Are Panera and Chipotle eating Darden's lunch?

The owner of Red Lobster and Olive Garden released earnings Thursday, and could be in trouble. Is the burgeoning fast-casual dining industry to blame?

By Motley Fool Investor Beat Dec 19, 2013 4:48PM
Darden Restaurants (DRI) reported earnings Thursday, and the headwinds the company is facing caused the market to sell off the stock to the tune of about 6%.

Is this restaurateur in trouble? On today's Stock of the Day, Motley Fool analyst Jason Moser takes a look at Darden Restaurant's troubles, and why the competition may be eating its lunch.

With the growth of the so-called "fast-casual" dining industry, and companies in this space such as Panera Bread (PNRA) and Chipotle Mexican Grill (CMG) seeing a lot of success as the preferred option for consumers who are looking for good food at an affordable price, fewer consumers are choosing the experience of eating at casual restaurants over the value proposition of fast casual.
While this has hurt Darden across its restaurant chains, Red Lobster has been the stand out underperformer for the company, and Darden has now announced that it will be spinning off Red Lobster from the company.Customers walk into a Red Lobster restaurant in Hialeah, Fla. on Sept. 6, 2012 (© Alan Diaz/AP Photo)

So could this sell-off be considered a buying opportunity for value investors looking to pick up Darden on the cheap? Jason isn't looking at it that way. With the continued rapid growth of restaurants in the fast casual sector compared with Darden's current anemic growth rate, he sees the pinch that Darden is feeling today as a trend that could stretch on into the foreseeable future.

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7Comments
Dec 20, 2013 10:38AM
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The food at Olive Garden tastes like it is manufactured in a factory somewhere, shipped to the restaurant then re-heated and served. Very bland and generic tasting. For this reason we stay away from places like this and prefer to dine at locally owned places where the food is made fresh with a personal touch. The mixed drinks are weak and not worth the money. Overall these places have a "corporate" feel to them which just doesn't feel right.
Dec 19, 2013 11:35PM
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The menu changes for Red Lobster maybe some of its downfall. While trying to bring in business it got rid of menu items that customers preferred. Instead of seafood items, you will find pork, steak, chicken, even burgers. If you go some place for good seafood, then you expect to find menu items that have seafood in them or dishes that enhance the seafood not surf and turf. I like the restaurant but don't really get the changes. If I wanted a steak or burger I would go somewhere else. I go there for salmon, crab legs, and shrimp, etc. If you like seafood then want to see variety and it seems like the new menu limits the seafood choices.  
Dec 19, 2013 7:13PM
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I haven't eaten at Red Lobster for a while since my last significant negative experience.  The food was stale and plastic.  I could have cooked at home frozen food style and receive much better.  The alcoholic beverages did not mask the unpleasantness so at least I didn't have the morning after surprise.   In fact when I asked the waiter how much the glass of draft was, he was not able to answer even after returning to the bar for the answer.  Guess what... It was substantially overpriced.  I vowed to never return after complaining not only for hope of redeeming, but for my own safety.  I am too paranoid of finding foreign substances in my food especially when I as a patron am most vulnerable.  Red Lobster was a great casual dining choice at one time but I would bet that a greedy CEO got rich on this restaurant selection, screwing the pooch for all.  
Dec 19, 2013 11:38PM
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I can remember when the Red Lobsters had waiting lines going out the door. I was told that in some you actually had to call and reserve a place in the waiting line. I always thought the food was good. If they would go to a buffet line, I'd think they could do better. I'm thinking on the order of Captain Georges in Virginia Beach, VA. That place always seemed to be jumping. Phillips seafood is another one (not a buffet line). I've never been at a Panera's or Chipotle, don't even know what they serve. Sorry to see them go, if it happens? 
Dec 19, 2013 5:33PM
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Not in MY eating out choices!!!  I dislike Panera and Chipotle intensely (also Outback!), whereas I like the Darden restaurants.  The Dardens are not my first choices, however.  I much prefer Burger King, Applebee's, Ruby Tuesdays, and just about any breakfast chain such as Village Inn (also known as Bakers), IHOP, etc.  It is pretty hard to screw up bacon and eggs!
Dec 20, 2013 4:25PM
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Just avoid anything and everything associated with Repukelicans and you'll be fine.

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