When activist investor hedge fund Starboard Value recently took over the board of floundering Darden Restaurants, they felt they had a mandate for change and they have not backed off in their efforts to remake Darden’s flagship brand Olive Garden. The first change was a new CEO for the Olive Garden (Eugene Lee), and now the restaurant is working on reducing operational costs and revamping the menu.
In a Monday interview on Bloomberg Business, Starboard and Darden chairman Jeffrey Smith claimed that the firm did not really “take control” of Darden, instead they just “made changes to make sure the board was doing their job to represent the best interests of the shareholders.”
Darden board members work a shift at Olive Garden
Also of note, Smith highlighted in the interview that every Darden board member worked one night in one of the company’s restaurant. Smith said he worked closely with the manager in greeting guests, waiting on tables and serving food in the kitchen. “It was an amazing experience,” he said.
He noted this was not an “undercover boss” situation. It was planned and everyone know the VIPs were coming,
Smith commented that the board members found out “The restaurants are doing a great job…it’s about making sure we’re giving them the tools so that they can do the best job succeeding for everyone.”
He continued: “How can we make sure that we’re providing the best opportunities for success in the company…that means improving the menu, better items that are focused on our core guests, improving the marketing…”
Focus on the guest
Besides reiterating that the new Olive garden was 100% focused on thew guest experience, it was also highlighted in the interview that the new management re-evaluated all expenditures that were not guest related, and “found some opportunities” to save on operational costs.
Smith also emphasized that Darden is currently “evaluating real estate opportunities” that could potentially “unlock a lot of value” for shareholders. On the other hand, the company is not focusing on franchising or acquisitions until the turnaround is complete.
