A Hedge Fund Wants to Use Technology to Cut Thousands of Jobs At Olive Garden. So Why Is Everyone Focused on Bread Sticks?

Stripping assets, impairing operating strategies, cutting jobs: it's all part of the relentless quest for efficiency. Return more capital to those who know how to use it in order that it can be more optimally employed. Or at least that's the theory.

So the recent story about a hedge fund attempting to take over the Oliver Garden restaurant chain attracted a lot of attention not because of any of those tried and true financialization tactics, but because the hedgies charged that the chain handed out too many bread sticks. A little more discipline in the carbs department, they solemnly aver, would supposedly goose profits and give investors their, ahem, just desserts. 

The absurdity of that claim raised awareness about the degree to which consumer preferences are being driven by considerations that may or may not have anything to do with customer satisfaction - or with reality. But the story also underscores the impact that technology plays in the hopes and dreams of those wishing to shift the flow of commercial results in their direction.

The irony is that many businesses like the chain in this story are suffering in part because the demographic at which they are targeted can no longer afford their services precisely because they are being disintermediated by devices. There are other issues here as well - the destabilization of the business model through real estate sales in order to hike hedge fund returns being a prominent one - but the larger issue is the way in which technology is being employed to drive organizational financial outcomes in ways that may ultimately prove counterproductive, as tasty as the short term outcome may be. JL

Paul Constant comments in The Slog:

Olive Garden, Starboard claims, is "lacking appeal to Millennials," with "not enough social media." Olive Garden should be using tabletop tablets; tablets can reduce dining times by 5-10 minutes per tables." More meaningfully, "tabletop tablets will allow Darden to reduce labor costs as well."

Once, I dated a woman who loved Olive Garden. (She was from Florida; the relationship didn't end well.) Even though she lived on Capitol Hill, within walking distance of literally dozens of better restaurants, whenever it was her turn to choose where to eat we'd get into her car and go to the Olive Garden at the Northgate Mall. (The Northgate Olive Garden closed a little while after things exploded between us. It became a Chinese buffet, which itself recently closed.) As anyone who follows my work knows, I'm not generally a fan of corporate chain restaurants, so you can imagine what my Olive Garden experience was like. The pasta was slimy and pale, the sauce was a glorified ketchup. Everyone sitting around us always seemed to be in the middle of a fight over some stupid comment someone made in the car on the way there. The salad tasted like a toxic stew of oil and cellulose, the breadsticks were pillowy and flavorless, except for the butter-like grease slobbered over the top of them just before they arrived at the tables. I felt sorry for the servers and would frequently overtip, but I never complained to my girlfriend about any of it; I kept a lot to myself back then. I haven't been in an Olive Garden since. To be honest, I haven't wasted a lot of thought on Olive Garden since then, either.
But lately, Olive Garden has been on my mind. By now, you've probably read about Starboard Value, the aggressive hedge fund that blamed Olive Garden's recent financial decline in part on the restaurant chain's tendency to hand out too many breadsticks to customers. (Darden Restaurants Inc, the company responsible for Olive Garden, has refuted the charges, saying that the breadsticks are a symbol of "Italian generosity.") It's a stupid little story, the kind of thing that makes you wonder if perhaps the Starboard breadsticks complaint wasn't whipped together in some PR firm's boardroom as a way to get people talking about Olive Garden again. But then a PDF of Starboard's 300-page presentation about the future of Olive Garden went online. I read it. It's not a PR stunt. It's a sincere document that exemplifies the worst of corporate communications: Stultifying language, vapid repetition, pointless visual gimmicks, and an all-consuming blandness that threatens to descend on your brain in a feathery cloud and nibble your prefrontal cortex to pieces. Allow me to give you a summary.
Early in the document, which, I would like to remind you, is 300 pages long, Starboard claims to have "invested in Darden because of the substantial opportunity to unlock value with the right plan and right leadership." Starboard praises Olive Garden's "Great brands" and "valuable assets," but it warns that "Darden has lost its way" lately, as proven by their recent sale of Red Lobster. Darden becomes a piñata for the majority of the document, with Starboard complaining about Darden's "long history of disregarding shareholders' interests," along with a menacing "propensity to silence critics." The document begins to read like an anxious high-school suitor, slandering the boyfriend of the girl he wants to date; after a while, a reader has to ask how Darden managed to build several multi-national corporate restaurant chains in the first place if they're so bumbling and incompetent. Can there be any hope for a business owned by a company as cowardly and dumb as Darden? Fear not! Starboard promises it can restore Olive Garden's "value proposition" and "increase guest counts substantially" with "a turnaround of the Olive Garden concept." Starboard then fires a few bullet points from their restoration plan over your head:

• Recreate Italian authenticity within Olive Garden
• Make service a top priority.
• Reestablish the value proposition
• Innovate to stay relevant
• Improve the labor model

"But wait," I hear investors in Darden thinking, "Why should I trust Starboard? Aren't they just a gaggle of Bain Capital quick-turn wannabes?" Starboard responds to those concerns with a list of their strengths. Next to their most important strengths, Starboard includes three green checks that look like this:

This is one of main reasons why PowerPoint has become a joke: It transforms the art and science of visual communication into something any schmuck with an itchy cut-and-paste trigger finger thinks she can do. Rather than just explaining their strengths using actual human words, someone at Starboard decided that they were going to demonstrate surety by including an image to fortify their confidence. And they were going to do that with not just a checkmark, and not even just one large green checkmark, but rather with three large green checkmarks in a row—BANG! BANG! BANG! any questions, motherfucker?—because even a cross-eyed kindergartener understands three green checkmarks in a row mean something good happened. So you've got concerns, Darden? Let's go through them, one by one:
"[Does Starboard have] Restaurant operating experience?"

Well! Three green checkmarks! I guess they do have restaurant operating experience! But here's another question: "Will [Starboard] embrace Darden's roots?"

That certainly couldn't be any clearer. Look at those three erect checkmarks! Those surely spring from a desire to retain Darden's corporate culture! But here comes the clincher: "[Does Starboard have] Proven ability to innovate?"

What do you know? Three more of those little guys! I know I couldn't ask for any clearer indication of a proven ability to innovate than three clip-art check marks, pasted all in a row into a PowerPoint table. And how does Starboard intend to innovate with the Olive Garden brand? Why, by copying everything that multinational corporation Brinker International Inc. did to turn Chili's around a few years ago, of course! At this point in the document, as if to further demonstrate their commitment to innovation, Starboard incorporates quite a few slides from a Brinker PowerPoint presentation about Chili's success, starting with a slide demonstrating Chili's "incentive alignment":

Every idea has to have 3 wins
Win for the Team
Win for the Guest
Win for Chili's

Next comes the most-quoted part of the report, where the hedge fund clambers into the kitchen and starts complaining about the quality of the food. It's full of all sorts of factoids, and at times Starboard's document feels like a restaurant review written by an impossibly fussy accountant, complaining about how "after sitting just 7 minutes, the breadsticks deteriorate in quality," and that "the industry standard for chicken specifications is =/- 0.5 ounce, but Darden requires their chicken to be =/- 0.25 ounce." Starboard finds fault with what they perceive to be Darden's overspending on simple items, like slightly pricier doggy bags, straws that are cut at "non-industry length," menus published on "heavy stock paper, with lots of colors and folds," and a to-go container they sniffily refer to as "the 'Cadillac' container of the industry." Even the vegetables on the side dishes don't escape examination: the asparagus is of "tight length and spear specs, not in line with industry norms." Why, Starboard asks, can't the Olive Garden be more like Chili's, which "paved the way for culinary innovations like pizzas and flatbreads?"
After the fifty or so slides that gleefully dissect the menu, Starboard starts to get serious, with a bunch of graphs illustrating what they believe Darden's plan to be (spend more and earn less) and what Starboard's plan is (spend less and earn more). It's the boardroom equivalent of a John Wayne film, with the white hats and the black hats clearly delineated—Darden is against profits for shareholders, Starboard is for profits, and for "innovations" like technology. Olive Garden, Starboard claims, is "lacking appeal to Millennials," with "not enough social media." In a chirpy attempt at constructing a catch phrase, we are informed that "Olive Garden is the 800lb gorilla of Italian casual dining, but is a dinosaur when it comes to using technology in branding and marketing." There is no Olive Garden app (Chili's, we are solemnly informed, has an app). Olive Garden should be using tabletop tablets to guide the customer's dining experience; Chili's does it, after all, and tablets support an "efficient dining experience and can reduce dining times by 5-10 minutes per tables."
Perhaps more meaningfully, "tabletop tablets will allow Darden to reduce labor costs as well." None of the news reports I saw about Olive Garden's breadstick problem mentioned the frequent subtle allusions to the many cuts Olive Garden's workforce would suffer throughout the company under the Starboard plan—in the kitchen, the front of house, and in the corporate offices. I guess lost jobs don't pull in eyeballs the way a potential dramatic breadstick reduction does. The document is full of proposals to cut labor costs, including a call to modify "the front-of-the-house service to rely more on tipped servers, less on higher-salaried or higher-wage bussers and food runners," effectively moving payroll costs onto the customers, in addition to the company's attempts to train the customers to do the server's job themselves via tabletop tablet.
Oh, but never fear: In Starboard's new corporate culture, there will be plenty of customer service! Starboard promises to begin "informative, vibrant, ongoing conversations to appeal to different audiences: Millennials, Gen X and Y, and Baby Boomers" and also court "food bloggers, reviewers, and influencers." Those servers who do not lose their jobs to an iPad will be "knowledgeable, deft, happy, and genuinely passionate" about waiting tables at Olive Garden, or they will not be employed there. Genuine passion comes cheap, don't you know.
Starboard's report has achieved the unthinkable: It has made me sympathetic for the leadership at Darden. Not that I'd ever willingly eat at an Olive Garden—I'm not an idiot—but in this time when Wall Street's spreadsheet goons have tracked down and assessed every fraction of a cent in the operations of a chain restaurant, at least Darden managed to survive for a few years without bowing to the Mitt Romneys of the world. This Starboard document is a ghoulish representation of everything that is wrong with corporate culture: obsessed with herd mentality, overly fond of meaningless catch phrases, and happy to euphemize job losses to the point where readers of the report get more upset over the thought of having to ask for a few more breadsticks than over the idea of real human beings losing their low-paying jobs.
With all that in mind, I'm sure Starboard's plan will be a roaring success and more Americans will eat at Olive Garden than ever before. The food might improve a little bit, but it's still going to be empty calories and repurposed garbage. People will leave Olive Gardens with full bellies, and they'll also carry with them the almost intangible feeling of being a little bit angrier than they were when they walked in, and they won't ever be able to fully understand why those feelings of rage and confusion well up inside them every time they eat in soul-crushing chain restaurants. When you allow people who think and write and talk like the brain trust at Starboard to put food on the table in front of you, you're giving up a whole lot more than a decent plate of pasta.