You can’t please all of the people all of the time but the folks at Olive Garden were probably hoping for better reviews when the company changed its logo from this:
The reaction was immediate and scathing. “It looks like a second grader’s cursive practice” griped Slate. That was polite compared to BusinessInsider.com’s brutal “People hate Olive Garden’s new logo." The closest thing to a compliment from any major publication was Time.com which skipped straight over the relative aesthetics of the simplified text and less ornate new look and took a shot at the entire chain by noting that “Olive Garden’s new logo probably can’t save Olive Garden."
As rough as the reaction was for Olive Garden’s corporate parent, the abuse was probably a welcome reprieve from what it’s been hearing from Wall Street. Shares of Darden Restaurants (DRI) are down more than 10% already in 2014. Darden has responded to pressure from investor activists by announcing a plan to spin off its Red Lobster division. The company also owns high-end Capital Grill, Yard House and an assortment of other brands.
In the attached video managing director of LandColt Capital and FlexEra executive Todd Schoenberger says changing consumer trends means Darden is in trouble any way you slice it.
“It’s not the scent of oregano that’s out there it’s the scent of desperation,” Schoenberger howls. “This is a company that sees foot traffic down, sales down. Customers are just not buying the big dishes anymore. So what do you do? You change the logo and hope that’s going to change the appetite of your customers. That’s not going to happen.”
Schoenberger is referring to the news that Olive Garden, in addition to changing their logo, has announced changes to their menu as well. Patrons will be offered the choice to mix and match different pastas and sauces and the restaurant's offerings will include more small plates, apparently an attempt to appeal to more health conscious diners.
Darden better hope something happens to change its fortunes soon because the wolves are at the door. With customer traffic down 13% in December and sales off 5.4% in the third quarter, investors like Barington Group haven’t been shy about suggesting ways Darden can increase shareholder value. In a recent webcast Barington suggested Darden split into three different companies. Under Barington’s plan Darden would lump Olive Garden and Red Lobster into a mature brand parent company, put Darden’s other chains under an umbrella dedicated to more rapid growth, and spin off real estate assets entirely.
Darden insists its plans are sufficient and is refusing to argue the point in public. Darden recently cancelled its shareholders’ meeting, opting instead for a roadshow where it will meet institutional investors on an individual basis.
Running away from activists and throwing out an immediately despised logo may buy Darden some time, but unless customers start buying more meals Olive Garden and the rest of the corporation can run, but they won’t be able to hide for long.