If Olive Garden Raises the Wage, Here's How Much It'll Cost You

June 3rd 2015

Sarah Gray

On May 31, 2015, Olive Garden's biggest shareholders worked for an evening stint at the chain restaurant waiting tables, serving food, and greeting guests. 

"I was waiting on tables, greeting guests, serving some food, in the kitchen," Jeffrey Smith CEO and founder of Starboard Value told Bloomberg. "All of us did that. It was an amazing experience because we felt as board members how are we going to make good decisions in the board room without really knowing what's going on in the restaurants?"

While Smith and his fellow board members experienced a night in the life of Olive Garden servers, it is unclear if they got a taste of the low wages that tipped workers receive at the most well-known chain of Darden Restaurants -- the largest full-service restaurant company in the world.

Starboard Value hedge fund

In 2014 the activist hedge fund group Starboard and their partner Barington Capital, which own about 8.8 percent of Darden Restaurants, made headlines for writing a scathing 294-slide presentation on Olive Garden. It critiqued everything from their unlimited bread stick strategy to not salting the pasta water. Many of the criticisms however were on how to cut costs. "Through its company-wide margin-improvement proposal, Starboard believes Darden can earn up to $326 million in additional operating earnings," Business Insider reported. The money-saving measures included everything from changing the type of take-out container, to a strategy much less-reported than the bread stick change-up: cutting labor costs.

Low wages for Darden Restaurant workers

According to a 2014 report from Restaurant Opportunity Centers United (ROC United), titled "Drop of a Time" and supported with research from Professor Chris Benner, of University of California, Davis, Starboard proposed several cuts to labor, "including laying off up to 1,600 employees, increasing part-time scheduling, and passing more work onto sub-minimum wage employees."

When "Drop of a Dime" was released, 20 percent of Darden Restaurant's around 150,000 employees (at restaurants like Olive Garden, Longhorn Steakhouse, The Capital Grille, Yard House, Bahama Breeze, Seasons 52, and Eddie V’s) made $2.13 per hour -- the tipped federal minimum wage. According to the "Drop of a Dime" report, Starboard wanted to shift more labor to tipped workers who only make $2.13 per hour.

"The taxpayer cost of a single Olive Garden is $196,970 annually," according to another study from ROC United. Around half of full-service restaurant workers (which excludes fast-food workers) are on some form of public-assistance. This means taxpayers are subsidizing the low wages that Darden is paying its workers. The estimated public assistance program cost for Darden employees is $339,772,942.

ATTN: recently made a video about the nation's top three largest full-service restaurant chains that depend on taxpayer dollars to subsidize public assistance benefits for their underpaid workers:

On top of paying low wages to workers -- and passing the burden to taxpayers -- Darden Restaurants has actively lobbied against legislation that would have provided better conditions for its workers -- from higher minimum wages, sick leaves and fair scheduling. Since 2007, Darden Restaurants has spent around $1.3 million per year on lobbying, which is second only to McDonald's spending on lobbying.

What if Darden Restaurants paid a higher wage, and passed it off entirely to the customer?

Darden Restaurants could raise its wages to $15 per hour, and even if it passed the extra cost of higher wages to the customer, the price increase of an Olive Garden meal would be negligible. "For example, the cost of Olive Garden’s Tortellini al Forno would increase by 10 cents, Longhorn Steakhouse’s Spicy Chicken Bites would increase by 10 cents," ROC United reports. "In fact, the average check at Olive Garden would increase from its current $16.75 to $17.10." Watch the video from ROC United below to learn more:

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