Shareholders in Darden Restaurant Group have plenty to say about what the company needs to fix. And they aren't sugar coating it.
The parent company of Olive Garden and former owner of Red Lobster is used to hearing strong suggestions from its activist investors as the brand has struggled over the past year. Starboard Value has led the criticism campaign, announcing plans in May to unseat Darden's entire board.
On Thursday, Starboard released an extensive plan for "Transforming Darden Restaurants." The 294-page presentation may be the activist investor's snarkiest work to date.
Here are some highlights:
1. "If you google “how to cook pasta”, the first step of Pasta 101 is to salt the water." Olive Garden cooks are not instructed to salt the water when making pasta. Starboard dials up passive aggression to the highest level, pasting a screen shot of "Pasta 101: Cooking Perfect Pasta Every Time" into the presentation. It then calls Olive Garden's pasta "mushy" and "unappealing."
2. "The lower quality refined flour breadsticks served today are filled with more air and have less flavor (similar to hot dog buns)." An intense burn regarding the quality of Olive Garden's most beloved menu item, the breadstick.
3. "Technically called “Crispy Parmesan Asparagus”, the actual dish was anything but…" Starboard employs the technique favored by pissed off Yelp-reviewers everywhere: posting cell-phone quality photos of sub-par fried asparagus next to a beautiful photo of the menu offering from Olive Garden's website. And yes, the ellipses are in the original presentation.
4. "Management and the Board have destroyed shareholder value…even since its announcement of Darden’s “comprehensive” plan to “enhance shareholder value” in December 2013." Starboard brings out the scare quotes, setting up plans to replace Darden's board with what they consider more suitable replacements.
5. "Darden does not even have an Olive Garden app!" The bolding and underlining here are courtesy of Starboard, who argues that the company is nowhere near as social media savvy as it should be.
6. "Train servers on wine – understanding vintage, type, color, taste, how to serve, and wine preference (or at the very least, taking a drink order)." Olive Garden's alcohol sales are well below those of competitors, and Starboard is blaming servers who have never been taught about wine. Apparently, they don't even know how to take a drink order!
7. "Breadsticks: just one example of food waste." Not only do break sticks taste like hot dog buns, but Starboard claims servers also bring too many to the table, as the chain serves 675-700 million breadsticks a year. Yikes.
Starboard's presentation also included plans to split Olive Garden and LongHorn Steakhouse from Darden's smaller brands, refranchise existing stores and cut unnecessary costs across the board.
"While we will carefully and thoughtfully review Starboard's plan, which has been promised by Starboard for some time, upon initial review, we believe many of the brand and cost optimization strategies are already being implemented across our company and are showing results," Darden's president Gene Lee said in a statement on Friday.
Shareholders now have the choice to back the Darden board's plans for an "Olive Garden renaissance" or to put their faith in Starboard's snarky wisdom. Shareholders are currently voting on director nominees by sending in either one proxy card for Darden's nominees, or a different one for Starboard's picks.
On Friday, Darden reported a net loss for the first quarter of $19.3 million, or 14 cents per share, compared to a profit of 32 cents per share a year earlier. Excluding Red Lobster spin off related costs, however, earnings per share were 32 cents, slightly beating analysts' predicted profit of 31 cents per share.
Olive Garden's planned renaissance has not yet paid off, as same-restaurant sales dropped 1.3 percent. LongHorn Steakhouse increased same-restaurants sales 2.8 percent and Darden's Specialty Restaurant Group increased 2.1 percent.