ORLANDO Fla. Acknowledging that the casual-dining market has softened more than it anticipated, Darden Restaurants Inc. said Wednesday that its casual-dining brands are adjusting in the short term by couponing, tweaking prices and marketing more aggressively. Executives also sketched out more fundamental changes for the company’s flagship Red Lobster brand, including a menu changeover aimed at reeling in lost customers, and for its LongHorn Steakhouse chain, which is expanding a remodeling program.
In a conference call with investors following the release of its first quarter results, officials detailed the revised short-term and long-term strategies for each of its six casual-dining chains.
“Each brand has reviewed their key sales-building initiatives, including advertised promotions, coupons and menu initiatives, and made adjustments where appropriate,” said Drew Madsen, Darden's president and chief operating officer. He cited a target for each chain of delivering flat to 1-percent gains in same-store sales for the fiscal year ending in May.
The means of delivering that result varied greatly. Executives noted that Olive Garden, the one chain in Darden’s portfolio to deliver positive same-store sales for the first quarter ended Aug. 24, would raise its prices by a higher than usual degree. Madsen pegged that increase as coming close to 3 percent.
Yet Madsen also spoke of cutting the prices of promotional dishes at Red Lobster, including lobster, which has been dropping in cost. He also indicated that the seafood chain would put more marketing support behind its Endless Shrimp all-you-can-eat promotion, which began three weeks ago.
Darden chief executive and chairman Clarence Otis disclosed the company’s plan to address the longstanding negative perception that Red Lobster specializes in frozen, fried and bland fish, which Otis characterized as a major turnoff for some customers. To win back those “lapsed users,” he said, the chain will introduce a new menu by the end of November.
Otis said the new bill of fare will strive to change perceptions not by including “a lot of new higher-priced items,” but rather by stressing freshness, flavor and “culinary innovation.”
Madsen said Red Lobster is offering coupons during the current quarter.
LongHorn, because of its relatively high check average, is increasing its couponing by about 25 percent for the remainder of the current fiscal year, Madsen said. He acknowledged that Outback Steakhouse’s promotion of a $9.99 sirloin “is probably having an impact on LongHorn and others in the category.” But he stressed that LongHorn would not counter with a price-specific promotion of its own.
However, he said, “I wouldn’t rule out a value-oriented promotion in the future, not unlike [the] Endless Shrimp promotion that Red Lobster does.”
At The Capital Grille, same-store sales declined 8.6 percent for the first quarter. Gene Lee, president of Darden's specialty restaurant group, said the decline was a result of ongoing weakness in luxury consumer spending combined with competitive promotions at premium steak eateries.
The 33-unit chain is addressing that challenge in part by striving to increase its private-dining business, Lee said.
The 23-unit Bahama Breeze chain had a same-store sales decline of 3.7 percent, and the company said it is addressing the issue through cable advertising, direct-mail promotions and an initial foray into internet marketing.
Darden, which also is parent to the Seasons 52 concept, operates about 1,700 restaurants across all its brands.