Olive Garden's parent company says it's luring diners in by not raising prices as much as rivals — even if it's not offering hefty discounts

• Olive Garden hasn't been raising prices as much as its rivals — and execs say this is helping it buck industry traffic trends.
• Its guest counts topped industry benchmarks, even though same-restaurant sales slumped.

Olive Garden's parent company says the Italian chain is bucking industry traffic trends and luring in diners by not raising prices as much as its competitors.

Olive Garden's same-restaurant guest counts in the fourth quarter were about 0.6% higher than the industry benchmark, Darden Restaurants CFO Raj Vennam told investors at the company's earnings call on Thursday, using Black Box data.

Despite this, Olive Garden's same-restaurant sales in the quarter fell by 1.5% year-over-year, Vennam said. He attributed the fall to its "decision to minimize pricing."

Olive Garden's average prices went up by about 1% in the quarter, he said.

"Maybe that's why we didn't outperform on the sales side, but we did continue to outperform on the traffic side," CEO Rick Cardenas said.

"If we would have taken the pricing that the industry took in the fourth quarter, Olive Garden would have been positive and would have performed even more," he said.

In the year to late May, Olive Garden raised prices by about 3.5%, Vennam said — putting it in line with average increases at full-service restaurants across the US. Olive Garden is planning to increase prices by between 2.5% and 3% over the next year, Vennam said.

Other brands Darden owns include LongHorn Steakhouse, Cheddar's Scratch Kitchen, and Ruth's Chris Steak House.

Restaurant prices rose rapidly during the pandemic amid increases in both food and labor costs. Grocery prices rose too, but the rate of increase has since stabilized, whereas restaurant inflation is still higher than it was pre-pandemic.

Diners have noticed this, with many complaining that fast food in particular isn't as good value as it used to be. Some are cooking more at home instead, while others are switching to casual-dining chains like Chili's, Applebee's, and Olive Garden, where they can have a sit-down meal with their family for only a few dollars more each.

In recent months, some casual-dining chains have focused their marketing on discount combos to lure diners away from fast-food giants. Chili's, for example, has a "3 For Me" deal offering an appetizer, entrée, and drink for $10.99.

Cardenas said Olive Garden had shunned the deep discounting its rivals were focusing on, which he noted had led to the chain's competitors attracting some customers from fast-food businesses.

But Olive Garden's approach of focusing on low prices generally rather than offering hefty discounts was more sustainable in the long run, he said.