What Red Lobster and Olive Garden Need Even More Than Fresh Menus

A Red Lobster seafood casual dining chain restaurant.
Alamy
Diners want more than Cheddar Bay biscuits these days, and no one knows this better than Red Lobster parent Darden Restaurants (DRI).

The casual dining juggernaut behind Red Lobster, Olive Garden, and several smaller chains has been posting uninspiring financial results lately. We'll get another fresh snapshot when it reports quarterly results in two weeks.

The last time out was a disaster. Back in September, Darden served up lower-than-expected profitability numbers as business fizzled out at its two marquee concepts. Same-restaurant sales -- an important metric for the industry as it measures how well the average eatery is holding up -- fell 4 percent at Olive Garden and 5 percent at Red Lobster. Darden's other restaurants are faring better for the most part, but it's not as if LongHorn Steakhouse, Bahama Breeze, and Capital Grille can move the needle here. Olive Garden and Red Lobster combine to account for 71 percent of Darden's business.

Olive Garden is trying to liven things up by introducing a burger into its menu this month. Red Lobster may want to see what it can do to appeal to a broader audience, too.

Have a Burger with Your Unlimited Breadsticks

Olive Garden's Italiano Burger is rolling out across the chain this week. It's a hamburger, dolled up with prosciutto, mozzarella cheese, arugula, and marinated tomatoes. The buns are dressed up with a garlic aioli spread. Parmesan garlic fries come on the side.

It's clearly Olive Garden's attempt to put an Italian spin on the traditional burger, but naturally there's no reason why you can't strip the sandwich of the Italian garnishes and just order your burger plain.

Olive Garden is also introducing a sausage and bell pepper sandwich, but it's a safe bet that it's the Italiano Burger that's going to be turning heads because it helps defuse the "veto factor" that has likely held Olive Garden's performance back in the past. That's how the restaurant industry thinks of the problem of having just one person in a group who won't be able to find anything on your menu he wants. If someone in your dining party just isn't in the mood for Italian, it's hard for Olive Garden to win your business that night.

"I'm just not feeling Italian right now," your friend might say.

"Well, you can always have a burger," you counter. "It even comes with fries." Veto problem, sorted.

Cracking Red Lobster's Shell

Red Lobster may carry an even bigger "veto factor" burden given the nature of seafood and finicky diners, but it won't have to follow Olive Garden to Burger-ville. It's already there.

Red Lobster already offers a traditional wood-grilled burger. In fact, it offers plenty of landlubber choices including steaks, chicken sandwiches, and chicken-topped pastas. It's problem is getting people through its doors to try them.

Red Lobster overhauled its menu late last year, adding to its offerings items like pork chops, parmesan-crusted chicken served over corkscrew pasta, and even roasted veggie skewers. Unfortunately it's not working. Red Lobster performed even worse than Olive Garden during the summer quarter. It apparently needs more than a broader menu. At the very least, Red Lobster could be doing a better job of letting potential diners know that it's about more than just the signature lobster.

"Sea Food Differently," is the chain's current slogan. A few years ago it used to be "Red Lobster for the seafood lover in you." One would think that with the word "lobster" in your name, you wouldn't have to play up the seafood quite so hard in your marketing, but that hasn't stopped the chain from pumping its maritime theme and aggressively promoting its endless shrimp campaigns.

This strategy could be a mistake, but it also isn't helping that we're in the worst of times for the table service dining industry. Industry tracker NPD Group has been reporting negative sales for the casual dining market dating all the way back to 2008. The streak ended with a merely flat showing this summer, but it's still a bad moment to be a weak player in a weak eatery segment. It's time to work on the marketing.



Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants. Try any of our newsletter services free for 30 days.

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104 Comments

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cynthiaswtrt

I have not been to Olive Garden in 10 years. Food is not that great and is priced too high They refuse to let you order your salad with Ranch or other dressings. If I am paying for it let me order the way I want it. I rather go to a restaurant that really caters to their customers.

December 06 2013 at 3:28 PM Report abuse rate up rate down Reply
Rickrak

Why dont they just try serving better food. Last time I ate at Red Lobster, the quality left a lot to be desired. The lobster tails were pethy and were over cooked. My date even got sick.

December 06 2013 at 2:12 PM Report abuse rate up rate down Reply
alstenzel

After reading the above I ask, Is there no person anymore who knows the difference between the words "It's" and "Its?"

December 06 2013 at 11:04 AM Report abuse rate up rate down Reply
LYN

I have been to both restaurants and I don't think the food is bad. I refuse to go there because I do not believe in having to wait 20 plus minutes to be seated. It makes no sense to wait in line for okay food when I can go to a local small restaurant and make a reservation and be seated when I get there. I have gone to some and have over an hour wait to be seated!

December 06 2013 at 9:30 AM Report abuse rate up rate down Reply
allini

This article is bogus. Fact is all such venues are down in revenue because people want to save money.

December 06 2013 at 8:51 AM Report abuse +1 rate up rate down Reply
2 replies to allini's comment
Rickrak

You are right! In spite of what our government tells us, the economy sucks.

December 06 2013 at 2:10 PM Report abuse rate up rate down Reply
Noreen

...or they just don\'t have the money to eat out any longer. We are still in a recession. Nobody where I work has received a raise at since 2006, and yet all these companies keep raising their prices. We get no COLA, either....barely able to cover the monthly bills.

December 18 2013 at 5:53 AM Report abuse rate up rate down Reply
Robert Grabo

Red Lobster Olive Garden does not fit in our budgets anymore too pricy for a family of 3

December 06 2013 at 7:47 AM Report abuse +1 rate up rate down Reply
breid2

fresh non-gmo foods prepared on premises is the future, not some bagged meal that is boiled in the bag.

December 06 2013 at 7:47 AM Report abuse +1 rate up rate down Reply
prov17v17

Karma! Take care of your employees. Remember founder Bill Darden said “Our greatest competitive edge is the quality of our employees, evidenced by the excellent job they do every day.”

December 06 2013 at 7:14 AM Report abuse +1 rate up rate down Reply
1 reply to prov17v17's comment
Susan

Exactly. Many people like me now refuse to give business to companies that screw their employees and then blame the government. Darden, Papa John's and more have done this. First the food because a me awful then they pulled their stunt with employees. They deserve it. It's called karma.

December 12 2013 at 11:40 PM Report abuse rate up rate down Reply
campiglio4

Let me take a leap of faith, and guess that the Red Lobster/ Olive Garden crowd is from the mid-west/ land locked state....the big night out is eating at the "mall". Upscale is the Cheesecake Factory. The supports here need to eat at "real" restaurants, ones where the food is not brought in from a warehouse frozen...someone here brought up Long John Silver....my God....calling that a seafood restaurant is like calling Burger King a BBQ joint. Once again I must say....find the local place....ones where food is prepared fresh....actually cooked, not defrosted, and a menu not created in some lab, tossed in front of a focus group for their opinion.

December 06 2013 at 7:01 AM Report abuse +4 rate up rate down Reply
3 replies to campiglio4's comment
prov17v17

It is definately Karma. Darden ceased taking care ofits employees. Steadly, the took away beniefits. Bartender's across the board were cut in pay. I know one who went from making $12 reduced to $5. This was a 20 year employee. Older employees with tenure were fired or forced to resign, One long time server I know was demoted to busser to make her quit. Bill Darden knew it was this employees who made his business successful. That is a lesson the company needs to learn again.

December 06 2013 at 6:56 AM Report abuse rate up rate down Reply
2 replies to prov17v17's comment
Susan

Awful people at Darden. They deserve what they get with their fake food. My idiot sister and her husband visited Italy and said food was awful because it wasn't like Olive Garden. But hey, they're 'all you can rat's people. Nasty. No class. No taste.

December 12 2013 at 11:56 PM Report abuse rate up rate down Reply
Susan

Sorry. My tablet substituted word rat's for eat' in prev post. I hate tablets for typing. Grrrrrr

December 12 2013 at 11:58 PM Report abuse rate up rate down Reply