Darden sheds 11% of support staff as part of a 'strategic restructure'

Dive Brief:

Darden Restaurants, parent company of Olive Garden, LongHorn Steakhouse and six other brands, said on Thursday the company declined same-store sales by 29% during its Q1 2021. This is an improvement from its Q4 2020 results, in which same-store sales decreased by nearly 48%. CEO Gene Lee said the Q1 2021 earnings release that performance exceeded expectations.
Despite the restaurant company's marked improvement, Darden began a strategic restructuring of its corporate workforce on Aug. 31 to reduce costs and "better align corporate expenses to the company's sales in the new environment." The plan included offering corporate support center employees and field management team members a voluntary early retirement inceptive program, additional involuntary strategic workforce reductions and involuntary separations of some senior management, which included the elimination of Chief Operating Officer David George's position.
Darden's elimination of the chief operating officer role may be the biggest shock, as the company balances on-premise and off-premise business more than ever before. Digital sales now account for more than half of Darden's off-premise sales, Lee said on the company's investor call.

Dive Insight:

During the company’s earnings call, CFO Rick Cardenas said the net 11% workforce reduction, or 225 employees, at its restaurant support center and among field operations leadership is expected to save between $25 million and $30 million annually. The workforce reduction strategy is expected to help keep general and administrative expenses below 5% in the near term, Lee said.

The restructure itself may come as somewhat of a surprise, as the company invested over $100 million in emergency pay for its team members in the beginning of the pandemic. Lee said this investment has incentivized furloughed employees to return and engage in the company. But the restructuring program affected corporate-level and field management-level employees, not the thousands of frontline restaurant workers furloughed in April. Furloughs ended in early August, Darden spokesperson Rich Jeffers told the Orlando Sentinel, and the company had brought 60,000 of roughly 150,000 furloughed employees back in June. Since then, an additional 25,000 hourly workers have returned.

"Our team member retention is better than ever, which is really exciting to see. I'm looking at retention numbers for our team members that I’d never thought I would see in this industry," Lee said on the call.

That retention should work heavily in Darden's favor, particularly as capacity continues to expand and dine-in business continues to pick up. That is, assuming there is not a second round of widespread dining room shutdowns.

That's not to say Darden's employment will be back to pre-COVID levels anytime soon.

"We're tracking number of servers per restaurant, per day trying to understand," Lee said. "As the business starts to grow, making sure we have the appropriate staffing … We're erring on the side of more labor, not less."

Restaurant unemployment is a major narrative in the industry from the COVID-19 crisis. In August alone, 14 states reported restaurant job loss and the industry overall remains nearly 2.5 million jobs below its pre-coronavirus peak, according to the National Restaurant Association.