8 Scathing Criticisms Of Olive Garden's Business

Activist hedge fund Starboard Value published a 294-page manifesto against Olive Garden's management, menu and customer service on Friday.

The firm, which owns about 8.8% of Darden (Olive Garden's parent company), claims food quality and taste have "deteriorated significantly" at the Italian chain, and that some dishes are "inedible."

It also criticizes Olive Garden for spending money on renovating restaurants when it should be investing in improving customer service.

Here are the most compelling reasons Starboard gave for why Olive Garden's sales and traffic are falling.

1. Olive Garden serves dishes that are "astonishingly far from authentic Italian culture, such as burgers and fries, Spanish tapas, heavy cream sauces, more fried foods, stuffed cheeses, soggy pasta, and bland tomato sauce," the hedge fund writes.

"We believe many customers find [these dishes] extremely unappealing," Starboard adds.

Here are some examples of the menu changes that the firm finds unacceptable.

2. Olive Garden's food looks nothing like it's advertised.

Here are some examples:

Starboard described the Lasagna Fritta, or fried lasagna bites, as "barely edible."

The "Crispy Parmesan Asparagus" looks particularly unappealing.

3. Olive Garden has poor customer service.

Darden is spending tons of money remodeling its restaurants instead of improving customer service, Starboard says. The company is spending up to $600,000 per restaurant on renovations.

"Why would Darden spend money to attract customers into the restaurant, only to disappoint them with more the same underwhelming food and poor service?"

In the graphs below, Starboard compares Olive Gardens' Yelp and Facebook reviews to those of its competitors.

4. Menu design is "confused."

For example, Starboard writes, "Olive Garden recently introduced a high-quality, healthy trout dish that is generally prepared well, but by loading half of the oversized plate with bland and mushy pasta, Darden has contradicted the "healthy" image of the dish.

5. The company's logo change, which was widely criticized, was costly and unnecessary and it won't change customers' perception of the brand.

The change is an example of how Olive Garden management is "out of touch with their core customer," Starboard writes. It's expected to cost the company an estimated $42 million to update signage at all of its restaurants, according to Starboard estimates.

"Signage is irrelevant at this moment and is another example of capital misallocation - again this is the same strategy that failed for Red Lobster," the investors write.

6. The chain's famous breadsticks have "lost their quality taste."

"The lower quality refined flour breadsticks served today are filled with more air and have less flavor (similar to hot dog buns)," Starboard writes.

7. The "overcooked" pasta is "shockingly" unsalted and sauce is "ladled in a heap" on top of the dish instead of thoroughly mixed throughout.

"Shockingly, Olive Garden no longer salts the water it uses to boil the pasta, merely to get a longer warranty on its pots," the hedge fund writes.

8. The chain has raised prices to offset declining traffic, which is "alienating" customers.