Red Lobster and Olive Garden cook up a mess

Parent company Darden blames the payroll tax hike for biting into sales, but its restaurants' recent performance indicates bigger problems.

By Jason Notte Feb 22, 2013 3:29PM
Customers walk into a Red Lobster restaurant in Hialeah, Fla. on Sept. 6, 2012 (© Alan Diaz/AP Photo)

Ask what's wrong with The Olive Garden and Red Lobster, and parent company Darden International (DRI) will give you a full menu of options: The specials aren't cheap enough, people are eating less seafood, the healthier menu items haven't caught on yet, the new décor and menus require some acclimation, the weather has been bad.

Now it can add a new special to the list: Rising payroll taxes.

For the second consecutive quarter, Darden issued a warning about its profits for the most recent quarter and cut its outlook for the year. It now expects revenue to slide 4.5% for the quarter ending Feb. 24, and it placed the blame on a two-percentage-point increase in the Social Security tax after a temporary tax cut expired.

This plaintive cry may sound a bit familiar, as retail giant Wal-Mart (WMT) just used the same excuse for its soft performance in January even though competitors like Target (TGT), Macy's (M) and TJX (TJX) reported rising sales during the same month. Darden's situation is somewhat more dire, however, because its attempts to fix problems that cropped up at the end of 2012 have been largely fruitless.

After the company revised expectations last quarter, sales at Darden's U.S. restaurants fell 2.7% for its three biggest chains. That included a 3.2% drop at Olive Garden, a 2.7% decline at Red Lobster and a 0.8% slump at LongHorn Steakhouse. At the time, Darden said it was still waiting for tweaks to its restaurants and menus to take hold. But it admitted misjudging its specials by offering 2-for-$25 meal deals when competitors including DineEquity's (DIN) Applebee's, Brinker Restaurants' (EAT) Chili's and Bloomin' Brands' (BLMN) Outback Steakhouse offered 2-for-$20 meal deals or $10 entrees.

Meanwhile, Darden increased the number of chicken and beef items offered at Red Lobster from 8% of the menu to nearly a quarter, added low-calorie options to Olive Garden's menu and changed its slogan from "When You're Here, You're Family" to the more fast-paced "Go Olive Garden." That move didn't work, and in January, Darden replaced Olive Garden's president in an effort to boost results.

The problem is bigger than Darden or its restaurants, though. Americans spent 5.5% more at chains that offer low-calorie menu items, but 3% less at casual-dining establishments last quarter. Combined with drops in casual-dining spending reported by NPD Group every quarter since spring of 2010 and the gradual shunning of roadside chains by people ages 18 through 47, these are grim times for the segment.

When your industry's decline predates the tax cut you're complaining about, maybe it's time to stop blaming everything beyond your restaurant's walls and start taking a good, long look at the boil-in-bag dishes being served at the vinyl-lined booths within them.

More on moneyNOW

Feb 25, 2013 12:21PM
It is very simple: we, the consumers, do not have the same disposable income as we had other years, to spent on eating out. To compound to this lack of money: the high cost of gasoline, the constant increases on bridge and highway tolls, high cost of heating our homes, high cost of electricity, all of these factors do not help the economy! Our pockets get empty too fast!
Feb 23, 2013 7:41PM

One more thing I am not callous to the plight of many Americans..I realize there are many in trouble.


A few, not as many as some would say...Have put themselves in the positions they are in..


Many others by circumstance...Yeah I know many are hurting and our Government has more then their share of shortcomings....

I also know what being poor was, many decades ago..


But I also don't blame this President, for most of what is going on...That's a cop-out..And wrong.

Feb 23, 2013 6:11PM

Another thing...Spaghetti & meat sauce isn't worth $10-12..No matter where you get it..Plus tip ??

And to us, a lot of Pasta dishes about the same..?

We just eat them at home.."The old fashion way."

Our's are homemade, with 2-3 times the meat or shrimp in them.

Feb 23, 2013 1:55PM

While many on here lament and grumble about, why they will or won't eat at these Restaurants...


And THEN try and blame Obama or the "tax take-back.."

Which even the Darden Companies try or attempt to "sluff it off to.."

And a few other's like Wally World...? Others(retail) did quite well..?? Hmmm.


"Darden Companies" admitted many other problems,,AND the "biggie", their SPECIAL MEALS were

2 for $25 and the Competition sold their's 2 for $20("they admittedly misjudged it's special offerings")

If YOU put a pencil to that, MANY might notice that is a 25% increase in price over the Competitors..

Now do you really still want to go with it being Obama's Fault?...PLEASE READ THE ARTICLE. 

Feb 23, 2013 8:12AM
Pasta dinners are the least expensive to make and most are priced too high. My family cooked in a local well known italian restaurant and I always helped make the sauce also helped price the food pantry and the cost per platter would be around four to five dollars with three meatballs or two large pieces of sausage and around four with mushrooms..You get more pasta than you could eat because of the large portions and the restaurant was always packed. Cost 8.95 per platter with salad and bread.Shrimp scampi with 8 large shrimp 9.95.
Feb 23, 2013 2:27AM
Olive Garden have to look @ there management not only the the top brass but individual restaurant GM's how ar the running the restaurants. If some one from higher up visit restaurants without letting the restaurant managers know who they are, they might find some clues to there declining sales. Dinners are more pasta and less substance  and bigger price per entree. Just try to clean the house from bottom up.
Feb 23, 2013 1:06AM
Unfortunately it's just getting too darned expensive to eat out anymore, hence the proliferation of buffets. When you go to a restaraunt and your bill comes to $50.00 or more for two people, than on top of that you're expected to tip 20% (how the hell did that happen?) obviously you're going to save your money for gas so you can get to work or drive to your vacation spot. We need to start lowering costs, not raising them all the time.
Feb 23, 2013 12:13AM
Red Lobster is serving smaller portions, only giving a couple of biscuits, and the shrimp cocktail don't even come served in the compote with ice anymore.  Their prices are higher and their portions are lower.  I don't much care for Olive Garden at all.  We've found another privately owned restaurant that serves great meals, lots in them, and they're cheaper. 
Feb 23, 2013 12:06AM
Olive Garden has deteoriated in quality tremendously in recent years with a reduced menu of seafood and replaced with lettue salad with nary a tomato or mushroom and almost no seafood.What seafood there is is thin sliced fish,tasteless and often overcooked. A terrible ripoff of the consumer. It's too bad but Long John Silver is a much better value for monkfish       . You're charged for cod and get catfish or tilefish but pay premium prices for tasteless trash. Stay away from Red Lobster and Olive Garden if you want good food at a fair price
Feb 22, 2013 11:06PM
Our Olive Garden is always great no matter what you choose and the service is amazing.  Red Lobster is the same, except a bit more expensive.  Both of these restaurants are favorites.
Feb 22, 2013 10:45PM

We used to go to Red Lobster but every time I tried to order a LOBSTER TAIL, they were out.  They repeatedly denied me if I tried to order one earlier in the week. I used to go there for my birthday and my lobster dinner.  I had one tail I couldn't even CHEW!  I did get fifty dollar gift cert but have not used it in the last 2 years!  Why the hell would you name something the Red Lobster and then not be able to furnish a damn lobster tail.  I have worked in these places so your excuses won't work.  Also, when I found out they are cutting hours due to Obama care and screwing their employees, I vowed to never go there again until they change to what they are suppose to be.  Now we go to the Lobster Shop where I can get what I want when I want and no whining about any excuse, cause they don't need excuses!!!!  They can supply what you want with warmth and a smile!  And forget the Olive garden.  We all went out to one and we had to stop at another place to fill up my husband!!!!!

Feb 22, 2013 10:21PM

It becomes fairly obvious that very few of you, would know good from bad dining. Should the before mentioned establishment be the choice of my guest, I will enjoy the company and the meal, as it conforms to the requirement of what they know of  the restaurant franchise and its target market, If you wish for more food quantity or quality you should be prepared to pay $25.00 plus, educate yourself to obtain  the skill of culinary arts to bring you more enjoyment. If your only requirement is to sit eat and discuss that ugly dress Matilda wore to Sunday service, and dine like swine at the trough, the dreaded group that  typically show up in three parties of five, so you aren't required to pay these hard working gratuity dependant workers a fair wage. There are plenty of

popular franchises that budget for these groups. 

Oh !!! if you can't fix a better salad at home then God bless you.



Feb 22, 2013 10:02PM

Remember about 20years ago when you could actually get fresh fish at Red Lobster like red snapper. I went there probably 6 times a month. Well that all ended when they decided to do away with the fresh catch. We decided to try them again for Valentines. That was a complete waste of a night out. Spent about 70.00 on average at best food that might have been worth 30.00 needless to say I won't be back.

Feb 22, 2013 9:56PM
I'm sick of RL's  "I see food differently" commercials.  ..they sure do.  It's gross.
Feb 22, 2013 9:54PM
Damn these companies..It was TEMP. TAX CUT!!! How did they say in business before the tax cut. Damn those greedy companies and their goons
Feb 22, 2013 9:50PM

When all the food comes comes pre-cooked in a bag or box from a factory. You will not get good food ever. I people knew how processed the junk is at these type of restaurants, I think they would be shocked.


They don't give the "Cooks" knives in these kitchens. They give them scissors.

Feb 22, 2013 9:48PM
Over priced slop for hogs are the trademark for these two chains. Close all of them!
Feb 22, 2013 9:48PM

I for one don't eat out much. I make my own dinners and if I want a steak dinner, lobster dinner, shrimp dinner, I go out and buy it fresh, for a 1/3 of the cost and I never complain of how my portions are.


Red Lobster is over priced and like many have mentioned here, not enough to their meals. As far as Olive Garden, I may have eaten there once or twice. Again, they load you up on the pasta and leave you hungering for more meat.


Why would I want to blow my money going out to eat, just to have to wait in line and get short changed on my meal.

Feb 22, 2013 9:46PM

Red Lobster's meals are a complete joke and totally over-priced.    Stay away, save your money...better yet cook at home,  you know how it's prepared.

Best thing about Olive Garden is the never ending salad bowl with bread sticks.

Feb 22, 2013 9:40PM
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?


[BRIEFING.COM] The stock market began the new trading week on the defensive note with small-cap stocks pacing the retreat. The Russell 2000 (-1.4%) and Nasdaq Composite (-1.1%) displayed relative weakness, while the S&P 500 lost 0.8% with all ten sectors ending in the red.

Global equities began showing some cracks overnight after China's Finance Minister Lou Jiwei poured cold water on hopes for new stimulus measures. Specifically, Mr. Lou said the government has no plans to change ... More