The deal hasn’t been inked.
But given glowing remarks Monday from the mayor and City Council, the city manager’s recommendation, the endorsement of this newspaper and the desire of residents, it’s safe to say DeKalb will loan the world’s largest restaurant corporation ($8 billion in annual sales) $900,000 to build an Olive Garden.
If we don’t, it would be a “deal breaker,” and DeKalb needs to show Darden Restaurants, Inc. (Olive Garden’s parent company) that we have “skin in the game.”
Phrases like “deal breaker” or “skin in the game” imply that assistance for a new business is absolutely critical and the startup is sweating enormous risk.
In this case, that’s ridiculous. If demolition and refurbishment of the lot Small’s Furniture City once occupied is such a hindrance, there are vacant lots around DeKalb which would attract the same customers. True, an upscale restaurant would likely brighten that area and attract new businesses.
But overwhelmingly, evidence that the deal constitutes nearly zero risk – for Darden – comes from Darden’s data and commentary.
According to its 2012 annual report, Olive Garden’s 792 stores generated $3.6 billion in sales; each store averaged $4.7 million. Total Darden sales amounted to $8 billion, a 6.6 percent increase over fiscal 2011’s $7.5 billion in sales. And, it recently scraped up $585 million to buy Yard House USA restaurants.
Trudy Blakeman, director of incentives, property and sales taxes for Darden, said, “When we make a $4.5 million investment, that’s Darden’s capital. We will be a part of your community for a very, very long time.”
But only if DeKalb fronts this money, because according to Allea Newbold, who works for a tax services firm Darden hires for consulting, the chain does not build restaurants if there are “extra costs.”
DeKalb stands to gain $180,000 to $195,000 a year in sales tax revenues, according to Roger Hopkins, the city’s economic development coordinator, and estimates are that the loan would be repaid in 4 to 5 years. And, residents who crave its fare will be happy.
To recap: Nothing is certain, but it’s extremely likely that Olive Garden in DeKalb will make lots of money.
So, we MUST lend Darden $900,000?
No, but we’re going to. This is the difference between could and should.
That DeKalb would loan nearly a million bucks to an incredibly rich corporation, with little negotiation, no compromise, easy terms and against the wishes of many, to hire about 55 people (mostly at menial wages for menial tasks) angers me.
I’ve had five restaurant jobs. It’s hard, thankless, low-paying work with minimal benefits.
Olive Garden’s food, ambience and service are all pretty good, but not as good as any of three Italian restaurants I recall that residents didn’t support.
About 47,000 Consumer Reports readers agreed, rating Olive Garden only so-so among national Italian food chains in August. Like one person said online, “People here don’t want good Italian food, they want Olive Garden.”
Olive Garden, which is experimenting with shifting workers to part-time to avoid paying for health care even though (according to the Associated Press on Tuesday) it has already lowered labor costs to 31 percent from 33 percent, lowered pay for workers and managers and instituted a “tip sharing” program so waiters and waitresses share tips with other employees.
This program, the AP says, “allows Darden to pay workers a far lower ‘tip credit wage’ of $2.13, rather than the federal minimum wage of $7.25 an hour.”
• Jason Akst teaches journalism and public relations at Northern Illinois University. You can reach him at firstname.lastname@example.org.