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This Is Exactly How Bad Things Have Gotten for Red Lobster

2 minute read

With the sale of Red Lobster, Darden Restaurants said its remaining restaurant chains, including Olive Garden, LongHorn Steakhouse and a growing roster of upscale brands, could now focus on reeling in their “core customers.” Darden CEO Clarence Otis Jr. offered a clue as to who those core customers might be. Hint: they’re “more financially secure.”

“At Olive Garden,” he explained during a recent investor call, “we had 11% more visits last year, fiscal 2013, from guests with household income over $100,000 than we did five years earlier.” And that was small potatoes compared with LongHorn Steakhouse, which wrangled 50% growth out of the same income bracket.

“In contrast,” Otis said, “Red Lobster traffic from this income demographic was flat.”

Lodged squarely in the middle-income bracket, Red Lobster’s sales have trailed behind Dardene’s upscale brands, particularly Eddie V’s, a premium seafood restaurant where diners can sip on world-class wines and enjoy live jazz performances at the “V Lounge.” The columns bookending this chart tell a tale of two seafood chains.

Source: Darden 2013 Annual Report

It was the best of times, it was the worst of times for Darden’s 2013 income statement, and it’s a sign of the times that it seems to be luring upscale diners with promotions that are a little more understated than a never-ending pasta bowl. Olive Garden, for example, has garnished its dishes with more exotic (read: Italian) ingredients, including capers, kale and polenta.

It may be a discouraging, lopsided, sluggish economic recovery, but at least it came with capers.


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