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.

By Aimee Picchi Apr 22, 2013 1:30PM

Customers walk into a Red Lobster restaurant in Hialeah, Fla. on Sept. 6, 2012 (© Alan Diaz/AP Photo)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.


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156Comments
Apr 22, 2013 4:08PM
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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.

Apr 22, 2013 2:00PM
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They could try improving the food.It`s went down the last few years.

Apr 22, 2013 3:36PM
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Biggest problem I have is that we're talking about pre-packaged, frozen food at a fresh food price point.  That's why I steer the herd away from these places. 
Apr 22, 2013 3:25PM
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Went to Olive Garden last night.  The food was frozen that had been microwaved for $12.95; soft drinks, iced tea was $2.95 a glass, so I had water.  Did get "free salad and bread sticks". However, Stouffer's dinners are a lot better at one third the price and I can fix a salad for about $2.  Plus if I eat at home I don't have to be stuffed into a small booth surrounded by crying and yelling kids.
Olive Garden prices have gone up while quality has gone down.  That spells disaster for the chain.
Buca di Beppo Italian chain is much better as is Macaroni Grill.  Better prices, quality and atmosphere.  Good-bye Olive Garden.
Apr 22, 2013 3:51PM
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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!!! 

Apr 22, 2013 3:51PM
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Ironic, one Red Lobster near me closed it's doors and reopened as a cut rate funeral home. 
Apr 22, 2013 4:11PM
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who are the people that go to olive garden for a good italian meal?  I'll bet 99 times out of 100 that a local, family/privately owned italian restaurant is going to be better than olive garden.
Apr 22, 2013 3:24PM
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I think adding value meals are great for the consumer. Restaurants have always faced competition from each other but with a sluggish economy mix with a increase in health awareness has led consumers away from High Calorie, high Fat, high salt foods and people are starting to cook more at home. I dont think it is possible for them to create steady growth but they can try to keep current market share. Value menus will cannibalize their margins but as a consumer this is a great thing. People are also tired of paying 2-3 dollars for a drink that may or may not have free refills.
Apr 22, 2013 2:38PM
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And since the Economy supposedly got out of the RUT since June 2009 ("BS" HA HA) Government Reports continue to FUEL us into thinking there is no INFLATION and that everything is ROSY...!!
Apr 22, 2013 3:42PM
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recently went to a Red LObster here in Western CT. The food was not good. Wilted lettuce in the salads, and just not prepped well. Service was fine, but the food was not really that good. 
Apr 22, 2013 3:45PM
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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.

Apr 22, 2013 3:48PM
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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.

Apr 22, 2013 4:02PM
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The problem with the "value meals" is that they are mosty chicken dishes.  I don't know anyone that goes to Red Lobster or Longhorn for chicken.  Olive Garden, even though it is tasty, is way over priced for pasta and salad that you don't have a choice of dressing. 
Apr 22, 2013 3:54PM
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Food quality is the problem at Red Lobster, the prices are alright if the food tasted better.  Too salty and calories galore.  Sorry I just stop going to Red Lobster, I can buy my own Lobster and stay at home
Apr 22, 2013 4:05PM
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I agree with those that have commented that quality has suffered.  If the quality iss there, I believe people will come.

Apr 22, 2013 4:04PM
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Red Lobster has simply morphed into Captain D's only with more butter and cheddar bay biscuits. It's time just to drop this franchise into the fast food category.
Apr 22, 2013 3:53PM
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What are they talking about? Every time I go my local Red Lobster or Olive Garden, it's packed. And the food is good.
Apr 22, 2013 3:59PM
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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.

 

Apr 22, 2013 4:04PM
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Rock bottom food for rock bottom prices, sounds about right.
Apr 22, 2013 3:56PM
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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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