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General Mills Restaurants (chart) GENERAL MILLS TURNS EAST FOR INSPIRATION CHINA COAST AIMS TO MATCH OLIVE GARDEN'S SUCCESS

By Published on .

Casual dining powerhouse General Mills Restaurants is hoping China Coast will do for Chinese food what Olive Garden has done for Italian dining-and along with it, work the Olive Garden's magic on corporate sales.

Many of the most popular ethnic cuisines, from Mexican to Italian, have been parlayed into successful national concepts. But restaurant chain developers have long steered clear of Chinese, dominated by local restaurateurs.

Enter Orlando-based General Mills Restaurants, purveyor of specialty chains Red Lobster and Olive Garden. Known in the restaurant industry for its meticulous rollout of new concepts, General Mills has invested heavily to crack the $6.5 billion Chinese market.

"The Olive Garden already proved there could be a national Italian chain, and Red Lobster is the only national seafood chain. They've already done it twice, and they're in a good position to do it again with Chinese," said Ron Paul, president of restaurant consultancy Technomic, Chicago.

Success with China Coast is critical right now for General Mills Restaurants, facing a sales slowdown at Olive Garden and completing an overdue facelift of Red Lobster. Ever the tightly run ship, General Mills Restaurants headquarters in February laid off 84 employees, including 33 in management posts. The company attributed the layoffs, the first since 1987, to an internal review designed to cut costs, but clearly the pressure is on.

"They have put a significant amount of time and money into developing, testing and executing China Coast," said David Thickens, an analyst at Dain Bosworth, Minneapolis.

Having grown China Coast to 30 from five units in the past year, General Mills is mum on future expansion plans, saying only it will add units in four new states by yearend. China Coast now operates in Ohio, Michigan, Indiana, Florida, Texas and Arizona.

Although China Coast has no direct competitors, Chinese fast-food chain operators say the project has hit some snags.

David Wu, VP of Magic Wok International, Tampa, Fla., estimated average unit sales at some China Coast locations are around $2 million, far below the $3.5 million he said General Mills is expecting.

General Mills would not comment.

Mr. Wu also raised an issue faced by many national ethnic chains: the authenticity of China Coast's food.

"They try to use average American people to cook Chinese food," Mr. Wu said. "But it's not like cooking a hamburger. You need to know how to use a wok."

China Coast Director of Marketing Chuck Chatham acknowledges the challenge. "Wok-style cooking is difficult," he said. "But it can be mastered and taught to others."

Dinner entrees cost $7 to $11, while a lunch buffet priced under $5 attracts traffic from nearby malls.

The chain's biggest strength is clearly its atmosphere. The first TV spots from Grey Advertising, New York, broke July 11 in several markets, urging customers to "Bring your appetite for adventure."

The restaurant's most eye-catching feature is its turquoise pagoda roof. Silk wall screens, hanging Chinese lamps and authentic Chinese artifacts decorate the interior.

Creating a lively environment is what General Mills does best. Both Olive Garden and China Coast were created in-house by President of New Business Blaine Sweatt, deemed a master of details by colleagues.

Through the current renovation of 670-unit Red Lobster, General Mills is hoping to work the same magic on a somewhat bland concept.

"The traditional Red Lobster unit before was a little more functional," said VP-Marketing Wyman Roberts. "We want to enhance the atmosphere around each individual table."

The new "wharfside" interior features lighter wood, nautical decorations and lively music. Ads from Grey reflect the changes, replacing Red Lobster's longstanding beautiful food shots with a focus on the nautical ambience.

Seen by many as a more expensive-and thus special occasion-cuisine, seafood restaurants must try harder to maintain the same frequency of visits other casual dining chains experience, Mr. Roberts said.

To satisfy frequent seafood diners, Red Lobster is testing a value menu, offering 15 entrees under $10. But to attract new customers, the chain has expanded its menu to include more chicken and steak.

Appeal could not be much broader at Olive Garden, the golden child of General Mills Restaurants. Founded in 1983, the 458-unit chain has grown rapidly in the past two years, often posting double-digit quarterly sales increases.

But heavy is the head that wears the crown. A 4% dip in average unit sales for fiscal 1994, ended May 29, underscored the need to keep primping the Olive Garden concept.

The chain this summer broke its "Freshissimo!" campaign from Grey, an attempt to more closely align the restaurants with fresh, Italian food, said new Senior VP-Marketing Brad Blum.

A group of Olive Garden personnel recently trekked to Italy to capture new recipes for the chain; dishes this fall will feature fresh mozzarella, red pepper linguine and porcini mushroom sauce.

With the eventual goal of operating roughly 700 full-service restaurants, Olive Garden is looking for alternative locations, like its fast-food compatriots. The Olive Garden Cafe in a Lakeland, Fla., mall food court serves soup, salad and some pasta. A free standing cafe with limited seating is also being developed, Mr. Blum said.

"Because it's been so successful, it's spawned a lot of imitators who are doing a very good job," said Jamie Graham, VP-creative director at Grey. "For the foreseeable future, the competition is going to be very tough, and we'll have to keep evolving."

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