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Olive Garden challenges competitors with menu change

By Leslie Patton
Bloomberg News

Olive Garden is beefing up its menu — literally.

The Italian restaurant chain on Monday began serving a $9.99 6-ounce burger in an attempt to compete with fast-casual and other sit-down dining chains. Owned by Darden Restaurants Inc., Olive Garden has been refining its menu as it struggles to attract consumers amid fierce competition in the aftermath of the economic downturn.

Darden Chief Executive Officer Clarence Otis has been advertising three-course meals aimed at budget-conscious diners and small plates to lure the young, bar-hopping crowd. The chain’s same-store sales dropped 4 percent in the three months ended Aug. 25, and, in October, hedge fund Barington Capital Group took a 2.8 percent stake and began pushing for changes.

Olive Garden conducted research to figure out which competitors were picking up the diners it was losing, said Jim Nuetzi, executive chef at the 820-store chain. “A lot of times we were losing them to a burger craving.”

Competitors have been selling and refining burgers for years. Chili’s, the eatery owned by Brinker International Inc., sells bacon, guacamole and mini burgers with sauteed onions. DineEquity Inc.’s Applebee’s restaurants have quesadilla burgers and a bourbon black and bleu burger slathered with spicy mayo.

Olive Garden’s menu got too expensive and they didn’t remodel stores fast enough, said Peter Saleh, a New York-based analyst at Telsey Advisory Group.

He said the chain needs more than one burger to boost sales and isn’t convinced it fits Olive Garden’s Italian roots.

“It would be the same as McDonald’s trying to do some sort of pasta meal,” he said. “I’m not seeing it.”

Neither were executives at Olive Garden, at first.

“There was hefty debate” and some couldn’t imagine what an Italian burger would look or taste like, said Nuetzi. Others were worried that arugula wouldn’t appeal to Olive Garden diners, most of whom are better acquainted with iceberg lettuce. Nuetzi convinced the opposition by cooking an Italian-style burger for them to try.

Nuetzi, 41, has been cooking since he was 14 — first dishing up pizzas at an Italian eatery in Atlanta. He started at Capital Grille in 1998, now owned by Darden, and moved to Olive Garden last year. One of his first moves has been creating the Italiano burger. Olive Garden’s burger is topped with mozzarella, prosciutto, arugula, pesto tomatoes and aioli spread.

The burger was tested twice earlier this year. Nuetzi tweaked it after diners weighed in — doubling the aioli spread, slicing the tomatoes instead of dicing them into small pieces because they fell out of the bun and made a mess. Perhaps the biggest change: French fries.

All Olive Garden sandwiches used to be served a la carte. Starting next month, they’ll be paired with Parmesan garlic fries.

“It just became obvious,” Nuetzi said. “You’ve got to serve a burger with fries.”

Darden shares have gained about 18 percent this year, and Brinker jumped 52 percent and DineEquity advanced 26 percent.


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