Happy 40th birthday, Red Lobster. The nationwide seafood chain is segueing into middle age as not only the oldest chain of its kind in the country, but also the largest.
According to Kim Lopdrup, who is president of what is also the biggest chain owned by Orlando, Fla.-based Darden Restaurants, the sales by Red Lobster’s 680 units represent a nearly 52-percent share of the industry’s seafood market.
Started in Lakeland, Fla., in January 1968 by Georgia restaurateur William B. “Bill” Darden, Red Lobster initially reflected his vision of a no-frills seafood chain that would emphasize quality, service and affordable prices.
Over time, the chain has mostly lived up to that vision, analysts say, because in good times and bad Red Lobster has successfully reinvented itself to remain relevant to increasingly fickle and demanding consumers.
“Red Lobster has been able to take a heritage brand that is 40 years old and one of the early pioneers in chain ownership and navigate it to become the industry leader in its sector,” says Craig Weichmann, managing director of Mastodon Partners in Austin, Texas. “It has continuously reinvested in itself, repositioned itself and reimaged stores to continue to keep the brand current with consumer tastes that have changed remarkably since the 1960s.”
Though there are strong competitors at the higher and lower ends of the seafood market, Red Lobster is the clear leader among the sector’s casual-dining players, Weichmann says. On the higher end are such players as Cameron Mitchell’s Fish Market restaurants, the Oceanaire Seafood Rooms and McCormick & Schmick’s Seafood Restaurants, and at lower price points are such brands as Long John Silver’s and Captain D’s Seafood Kitchens.
“But none have remained as true to the mission of always [offering] competitively priced fish with a good variety of options as Red Lobster has consistently done,” he says.
As the story goes, the first Red Lobster got its name when the gentleman printing Bill Darden’s menus noted the success of his first restaurant, the Green Frog, a Depression-era lunch counter that seated 25 customers and boasted the memorable slogan “Service with a Hop.”
“You were successful with a green frog, so why not a red lobster for seafood?” he was asked.
Darden billed his first Red Lobster as a “harbor for seafood lovers.” A month after opening the Lakeland unit Darden had to expand to accommodate an overwhelming number of guests. His right-hand man was Joe Lee, the first Red Lobster restaurant manager, who eventually rose to chairman and chief executive of Darden Restaurants. He held those posts until his retirement in 2005.
Four additional units opened in Central Florida before General Mills Corp. bought the concept in 1970. At the time, the packaged-foods company was looking to bolster its fledgling restaurant holdings, and Darden and Lee’s expertise were included in the deal. Red Lobster and sister chain concept Olive Garden were together spun off from General Mills in 1995, becoming Darden Restaurants.
Malcolm M. Knapp, a foodservice consultant who has advised Red Lobster over the years, attributes the chain’s national prominence today to the early “entrepreneurially single-minded focus” and operational skills of Darden and the prescience of Lee in understanding the need for a good supply network of fish providers.
“Joe [Lee] deserves real credit in that he understood if they were going to be a big seafood chain it had to have an incredibly good fish supply network,” Knapp says. “General Mills did not agree so Joe went to Brazil initially on his own dime to meet suppliers and start building relationships. He pioneered the chain network, and that is the real reason they were able to expand the way they did, and why now they can buy fish from countries all around the world.”
Lee also pioneered an extremely rigorous quality control process that the U.S. Department of Agriculture eventually adopted, Knapp says, as well as fresh fish delivered overnight by airfreight.
“Most chains stayed away from seafood, but once the Darden folks got it figured out, they piggybacked on it,” he adds. “If Darden hadn’t done these things, without Joe’s distribution structure, there wouldn’t be a place like a Bonefish Grill.”
Lee’s other accomplishments were numerous, Knapp says, including developing and instituting one of the earliest restaurant point-of-sale systems and prompting the aquaculturing of shrimp.
“The farmed-shrimp industry has enabled Red Lobster to keep prices down for shrimp, which is very important since shrimp is its largest-selling item,” he says.
Over the years, the chain has become known for promotions like “Shrimpfest,” “Big Seafood Festival” and for endless-crab promotions, one that ended badly.
In the summer of 2003, the company aggressively promoted a six-week-long “Red Lobster’s Endless Crab” event that offered all-you-can-eat snow crab legs.
The promotion proved to be a fiasco that ate into profits as customers went back three and four times to feast on shellfish whose wholesale prices were climbing at the time. The promotion also resulted in increased wait times, and Darden blamed it for an overall decline in quarterly profits.
Knapp says that the crab debacle was truly a onetime aberration for Red Lobster, which has typically done a good job of managing promotions.
Weichmann of Mastodon says the failed crab promotion became “just a blip on the horizon, whereas at a smaller company it could have really upset the apple cart.”
Putting such isolated miscues in perspective, Darden expects total sales growth of between 19 percent and 20 percent in fiscal 2008, including revenues from the recently acquired Long Horn Steakhouse and Capital Grille chains.
For fiscal 2007 Darden had sales of $5.57 billion, and in the November-ended latest full quarter of the current year the company had revenues of $600.3 million.
Red Lobster’s evolution over time has led to today’s multi-pronged strategy to refresh and contemporize the maturing brand. Orchestrated by brand president Lopdrup, the plan includes an emphasis on fresh fish, a new prototype store whose smaller footprint would pack a more sophisticated ambience, and upgrades to such things as plateware and flatware.
In 2005, Red Lobster hired chef Michael LaDuke, a veteran of Epcot Center in Florida’s Disneyworld, to oversee an extensive menu revamp that would shift the seafood brand’s focus to fresher products. Over the last year, the chain has unveiled a new advertising campaign to highlight its fresh fish menu and new “chef-inspired” dishes. More recently, Red Lobster has added such things as fresh asparagus, lobster-topped potato side dishes, new wine selections, signature cocktails and its first new dessert items in years.
Dubbed “Bar Harbor,” the new prototype restaurant was inspired by the coastal town of Bar Harbor, Maine. The model boasts stone and wood accents and warmer lighting. Its 244 seats in 7,000 square feet are 21 more seats and 400 fewer square feet than are in the chain’s current “Coastal Home” standard building
Bob Derrington, a restaurant analyst at Morgan Keegan in Nashville, Tenn., has called the new prototype the final piece the casual-dining chain needed to “bring together” all of the other changes made to the brand as it courted a more affluent and discriminating customer. He’s observed that Red Lobster seems to be eyeing consumers who appreciate a finer dining experience and would pay a higher price for it.
For now, at least, Red Lobster’s average per-person check remains $17 to $18 throughout the day, Darden says.
