why the restaurant industry will be changing in the customers favor

My friend who has worked for Olive Garden for over 20 years told me that the company recently sent notice to all tipped employees that regardless of what their hourly rate is they would all go back to making minimum wage.  My friend at the time was making over $14 for their service and this change represented a $400/month deduction.  But the Olive Garden made it clear that this would not be a big financial burden for those employees because “Hey, you make your money on tips!”  The message here is…we don’t need to compensate you…that’s our customers responsibility.

The same company also reduced employee hours so that they wouldn’t have to provide health coverage…they blamed the impending hardship that would be caused by Obamacare (even though it has yet to take effect).  They also have slowly changed from offering fresh pasta made on premise to prepackaged pasta made cheaply in a commissary along with other prepackaged processed frozen food that they warm in a microwave (something that never existed in a Olive Garden 20 years ago).

The Olive Garden (and their sister restaurant Red Lobster under the same company umbrella, Darden Restaurants) is losing customers and money.  This despite attempts to revamp their menu (http://abcnews.go.com/Business/wireStory/darden-restaurants-coo-madsen-retire-20315570).  But why?

Any company, not just restaurants, that thinks they can reduce employee benefits and pay, lower the quality of their product, and still make money is lying to themselves and their investors.  The two most important things to running a successful business are a valuable product and great service, in the restaurant business this translates to food, front of house staff, and back of house staff.

How is this good for the consumer?  Customers reward those restaurants that provide great food and great service from happy employees.  If Olive Garden wants to make money then they will need to follow suit.  But if their history tells us anything it’s that they probably won’t because customers are not truly important to them anymore…money is and that’s the irony.  They can’t see how the two are really related beyond the fact that Olive Garden apparently thinks customers are just supposed to pay for this out-of-touch business plan.

The outcome is that future restaurants that want to be successful will have to follow the proper model.


Feel free to share this formula with anyone that’s interested.

Post a Comment

Your email is never shared. Required fields are marked *


  • Facebook
  • LinkedIn
  • Twitter