Luke Sharrett—Bloomberg via Getty Images
By Brad Tuttle
October 4, 2016

Olive Garden and its chain restaurant siblings appear to be quite happy with how business has been lately.

“We continued to gain market share and our same-restaurant sales growth outperformed the industry by a considerable margin,” Gene Lee, the CEO of Darden Restaurants, which owns Olive Garden and LongHorn Steakhouse, said in a press release sent out on Tuesday with the company’s latest quarterly results. Same-restaurant sales at Olive Garden were up 2% compared to the same period last year.

But all is not well in the restaurant industry as a whole. Most restaurant stocks have fared poorly in 2016. Ruby Tuesday, a casual-dining competitor to Olive Garden and LongHorn, saw its stock price plummet this past summer after announcing poor same-store sales and plans to close nearly 100 locations.

Darden doesn’t expect the restaurant business in general to suddenly start booming, either. “We’re not assuming the industry is going to get a whole lot better,” Lee said in a conference call on Tuesday, according to Business Insider. “What would be helpful,” Lee said, is if more restaurants followed the path set by Ruby Tuesday and simply decided to close locations. “We’ve seen some big announcements of closures lately, and I also think that if you drive down the road you’re starting to see more restaurants closed.”

Beyond the crowded, competitive marketplace, restaurants today are struggling because they face competition in the form of convenience stores and other on-the-go food options. “Restaurants are competing against a lot of other choices, not just restaurants,” Lee said.

Read Next: Americans Aren’t Going Out to Lunch As Much

What’s particularly interesting is that the CEO doesn’t seem to consider cooking at home to be one of the choices that his company is competing against. For months, grocery prices have fallen at the same time that restaurant prices have climbed. Staples like milk, eggs, and beef have all gotten cheaper lately, and because restaurant prices have continued to creep upwards, it should come as no surprise that many Americans have stopped going out to lunch as much.

The Associated Press noted on Tuesday that Olive Garden’s sales increase “was driven by higher prices and mix of more expensive items,” even as “customer traffic slipped.”

Nonetheless, Darden CEO Lee cast off the idea that the combination of cheaper groceries and higher restaurant prices is pushing more people to hit the supermarket and cook at home rather than venturing to a nearby strip mall for pepperoni fettuccine and Italian pot pies.

Read Next: Good, Bad, and Ugly of Paying $100 to Eat at Olive Garden for 7 Weeks

“It’s hard for me to quantify the impact on casual dining,” Lee said regarding the decrease in grocery prices, per the Wall Street Journal. “I have a hard time believing that people are trading out [of casual dining] because they can get their groceries a bit cheaper. I’m just having a hard time with that.”

You May Like