The parent of Olive Garden and Red Lobster-a "throwback" four years ago when General Mills spun off the then-foundering restaurants unit-is now at the top of the food chain. But it's no fish tale. It is a reminder of how focusing on the fundamentals can turn the tide for even an aging company in a mature industry. Because Darden fixed its problems during the upturn, it's now in a good position to weather a downturn.
"Companies with strong brand strength and reputation for good food and service will do better" when there is a slowdown, said Darden Chairman-CEO Joe Lee.
That Darden's Olive Garden has had 26 consecutive quarters of same-store sales growth and Red Lobster has had 13 quarters is certainly no accident.
The growth reflects improvements in marketing, menus, quality and service. Olive Garden President Brad Blum, for example, reinvigorated the chain in the '90s with fresher and more authentic food, and higher operational standards. The chain and Grey Global Group's Grey Worldwide, New York, also have tweaked advertising, adding cooking and travel magazines to promote its wine list and made-in-Italy fare. Said Mr. Blum: "We've got the best menu we've ever had"-and the chain's highest-ever customer satisfaction scores.
"The best thing they've done is revitalize Olive Garden," said Bob Goldin, exec VP of consultant Technomic. "Revitalizing a concept on the skids is very hard and very time consuming."
To better lure baby boomers and working parents, Red Lobster in 1997 moved advertising from Grey to Havas Advertising's Euro RSCG Tatham, Chicago, changing its dull "seafood lovers" positioning to a more playful and indulgent one. Then the chain freshened its menu and began remodeling its weather-beaten store design for a more contemporary atmosphere.
Both chains had record sales last year. A bunch of details add up to a simple success: Ads drive traffic; Red Lobster and Olive Garden then deliver what they promised; customers return.
What about the economic slump?
Darden CEO Mr. Lee contends-and analysts agree-casual dining can hold up well in a moderate downturn, given that consumers are pressed for time, mostly still employed and-while maybe rethinking big-ticket expenses-willing to spend on smaller treats. At $12 to $16 a person, Olive Garden and Red Lobster are affordable fare.
While Red Lobster and Olive Garden are outperforming the category, they have seen same-store sales growth slip this year as the economy slows. But they are a good bet: Customers, not wanting to waste money this year on a bad meal, know the chains deliver on the promise. "In a slowdown, people are conscious of food quality," said Mr. Lee.
Darden shows no sign of modifying its formula. "We're keeping it fresh, improving the quality of the food, the environments, the training and execution, and the advertising," said Rick Walsh, senior VP-corporate communications. "All those things are contributing to a better experience, and if our competitors don't get that, frankly it's good."