ORLANDO, Fla. — After 77 days of new leadership at Darden Restaurants, Olive Garden breadsticks are still unlimited, LongHorn Steakhouses don’t pay rent and Seasons 52 is under the same ownership.

Interim CEO Gene Lee says the new board will take its time on the biggest changes activist investor Starboard Value demanded before it took over the Darden’s board Oct. 10, namely selling the real estate portfolio and spinning off the smaller brands.

“I think they rattled the swords and got the board changed and now they are taking a step back,” said Christopher Muller, a professor at Boston University who studies restaurants.

Determining the fate of Darden’s real estate portfolio will be the first priority, Lee said during the company’s quarterly earnings call last week with investors. That will happen while the company moves forward with the old plan to reinvigorate Olive Garden.

The new board hasn’t made any changes in restaurant operations yet either, said Darden spokesman Rich Jeffers, and the new directors are evaluating the results of the turnaround plan instituted under old leadership.

The slowdown is a surprise after Starboard’s ambitious 100-day plan that included suggestions like cutting prep cooks, changing the way soup was prepared and eliminating levels of management, Muller said.

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But the first few months of new leadership has been a positive for investors. Darden also said that same-restaurant sales and total sales were up in the most recent quarter at its flagship restaurants.

There also was a $32.8 million net loss and a decline in the number of guests at Olive Garden and LongHorn Steakhouse. Much of those losses, Lee explained, were a product of the proxy fight with Starboard Value and recent restructuring.

Lee said the company isn’t committed to selling the real estate portfolio of 1,200 Darden brand restaurants and that the board and management wants “to look at what all the alternatives are,” Lee said.

Muller said the real estate move could take six months or more while Darden explores whether to sell off the properties piece by piece, create a real-estate investment trust or even keep the properties.

The real estate decision, Lee said, will likely come before a decision on whether to spin off Seasons 52, Yard House, Eddie V’s, The Capital Grille and Bahama Breeze.

Restaurant analyst Christopher O’Cull with Keybanc was disappointed that the company didn’t have a better idea of where it was going.

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“We understand the company is an awkward position given the board is still drinking from a fire hose and a CEO search is under way, but we think it will be critical for the company in the next six months to describe the vision for Darden under new leadership,” O’Cull wrote in a note to investors.

Darden also is putting the Olive Garden remodel plan on hold. When announced early in 2014, Darden said it would remodel about 80 restaurants during this fiscal year. Initial signs were positive, Lee said, but the company wants to see which levels of redesigns were the best investment.

Even so, at the restaurant level, Olive Garden has made dozens of changes to the way its kitchens operate.

At Olive Garden and LongHorn, the focus is on making operational improvements, fixes that are on pace to save the company about $20 million a year.

Olive Garden’s leadership spent several weeks in restaurant kitchens during the past year trying to figure out how to cut steps from the food-making process, Jeffers said.

For instance, Olive Garden prep cooks used to put basil into individual cups for cooks to use later when making meals. The intention was to cut waste. But separating the basil was costing Olive Garden about 130 percent more than the cost of the herb alone.

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The company made about 91 similar changes and cut the amount of prep work by 40 percent.

“Phase one was the prep production and now in phase two we are looking at how to get the food to the guests more efficiently,” Jeffers said.

Adding a permanent $9.99 “Cucina Mia” portion to the menu has also made the company less dependent on promotions, Lee said and allows the company to look at streamlining the menu and the kitchen.

“We can’t just ask our people to work harder, we have to design more efficient menus,” he said.


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