The Math Behind Olive Garden's 'Never Ending Pasta Pass'

Summary

WSJ Your Money Briefing

Episode: The Math Behind Olive Garden's 'Never Ending Pasta Pass'
Date: August 19, 2019
Host: Lee Hawkins (WSJ)
Guest: Spencer Jacob (WSJ Heard on the Street Editor)

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Episode Overview

This episode delves into the business logic and financial impact behind Olive Garden’s annual "Never Ending Pasta Pass" promotion. Wall Street Journal’s Lee Hawkins interviews Spencer Jacob, who explains how this offer works from both a marketing and financial perspective, why it benefits Olive Garden, and how it compares to other "unlimited" deals. They explore consumer behavior, company strategy, and even some personal experiences with the pass.

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Key Discussion Points & Insights

The Never Ending Pasta Pass: Structure and Intent

• Promotion Basics: Customers pay $100 for a card granting unlimited pasta, soup, salad, and breadsticks for nine weeks; 50 customers each year also nab a $500 lifetime pass. (02:18)
• Limits and Upselling: Drinks, desserts, and some premium toppings cost extra; Olive Garden profits from upsells and accompanying non-pass guests. (03:06)
  • "Are you going to eat by yourself? Are you going to bring your wife or your husband or your kids? Unless they have pasta passes, they're paying customers." — Spencer Jacob [03:19]
• Break-Even Calculation: The average customer breaks even after 9 visits, but most use the pass about 14 times. Pasta itself is inexpensive; it would take far more visits to hurt the restaurant financially. (03:06, 06:00)
  • "By the ninth time you ate pasta, you'd be breaking even. On average, people eat 14 times... but pasta is not that expensive." — Spencer Jacob [03:48]

Marketing Value & Investor Perspectives

• Off-peak Strategy: The pass is sold and primarily used during September–November, traditionally a slower period for restaurants, boosting foot traffic when needed. (03:06, 04:05)
  • "It's coming at a time of year when their restaurants are not that full... It's great publicity." — Spencer Jacob [03:14]
• Investor Sentiment: Darden Restaurants (parent company) has improved performance since introducing the pass, but it's more a tool for buzz and goodwill than a primary profit driver. (04:05)
  • "It creates buzz. It creates a lot of goodwill, creates a lot of jokes, too." — Spencer Jacob [04:23]

Personal Experience: Living on Pasta

• First-Person Account: Jacob shares his own adventure eating daily at Olive Garden for six weeks after winning a pass. He gained six pounds despite frequent workouts and found the food surprisingly enjoyable. (04:52)
  • "I ate there, I think, for six weeks straight, every single day... I got up at 4:45 every morning to go to the gym to try to work off the carbs... and I gained six pounds." — Spencer Jacob [05:06]

The Math and Margins

• Volume vs. Cost: Even at 14 visits in nine weeks, Olive Garden’s margin on pasta remains high. True "losses" happen only for outliers (e.g., one passholder went 140 times), but such cases are rare and often bring positive press. (06:00)
  • "It's probably not going to move the needle very much... You would have to eat there a lot more than 14 times to actually cost them money." — Spencer Jacob [06:00]
• Lifetime Pass Holders: Rarest of the rare—only 50 people. Olive Garden rewards exceptional customers with ongoing perks (one record-holder gets a free pass annually). (06:00)

Cautionary Tales: When Unlimited Backfires

• American Airlines Comparison: In the 1980s, AA’s unlimited first-class pass led to massive losses and legal headaches. Key differences: scale, cost, consumer usage, and company motive (desperation vs. planned marketing). (07:04)
  • "There were a few people... who basically cost them over a million dollars a year in free flights." — Spencer Jacob [07:13]
• Not Designed for Revenue: The Pasta Pass is about customer engagement during slow periods, not quick cash generation. (07:04)

Who Buys These Passes?

• Deal-Hunters and Tech-Savvy Users: Data suggests clustering in tech-heavy areas; quick-clicking programmers may be overrepresented among buyers, but broad misuse has not been observed. (08:17)
  • "They tended to cluster around... places where there are lots of programmers... I think some tech-savvy people figured out how to kind of maybe jump ahead of people in line." — Spencer Jacob [09:05]

Fun Facts and Anecdotes

• Lifetime Pass Fun Fact: Eating Olive Garden pasta for 60 years would amount to bowls stretching the length of 98 Leaning Towers of Pisa. (10:01)
  • "If you ate there for 60 years, you would have bowls of pasta that stretched as long as 98 Leaning Towers of Pisa." — Spencer Jacob [10:21]
• Authenticity Check: Even Italian diners enjoy Olive Garden; it might not beat "your mother’s" home cooking, but it passes muster. (11:00)
  • "[Asked an Italian customer if it was as good as his mother’s cooking] He said no, but pretty good." — Spencer Jacob [11:35]

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Notable Quotes & Memorable Moments

• On corporate confidence:
  "Whether this specific promotion is what turned things around for them, it’s doubtful. But it certainly has helped." — Spencer Jacob [04:09]
• On maximizing value:
  "Don’t eat at Olive Garden every day. Don’t eat everything on your plate like I did." — Spencer Jacob [05:37]
• On pass misuse:
  "You would have to eat there a lot more than 14 times to actually cost them money. Now, Alan Martin, who holds the record at 140 times, he costs them money, but actually he gets a pasta pass for free every year they mail it to him because... he created so much goodwill." — Spencer Jacob [06:23]

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Timestamps for Key Segments

• [02:18] Overview of the Pasta Pass promotion
• [03:06] How Olive Garden profits from the pass
• [04:05] Wall Street and investor reactions
• [04:52] Spencer Jacob’s personal Pasta Pass journey
• [06:00] The mathematics and profit margin
• [07:04] Comparison to American Airlines’ unlimited flight fiasco
• [08:17] Discussion of deal-hunters and demographic clustering
• [10:01] Lifetime passholders and fun statistics
• [11:00] Anecdote on Italian diner’s verdict

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Conclusion

Olive Garden’s Never Ending Pasta Pass is less a reckless gamble and more a well-designed marketing strategy—delivering publicity, off-peak customer traffic, and overall goodwill for a modest financial risk. For most passholders, the deal is great but doesn’t come close to bankrupting the business, and the rare "superusers" offer more value as PR phenomena than as real liabilities. The episode is full of lighthearted anecdotes and thoughtful financial analysis, painting a vivid picture of why some unlimited deals are a win-win… and why others aren't.

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Transcript

[Charles Schwab Sponsor]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] Washingtonwise.

[J.R. Whalen]

Here's your Money briefing. I'm J.R. whalen at the Wall Street Journal in New York. Who doesn't love to go to the Olive Garden? It's a great restaurant, but how does it stay in business? By offering its Never Ending Pasta Pass every year? Wall Street Journal news editor Lee Hawkins takes over the interviewer's chair in a moment to get to the bottom of the pasta ball. First, some money in market news you should know American shoppers gave the US Economy a boost in July, but their outlook for the rest of the year is growing a bit cloudy. The Commerce Department says their retail sales rose 0.7% in July compared to June, but the latest reading of consumer sentiment fell to a seven month low. The survey of consumers shows the interest rate cut by the Federal Reserve as well as the ongoing trade battle with China is beginning to weigh on consumer shopping spirits. Now the news isn't dire. Despite the pullback in sentiment, including the feeling that inflation will inch higher in the coming months, the measurement of how consumers view the future is still at a historically high level. And teens, as well as those in Generation Z, are likely to be happy about their finances. Summer unemployment among young Americans is the lowest it's been since the 1960s. The Labor Department says that for Americans between ages 16 and 24, the jobless rate ticked down to 9.1% in July from 9.2% a year ago. That's the lowest such rate since July 1966. Let's digest these numbers just a bit. The jobless rate reflects a lower labor participation rate among young people. That's mainly because more students are taking summer courses or building their resumes with unpaid internships, and which indicates a shift to a knowledge based economy. Also, wages from summer jobs are unlikely to make a dent in tuition costs, and that deters some would be summer workers. Up next, Lee Hawkins on the legend of the Olive Garden's unlimited Pasta Pass.

[Lee Hawkins]

Darden Restaurant's next earnings report comes in September, and the balance sheet of its flagship brand, Olive Garden, is closely followed by investors. The restaurant chain has seen great success over the past four years with its Never Ending Pasta Pass, which lets customers pay $100 for a card that gives them unlimited food for nine weeks, and 50 of those people spent $500 to eat unlimited pasta For a lifetime. How does this promotion help Olive Garden cook up success? Let's check in with WSJ Heard on the street editor Spencer Jacob to help us break down the numbers. So, Spencer, I know you said $100 for unlimited food, but there are actually limits. You have to pay extra for things like drinks. So is that where Olive Garden makes its money?

[Spencer Jacob]

First of all, it's a great promotion. I mean, there are just dozens and dozens of articles, including in our paper, about the promotion. So it's great publicity for the chain. Second of all, it's coming at a time of year when their restaurants are not that full. In September, October, November. You know, they're not really packed. And so it's not like people are going to be like, you know, standing in line and waiting for all these pasta pass people. Also, you know, go and eat an Olive Garden. Are you going to eat by yourself? Are you going to bring, you know, your wife or your husband or your kids? You know, unless they have pasta passes, they're paying customers. Also, you know, you're probably going to get a drink, you're going to get dessert. So it's difficult for them to lose money. They have a calculation that, you know, if you were just going in there and just eating by yourself, that by the ninth time you ate pasta, you'd be breaking even. On average, people eat 14 times. That was the number last year. So people are getting their money's worth, but pasta is not that expensive.

[Lee Hawkins]

And Wall street is on board with this promotion.

[Spencer Jacob]

Wall street likes it because the results have been pretty good since 2014. They've been doing this. And 2014 happens to be about the time that they really turned this chain around. This was a really ailing chain. You know, it's the biggest in the company overall. It's not the fastest growing, but it's doing quite well. And Darden overall is doing quite well. So, you know, you certainly can't fault them for it. You know, whether this specific promotion is what turned things around for them, it's doubtful. But it certainly has helped. And it creates buzz. It creates a lot of goodwill. Creates a lot of jokes, too.

[Lee Hawkins]

This is a carb lover's dream. You've purchased one of these cards in the past yourself. And you also wrote a story about a man who ate every me at an Olive Garden every day to get his money's worth.

[Spencer Jacob]

You know, I sort of did it as I wrote about it, and I figured, you know, like the day before the thing came out, I was like, you know, I wonder if I could win it. So I had my laptop and my iPad and my phone, it was clicking all three and I won. And I ate there, I think for six weeks straight, every single day, made sure I had a breadstick and everything. And you can get seconds. I mean, I'm a small guy. I got up at 4:45 every morning to go to the gym to try to work off the carbs. And I asked the guy at the gym, the guy who runs the gym, who, you know, ironically enough, he was the trainer for the cast of the Sopranos, who, you know, oh my God, said like, you know, hey, do you think I could eat all this pasta and sort of. And not gain weight, maybe turn into muscle? And he looked at me like he thought I was pulling his leg, but he was. No way. You know, it's pasta. You're gonna get fat. And I gained six pounds. So don't eat at Olive Garden every day. Don't eat everything on your plate like I did.

[Lee Hawkins]

This kind of marketing promotion has worked through Olive Gard in the past, as you say, and it seems to be pretty confident that its projections are reliable. And this, like in past years will be a runaway success. What's the math behind that confidence in

[Spencer Jacob]

terms of being a pure moneymaker? It's probably not going to move the needle very much. This year they had 24,000. They've been raising the number every single year on average. Last year people used it 14 times. You break even on the ninth time. But it's not like people were gonna go 14 times during that nine week period. Also, that's at the retail price. I mean, the cost of pasta is not that high. Even with the toppings and meat and stuff like that. You know, they're making a pretty nice margin on this food. So, you know, you would have to eat there a lot more than 14 times to actually cost them money. Now, Alan Martin, who holds the record at 140 times he costs them money, but actually he gets a pasta pasta for free every year they mail it to him because, you know, he created so much goodwill. He's just such a funny guy.

[Lee Hawkins]

Okay, but this has not worked out for every business. I mean, in the early 80s, for instance, American Airlines offered free unlimited first class flights for an upfront fee of a quarter of a million dollars, $250,000. And that didn't end very well. What happened?

[Spencer Jacob]

So that was a little different. Back in the early 1980s, American Airlines was really in trouble. And they said, how do we raise a lot of money really quickly, like let's have this deal. And then they never imagined how enthusiastic people would be. There were a few people who were sort users of this pass who basically cost them over a million dollars a year in free flights. They'd fly to Paris for lunch and then come back, and they bought companion passes. And they'd see someone in the airport who was stranded and say, hey, come on, I'll fly as long as you fly with me. I'll fly with you to wherever you're going. And so it became too expensive, and it actually turned into a really bad PR stunt for them because they wound up having private investigators follow some of these guys alleging that they were misusing it and abusing it. And Mark Cuban, by the way, was one of the people who bought one of the passes. And so that did not work out too well. This is not a company that's desperate to raise money. They have plenty of money. They don't need to sell 24,000 passes at $100 a pop to raise money. As a matter of fact, these passes sold out instantly. If they raised the price to $200 or $300, there are probably people who would pay that much or they could raise a lot more money. The goal isn't to raise money from the sale of the passes. The goal is to get people in the door during a slow time of year.

[Lee Hawkins]

I want to push back on that a little bit because what you're basically saying is that people are becoming more and more savvy about these offers too. People like the guy you mentioned, especially the deal hunters. So what happens if the bulk of the people, the 24,000, were poor college students, or even worse, the frugal millionaire next door type. They could literally walk out, do the same thing that this guy did not buy any drink, no premium toppings, have water with lemon instead of soda, eat massive amounts of pasta and salad, and le only having to pay taxes on the meal or not even the taxes.

[Spencer Jacob]

Just a tip based on the averages. I haven't seen that. And if you look at. They sent me a list, for example, of the Olive Gardens that get most visited. And they're kind of all over the country, the people who use this. But I do have a slight suspicion that you're onto something. Because what we looked at back when I won the pass and wound up writing about it was the distribution of passes. Wonderful. And they tended to cluster around people, places where there are lots of programmers like Silicon Valley and places like that. So I have to think that maybe those people didn't go. They have plenty of money in Silicon Valley anyway, but that they gamed it a bit because this is a matter of how quickly you can click. And so I think some tech savvy people figured out how to kind of maybe jump ahead of people in line. I mean, they're all over the country, but there was suspicious number of them in those tech corridors.

[Lee Hawkins]

And this is a slightly tangential question, but I'm dying to know the answer to this one. What happens if you're one of the 50 who qualify for the lifetime pass and you pay your 500 bucks but you lose it five or ten years later? Will Olive Garden replace it or you're just out of luck?

[Spencer Jacob]

Hmm, I don't know. I guess they have a record of you having it. They did send me a really weird stat about the lifetime pasta pass people. They said, okay, if you live 60 more years, which, I mean, probably is gonna take a few years off your life expectancy if you eat there too often. It's not my cuisine, but I mean, the one combo I had was like just the meal was 2,000 calories, which is more than I have in a whole day usually. My son made me get it when we were there eating together one time, they said if you ate there for 60 years, you would have bowls of pasta that stretched as long as 98 leaning towers of Pisa.

[Lee Hawkins]

I sort of envisioned the 92 year old guy walking in there and saying, Young man, in 2019, I purchased this pass.

[Spencer Jacob]

Yeah, I mean, you know, why not? You know, I did discover, I mean, I think I'd eaten at Olive Garden one time, like just in desperation before winning this pass. And it kind of really grew on me, actually. I thought it was. Thought it was fine. You know, you think like you're here in New York City with like, you know, probably some of the best Italian restaurants not in Italy, you know, surrounding you in one square mile in Manhattan. And I thought it was okay. It's kind of like a really friendly place in the middle of New York City. And I also met an Italian guy eating there. He was sitting next to me because I went alone a lot. You know, I couldn't drag people from the Wall Street Journal every day. And so I sat at the bar where you sit with people and, you know, I was very curious about him, but he said it was really good. As good as your mother? And he said, no, but pretty good.

[Lee Hawkins]

Close enough, huh?

[Spencer Jacob]

He was so. You can't really ruin pasta.

[Lee Hawkins]

All right? That's Wall Street Journal heard on the street editor Spencer Jacob here in our studio. Spencer, thanks for coming on the show.

[Spencer Jacob]

Thanks for having me.

[Lee Hawkins]

And that's your money briefing. I'm Lee Hawkins in New York for the Wall Street Journal.

[Charles Schwab Sponsor]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. [e-mail] WashingtonWise.