Toward the end of last year, I reported that Darden Restaurants was trying to sell or spin off Red Lobster. Darden is a restaurant group that includes high-end concepts (The Capital Grille and Seasons 52) as well as more casual chains (Red Lobster and Olive Garden). Red Lobster suffered a 5.2% decline in sales over the past fiscal year—compared to a 4% drop for Olive Garden, and a 3.2% increase for Capital Grille.
It’s not clear what the ultimate fate of the seafood chain will be. Golden Gate is a venture capital firm headquartered in San Francisco, started by a group of investment professionals from Bain Capital (remember them?). Although Red Lobster has 700 locations and is still profitable, it has been plagued for years by a mediocre product. When it debuted in 1968, seafood was an exotic menu item in many parts of the country. Today, when consumers can eat fresh Alaskan halibut in Utah and abalone in Illinois, the idea of all-you-can-eat shrimp doesn’t seem worth a detour.
On the other hand, Darden is holding on to Olive Garden and seems committed to turning the operation around (as well they should be, given that the Olive Garden accounted for 45% of the company’s revenues last year). They are redesigning the interiors of many of the restaurants, and revamping the menu to add trendy dishes such as small plates and kale. Given that the demand for cheap, lousy Italian food is incredibly strong in most parts of the U.S.—particularly areas with a small or nonexistent Italian population—the turnaround should be easy to accomplish.
Here’s the problem, though: There’s lousy, and then there’s Olive Garden. If you live in a neighborhood with at least one Italian joint, you’ll generally do much better there than you would at Olive Garden. True, you’ll be served by a guy in a sweaty undershirt rather than a well-groomed young man named Todd, but the odds are that you’ll at least get a good pizza. Obstacles like that are difficult to surmount. All the small plates and kale in the kingdom won’t take the place of the shortest path to success: a quality product.
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 July. For more information, go to amazon.com