable real estate have caused us to lose all confidence in the ability of Clarence Otis to manage the company," Barington CEO James Mitarotonda said in a statement.

Darden’s latest moves have also been challenged by investor Starboard Value LP. Starboard is pushing to have shareholders to vote on a resolution telling Darden to halt plans to shed Red Lobster unless investors get a direct vote on the decision.

Related: Everything Seems to Be Getting Worse for Company Behind Red Lobster, Olive Garden

Otis hasn’t budged on the original plan to split from Red Lobster while hanging onto Olive Garden. “As we look forward, we remain confident we are taking the right steps to enhance sustainable value for our shareholders," the Darden CEO said in a statement

Darden also announced yesterday that it expects U.S. same-restaurant sales for the third quarter to decline 5.4 percent at Olive Garden and 8.8 percent at Red Lobster, with LongHorn Steakhouse increasing 0.3 percent. However, excluding the effects of more severe weather and the Thanksgiving holiday shift into the third quarter, same-restaurant sales would have been down approximately 2.8 percent at Olive Garden and 6.2 percent at Red Lobster, and up approximately 2.9 percent at LongHorn Steakhouse. 

Related: Desperate Measures: Olive Garden Revamps Menu as Investors Get Pushy

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