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Red Lobster jumps into value battle

ORLANDO Fla. Amid the casual-dining price wars, Red Lobster has until now kept its powder dry, but it bit the bullet this week with the debut of a $29.99 three-course meal for two.

The offer, for which the Darden Restaurants Inc. division has released no end date, includes two salads, two entrees and a choice of either one dessert or one appetizer to share.

In an effort to boost traffic in a recession that has hit the casual-dining segment especially hard, Red Lobster joins many of its competitors in offering a bundled meal deal. Applebee's launched the first volley in the pricing wars last year with a “Two for $20” promotion, which includes a shared appetizer and two entrees. Chili's upped the ante, tacking on a shared dessert with its "three courses for $20" deal. And on Wednesday, T.G.I. Friday's said it was bringing back its "Three for $12.99" dinner menu for a limited time, offering more than 300 appetizer-entree-dessert combinations.

Darden, which is also parent to Olive Garden, LongHorn Steakhouse, The Capital Grille and Bahama Breeze, has resisted the value-priced deals of its rivals.

However, Darden saw same-store sales fall across all of its brands in its Nov. 29-ended second quarter, including a steep 8.4-percent decline at Red Lobster. Until then, the chain’s same-store sales had been holding steady with no discounting other than seasonal all-you-can-eat promotions such as “Endless Shrimp.”

In a Dec. 18 conference call discussing second-quarter results, Andrew H. Madsen, Darden's president and chief operating officer, acknowledged that competitor discounting had hurt Red Lobster, requiring the chain to be “a little more aggressive” this year.

“Going forward, some of Red Lobster's promotions during the second half of fiscal 2010 will include attractive price points that more directly address our guest need for value and affordability," he said, "but they will not be deep discounts that could erode profitability or brand image.”

Clarence Otis, chairman and chief executive of Darden, also foreshadowed some discount pricing in the same conference call, saying “we have the flexibility in the second half with Red Lobster on our price point because we haven’t used that bullet.”

Applebee’s and Chili’s are continuing their $20 promotions into the new year.

Red Lobster's $29.99 promotion introduces the new entrees of garlic-herb shrimp pasta, garlic-herb grilled shrimp and peach-bourbon barbecue chicken and shrimp. Five other entree options are available for the meal deal.

Darden has more than 690 Red Lobster units in the United States and Canada.

Contact Ron Ruggless at [email protected].

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