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Darden Looking to Offer Delivery Service at Olive Garden?

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Darden Restaurants, Inc.DRI recently joined a bandwagon of restaurateurs that are partnering with third-party delivery service providers. The company announced during its fiscal second-quarter 2016 earnings call on Dec 18 its plan to collaborate with third-party delivery service providers like Postmates, an app-based delivery service, to introduce delivery at its Olive Garden branded outlets.

Currently, a third-party delivery provider covers around 50% Olive Garden restaurants but is not as productive as the company expected. Therefore, it is looking for a single operator to handle the delivery for 70-80% of the brand throughout the U.S.

Olive Garden's ToGo business, which offers online ordering at select locations, is also growing rapidly and currently accounts for about 10% of total sales. The company also stated that it was testing delivery for large catering parties.

In fact, comps at Olive Garden were up 2.8% in the recently reported quarter, marking the fifth consecutive quarter of comps growth for the brand since the fourth quarter of fiscal 2013. Initiatives like simplifying kitchen systems, improving sales planning and scheduling, developing core menu items and making smarter promotional investments are yielding results. Olive Garden also completed the addition of tabletop tablets at all its 800-plus U.S. locations this November, which has lowered waiting times and increased traffic at the restaurants.

Olive Garden's recent turnaround proves that technology has become an integral part of restaurant-ordering and Darden is no different. The digital wave has hit the U.S. fast casual restaurant sector as more and more restaurateurs are deploying technology to enhance the guest experience. While smartphone apps lure consumers to food joints, video menu boards in quick-service restaurants and tabletop devices are some of the tools used to push sales.

Moreover, coffee giant, Starbucks Corporation SBUX and fast casual operator, Chipotle Mexican Grill, Inc. CMG have already teamed up with Postmates to offer delivery at select locations in the U.S.

Darden currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same sector is BJ's Restaurants, Inc. BJRI sporting a Zacks Rank #1 (Strong Buy).

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CHIPOTLE MEXICN (CMG): Free Stock Analysis Report

BJ'S RESTAURANT (BJRI): Free Stock Analysis Report

STARBUCKS CORP (SBUX): Free Stock Analysis Report

DARDEN RESTRNT (DRI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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