Monday, March 11, 2013

Olive Garden Tries to Reverse the Serving-Size Trend

Olive Garden says it is going to try “smaller plates,” a restaurant way of saying it is reducing its serving sizes. The prices will be lower, and the restaurant chain hopes the lower prices help win back customers. And the smaller plates? In restaurants, plates are a necessary optical illusion to make the food look like it is the right size. If you plan to scale back the food, you have to scale down the plates to match.

Olive Garden has seen its customer count slowly erode along with its reputation. Opinions of its food quality and its faux Tuscan style have faded as the restaurants have remained relatively unchanged over the years, a measure of a public slowly changing its mind about what food should be. Some customers were lost late last year when the public reacted badly to a plan to cut costs by laying off all full-time workers, and that’s another reason Olive Garden is looking to shake up its image.

The issue of labor costs is not unrelated to the question of portion size. It takes chefs and servers only slightly longer to make and deliver a portion twice the size of what a person would rationally eat. A larger serving at a higher price makes the food itself a larger proportion of the cost, and the labor and real estate costs relatively smaller. As long as the larger portions persuade customers that they should pay more, whether they eat the excess food or not, it is favorable for the restaurant and server. But obviously, there are problems.

The food waste is a problem. In this strategy, one third to one half of the food in a restaurant entree is not really used as food, but just to create an illusion. If the customer eats the amount they really want, the excess is often just thrown away. If the customer eats the excess food, that may be worse. A stuffed customer leaves feeling at least vaguely uncomfortable, and with excess body weight that may have health consequences. There is also the issue of the higher prices, which may be an obstacle for most customers.

So beyond a certain point, the high prices and even the large portions themselves deter customers. U.S. sit-down restaurants in general have been pushing uncomfortably beyond that limit for the last 20 years, and the reputation and profitability of the sector have suffered. How often do potential customers pass by a restaurant like Olive Garden, looking for alternatives because they are “not that hungry”? This will happen less often if customers see prices and portion sizes shrink. With its other problems, it will be tricky for Olive Garden to find just the right balance, but if it does, other restaurants are ready to try to copy its approach.