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Red Lobster

By now, you’ve probably heard that Darden Restaurants wants to either sell or spin off the Red Lobster chain and its 700 Red Lobsterlocations worldwide.

Is money the issue? Yes and no: Red Lobster grossed $2.6 billion in 2013, but sales have been declining steadily for nearly a decade. Their predicament is similar to another Darden powerhouse, Olive Garden. Both concepts were once intensely popular, but times have changed, and the public is seeking new experiences at different price points. By divesting itself of Red Lobster, Darden can report more encouraging corporate earnings that will allow them to attract more investment capital.

It’s hard to believe today, but Red Lobster was once viewed as an attractive, elegant dining experience. Back in the 1970s the middle class was just beginning to patronize restaurants, which were once the exclusive province of the country’s elite. Red Lobster was not just an affordable splurge---it gave diners access to one of the most luxurious culinary items (lobster) at a price that many people could justify within their budget.

As 2014 looms, things look very different. Dinner entrees at Red Lobster start around $15 and top out in the $25-35 range---equal to prices at the trendiest farm-to-table restaurants. In terms of both quality and execution, the food is mediocre at best. And yet the folks at Darden scratch their heads, unable to figure out the problem. It never seems to occur to someone in their situation that business might be improved if they served a better product.

The real problem here is that Darden is a schizophrenic corporate entity. One part of the company is comprised of upscale, distinctive chains such as Seasons 52 and Capital Grill. On the other side, we find feeding troughs such as Red Lobster and Olive Garden. The stocking, cleaning and re-stocking of those troughs yields little in the way of culinary glory, although their profitability once compensated for that. There’s obviously more profit in a $47 Porterhouse than a $12.99 plate of Fish and Chips, but the popularity of the $47 Porterhouse depends on a robust economy that is beyond Darden’s control; yet, improving the quality and/or execution of the Fish and Chips would only further erode the bottom line. Short of suing the Food Network for raising everyone’s expectations, Darden has only one option: Sell Red Lobster.


 

Mark Spivak is the author of Iconic Spirits: An Intoxicating History, published by Lyons Press; his second book, Moonshine Nation, is forthcoming from Lyons Press in June 2014. for more information, go to amazon.com


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