Sometimes I read about the craziest things in my journey across the Internet’s many news sites over that morning cup of tea. Here’s one I found particularly interesting, because it’s relevant to our business here at Aria – not to mention huge implications for an entire industry not yet served by the benefits of recurring revenue.
It seems that the Olive Garden chain of restaurants has been under performing of late, financially speaking that is. So Darden Restaurants, the chain’s parent, came up with what it thought was a great promotion idea, to right the ship.
The Italian-themed eatery decided to offer a seven-week, all-you-can-eat pass for $100, which went on sale at the company’s website for a one-hour window of time. Mama Mia! That’s a lot of pasta!
The promotion got everyone’s attention. More than 500,000 would-be gourmands stormed the website in an attempt to grab one of those valuable (now sold out) passes. Obviously, Darden wasn’t prepared for the hungry horde on the hunt for multiple helpings. I think of this as a kind of test market for recurring revenue for the restaurant industry. What we have here is a company in a sector of the economy that has yet to jump into recurring revenue and subscription pricing. Its toe so in the waters with its all-you-can-eat pass promotion.
There are already a number of restaurant groups that offer smorgasbord pricing, which get all you can eat for the price of a single sit-down meal. They’re great places to chow down, if you’re on a budget and have big family that wants a night out.But it seems to me that the prepared food industry is ripe (if you’ll excuse the word) for all that recurring revenue has to offer, such as smoothing out sales and a profit streams over a long period of time.
Wall Street loves it when companies make the switch. We’ve talked about Adobe’s decision to switch to monthly pricing for digital copies of its Creative Suite of consumer software in place of shrink-wrapped software packages found on store shelves. Based on this little test at Darden’s Olive Garden — and overwhelming response — I’d say the division is ready for recurring revenue, if it can get all the kinks worked out.
Perhaps as an adjunct to other pricing models, including take-out sales based on orders taken over the Internet and increased wine sales at the dinner table. Pricing on a recurring basis is becoming more and more popular with consumers. It’s what they want, and what they are demanding. And since we’ve become a nation that “eats out,” it is the logical next step for the prepared food industry. It’s just a matter of figuring out how to estimate consumption patterns in the aggregate, then coming up with a pricing that covers all the costs, with enough left over for a profit.
Now to be sure, Olive Garden came up with pricing that’s probably way too low in the end. After all, this was a gimmick more than anything else, a successful marketing ploy. But what a great case study this is about the pent-up demand for prepared food.
Consider that some of the consumers who were able to snare one of the $100 passes sold them on eBay for $300 or more, despite the fact that Olive Garden warned they weren’t transferrable. We’ll have to wait and see how that turns out. In the meantime, let me remind you of what we often say around here, “Recurring Revenue: It’s not just about movies and music subscriptions.”
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