Can Red Lobster's 'value' meals rescue Darden?
The restaurant chain's three top brands, including Olive Garden, are trying to get diners to bite on bargain deals.
After serving up a mess at its Red Lobster and Olive Garden chains, Darden International (DRI) is banking on "value" meals to lure diners back. But the big question is whether diners will bite.
Olive Garden is offering a "buy one, take one" deal, giving diners an option of five entrees with soup or salad. The restaurant then sends a second entree home with the diner. Red Lobster is selling two seafood dinners for $25, while LongHorn Steakhouse is offering similar deals, according to Nation's Restaurant News.
The question is whether it's too late for Darden, given that diners fled earlier this year amid higher payroll taxes, rising prices at the gas pump and aggressive pricing from other restaurant chains. Bloomin' Brands (BLMN) Outback Steakhouse, for one, offered $10 entrees or 2-for-$20 meal deals.
With the move, Darden is taking a page from McDonald's (MCD), which is also struggling with getting diners in the door and has expanded its Dollar Menu to appeal to cost-conscious consumers.
McDonald's on Friday reported that same-store sales in the U.S. dropped for the first time in a decade, and it warned that sales would drop in April.
Like Mickey D's, Darden may also have to wait some time to see results.
Margins on items such as Olive Garden's new spaghetti with four-cheese meat sauce likely won't be high, Will Slabaugh, restaurants research analyst at Stephens, told NRN. But it's a step toward fixing Darden's problems, which included not having "a compelling value proposition," he said.
"It’s just a more approachable entry-level price point," he said. "What you do in very difficult times is that you get [customers] in the door with value. Earn their loyalty. Then when the economy gets better you can trade them up to higher-priced items."
In March, Darden said U.S. same-store sales at Olive Garden, Red Lobster and LongHorn Steakhouse declined for the fiscal quarter ended Feb. 24. The worst hit was Red Lobster, where sales slipped 6.6%.
Still, with Darden playing catch-up to rivals such as Applebee's and Chili's, which have offered "2 for $20" deals for years, customers may take their time to find their way back to Red Lobster and its corporate cousins.
Follow Aimee Picchi on Twitter at @aimeepicchi.
Why is it that people feel the need to constantly change a restaurant to try and entertain everyone. Red Lobster was great at selling "Sea Food" while offering an inviting New England'ish kind of atmosphere with a great staff and biscuits that left you wishing you would have eaten less of because you were too stuffed to finish your meal.
Over the last decade they have pulled back from offering up great seafood and have settled for stuff you can find in any other restaurants. I'm sorry but the lure of going to eat at Red Lobster because you were in the mood for great seafood has solely been lost by the lack of emphasis on what made them great in the first place. That's like going to Pizza Hut for a burger, I'm sorry but you just don't do it. They need to simplify their menu and reclaim their niche market. Make good food into great food, continue to offer great service and keep them biscuits coming. I will be more then happy to pay for quality then to subsidize their need for quantity, that's what Apple Bees is for.
They could try improving the food.It`s went down the last few years.
The only thing that will save Red Lobster is fresh food items on the menu. When they open
a new restaurant they entice you with good chefs, good food, and good service. After 60 days
its like, "What the Hell happened"? I used to love Red Lobster, that is until I recently celebrated
a birthday with my youngest daughter and the food and service was crap. Never again!!!
The margin on spaghetti won't be high? Who can't make a decent margin selling pasta?
That whole corporation is broken beyond repair. It starts with the catastrophic decline in food quality and obviously extends to the business end.
I find it amusing that you think all the food is frozen. The only thing that may be frozen first is their breadsticks and you can't blame them for that considering how many they serve in just an hours time. I work there and I can tell you for fact that all the food is not frozen. Their alfredo sauce is made by hand several times a day.
Noone says you have to go there, but at least speak the truth.
I agree with those that have commented that quality has suffered. If the quality iss there, I believe people will come.
when they do these value meals the quality of the meal goes down while the price of other items goes up....not a fan of chain restaurants anymore....personal opinion over the last couple visits to different areas of my state and different restaurant I was not impressed with quality of the food while spending alot of money for a meal and drinks. Even the drinks were used of mixes and not fresh. Too easy if you ask me when I go out to eat I want fresh food and real drinks not pre-fab crap I get that at any fast food joint or a grocery store.
Perhaps it's just our local restaurant (Canton OH) but Red Lobster is always packed and always spectacular. Compared to other chains such as Ruby Tuesday and Friday's, their prices are lower and the food is better.
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Reports say the generous benefactor behind the huge gratuities is a former PayPal executive.
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