Olive Garden Never Ending Pasta Pass

Everyone knows the importance of the return customer. Creating a base of regulars is like investing in Treasury Bills. You know they are there and over time you will make money. In other words regulars are your safety net. But attracting new customers is required for a successfully restaurant. The rule of thumb is at least 20% of your customer base should be first time diners. Of these new diners, some will become regulars, some may only return once or twice, some may never return, but almost all will talk about the restaurant. A simple, “Hey remember that place from last week? Let’s go there with the Smiths,” will bring more people to your restaurant. Word of mouth is still the most important medium of advertising for bars and restaurants. I am much more likely to dine at a restaurant my brother tells me about than a restaurant I see on a television commercial.

Enter the Olive Garden.Owned by the massive restaurant group, Darden, the Olive Garden is a casual full service American-Italian restaurant. Olive Garden is starting to sell a new special today at 3pm. Their new special, known as the never ending pasta pass, consists of unlimited pasta and soft drinks for an entire week for $100. Considering the average check per cover at Olive Garden is less than $20 from a business stand point, Darden must be assuming that the average person will purchase less than 5 meals with each pass.

Darden has been slowly losing profits for about a decade. Due to movements pushing healthy, local, organic, and other buzzword diets, the restaurant group has seen its average covers slowly decline and thus profits are following suit. Not one to give up a fight Darden has been planning and executing major brand changes including the sale of Red Lobster a few months ago. But this new sale of the never ending pasta pass, is a bad idea. Olive Garden has a large regular customer base. And this pasta pass is in essence a rewards card, because the more you use it the more its worth. If a customer gets lunch and dinner for a whole week (totaling 14 meals), each meal will cost them $7.14. What Darden is hopeful for is those with the pasta passes will go out to diner with non pass holders. Once again do to the large Olive Garden regular customer base, I don’t foresee this promotion helping Olive Garden’s bottom line. Overall the month of October will show the lowest profits for Olive Garden because of the drop in average check caused by these passes. In essence Olive Garden is building on it’s already substantial group of regulars instead of attracting new diners. Following a trend such as local produce by building gardens on the roofs of the restaurants would be a better business idea for attracting new customers as oppose to rewarding regulars.

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