Red Lobster is getting tossed overboard. The parent company, Darden Restaurants, announced that it’s selling the seafood chain for $2.1 billion. Both Red Lobster and Darden’s other big chain, Olive Garden, have been losing customers for years.
Casual dining faces two problems, says David Henkes of the food-industry consultancy Technomic. “It’s certainly getting squeezed at the higher end by more of a ‘polished-casual’ as we would call it,” he says. Think Cheesecake Factory. “And then at the lower end, you’ve got an extremely high-quality fast-food segment that we call fast-casual. You think Panera, Chipotle.”
Panera and Chipotle give consumers two things, says Harry Balzer, who looks at food and drink for the consumer-research firm NPD. “It’s time and money,” he says. “Save me time, save me money. And this country has been under pressure, for its income, for a number of years now.”
Consumers have been eating out less often, he says, to save money. Minding the size of the bill counts, too: An average check at Red Lobster is about twice the average tab at Chipotle.
Increased global demand for seafood has made it harder to contain costs, says Andy Brennan, a restaurant analyst at IBIS World. "Seafood is one of the foods that you can't substitute out for cheaper products," he says.
That's the money side. With time, casual-dining restaurants like Red Lobster fare even worse, compared with their fast-casual competition, says Alex Susskind, a professor of food and beverage management at Cornell University’s School of Hotel Administration.
Compared with fast-casual, an average party spends more than twice as long at a Red Lobster: 45 minutes to an hour. Even for family dining, that’s a stretch. “When I go out with my family— I have two young kids,” he says, “And if we could get out in 35 minutes, that’s better.”
Olive Garden has all the same problems, but Susskind says Red Lobster has an additional burden: demographics. “It’s still perceived as a restaurant your grandma went to.”
Even attempts to update the decor— like putting the bar front and center— haven’t helped with that. "It's just that older demographic— that is the bread-and-butter, I guess, of their existence— that prevents that younger demographic from moving in," he says. "In terms of problems, they probably saw that as something insurmountable, given the number of years they've been trying to adjust it."
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