What's Eating Olive Garden and Red Lobster?

If you're finding a few more empty tables than usual at your local Olive Garden or Red Lobster, you're not alone in being alone.

Darden Restaurants (NYSE: DRI  ) reported surprisingly problematic quarterly results on Friday. Analysts were taken aback by the lower-than-expected profitability at the parent company of Olive Garden, Red Lobster, and LongHorn Steakhouse, but the real shocker is the cascading same-restaurant sales at operator's two biggest chains.

Comps fell 4% at Olive Garden for the quarter. It was even uglier at Red Lobster, with its 5.2% slide. The results were more encouraging at Darden's smaller concepts, but let's not kid ourselves here. Olive Garden and Red Lobster combined for more than 71% of Darden's sales this past quarter. If there's not enough bread in Olive Garden's unlimited breadsticks basket -- or if something cheesy's going on with Red Lobster's Cheddar Bay biscuits -- Darden's going to be smarting.

It certainly seemed as if casual dining was starting to turn the corner. NPD Group reported earlier this month that after consistent quarterly declines dating all the way back to 2008, the casual-dining segment was flat during this year's second quarter. 

Darden's drivers held up well during that period. Comps at Olive Garden and Red Lobster rose 3.2% and 1.1%, respectively, in the previous quarter. Things seemed to be going well enough that Darden increased its dividend at the time. That was during the fiscal quarter that ended in May, and that's important.

Darden reports on a different fiscal calendar from most chains, but by doing so it also provides an early read into how business has been in July and August for the casual-dining industry. Right now, things don't look too promising. 

Then again, it's not as if casual dining was merely flat all over in the quarter NPD was tracking. If Darden's concepts were doing well during April and May, it follows that rivals weren't holding up as well. Ruby Tuesday (NYSE: RT  ) saw comps at franchised locations plunge 5.1% during the three months ending in June. Brinker's (NYSE: EAT  ) Chili's also posted a marginal dip in domestic same-store sales for the quarter. If Olive Garden and Red Lobster have deteriorated, one can only imagine how bad things may be elsewhere.

We'll find out soon enough. Ruby Tuesday and Brinker should report quarterly results next month. Keep the antacids nearby.

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  • Report this Comment On September 21, 2013, at 4:50 PM, benzsanchez wrote:

    I have seen this trend coming and it will get even worse; there is just no need to get together with friends to eat when all you have to so is get on social media to see how everyone is doing. People stopped putting pictures online of the food they were eating also. The new trend is to eat by yourself while you stare at your fb account on your Ipad screen.

  • Report this Comment On September 21, 2013, at 5:01 PM, MrPiggs wrote:

    I believe the food is substandard and service lacking certain accomodations to customers. Perhaps that is not it as many chains exist that serve slop and terrible food. Olive Garden's food is somewhat edible, while the Lobster joint is terribly bad

  • Report this Comment On September 21, 2013, at 5:40 PM, Jeffsd wrote:

    All of these restaurants serve the exact same pre packaged food that is distributed by Sysco and other similar suppliers. The chicken at every one of these places tastes like the same exact gelatinous stuff that is created at the Tyson factory. Pre packaged items for portion control are gross. 20 years ago, these restaurants were using fresh ingredient, now it is all homogenized and disgusting. Consumers have caught on and are dining at small locally owned establishments with owners who actually care about the food they create.

  • Report this Comment On September 21, 2013, at 5:59 PM, terriern wrote:

    Darden was a big supporter of the obama campaign. That could have something to do with it.

  • Report this Comment On September 21, 2013, at 6:02 PM, Baldurdash wrote:

    Darden got the reputation of treating their employees very poorly, that's why my grand parents stopped going to Olive Garden. Namely, not paying for health insurance.

  • Report this Comment On September 21, 2013, at 6:15 PM, LadyMantle wrote:

    I'd rather eat a local resturant that prides itself on its homemade sauces, breads, salads and desserts. Regular local people need all the help they can get these days and are willing to go the extra mile to put forth second-to-none quality and freshness.

    The franchises do not care. It's all about corporate profits and they care nothing about their employees nor the food they serve.

  • Report this Comment On September 21, 2013, at 6:38 PM, laclass wrote:

    I'm not familiar with Darden's. Olive Garden is okay but would prefer to eat elsewhere. My husband & I decided to try Red Lobster again a few months ago - after swearing it off 10 or more years ago - and it was not pleasant at all.

    Actually the coconut shrimp were good - nothing else was. Do noyt plan to ever return.

  • Report this Comment On September 21, 2013, at 7:21 PM, nnisey wrote:

    In my area these restaurants are usually crowded, the food and service are very good. Very popular places.

    I imagine the bad economy has affected some places.

  • Report this Comment On September 21, 2013, at 7:26 PM, nnisey wrote:

    Olive Garden and Red Lobster are very popular places here. The food and service are good. Staff is friendly. Very clean

  • Report this Comment On September 21, 2013, at 7:31 PM, Gorchuk wrote:

    We used to LOVE Red Lobster. But the portion sizes have gotten SO MUCH smaller where prices have risen. We just can't afford a meal where we are still hungry afterwards.

    Shrimp Scampi order used to have 15 then 12, now maybe 10 pieces. Size of the shrimp are smaller. Walter's Shrimp used to have 10 then 8 now 6 pieces. The Admiral's feast used to be a feast, I felt stuffed after eating it... now it's a variety meal, which leaves me wanting more.

    Fill up on bread I guess... but if that's what I have to do... what's the point of eating there.

  • Report this Comment On September 21, 2013, at 7:39 PM, jonnyappleseeds wrote:

    to start with the so called sea food there has gone downhill over the years, they have the smallest shrimp and lobster tails on earth, and now much of it like long back..now they just want to fill you up on cheese biscuits and miniature sea food

  • Report this Comment On September 21, 2013, at 7:42 PM, Lodach wrote:

    I know it isn't a large portion of the population that thinks like I do but because of this companies very public rejection of Obama care and then their promise to cut workers hours to not participate, I know I choose not to go to these establishments. I know most American's could care less about what companies they are giving money to but I feel if I don't spend the money I have on those places making our lives better, then I am a hypocrite. Perhaps a small portion of their decline is people like me.

  • Report this Comment On September 21, 2013, at 7:53 PM, doraglasberg wrote:

    Avoid all chains.

  • Report this Comment On September 21, 2013, at 8:12 PM, VanderBuiltIt wrote:

    I ate at Red Lobster in Southeastern MO. late..the crab and the lobster tasted salty. I like a brown gravy with my mashed like Cracker Barrel. The white cheddar mashed tasted salty. I had leftovers at home so I put some melted butter on the potatoes....anything helps!! A cup of soup at $4+seems a little ridiculous. Other soups were higher..i had the clam chowder. Good service. Poor seating..who wants to pay $25-$30 each person, not counting tip and look at storage containers and a Steak n Shake sign?? I'd just as soon have Long John Silver's fried shrimp..as Red Lobsters.

  • Report this Comment On September 21, 2013, at 8:17 PM, tpicciani wrote:

    Today we ate a the local diner that's a few hundred yards from the Olive Garden. The Olve Garden was taking the overflow from people who couldn't get into the diner. And that's no lie. The Diner was packed and Olive garden on Saturday night was very much wanting for customer.

  • Report this Comment On September 21, 2013, at 8:21 PM, dch77 wrote:

    @terrien...check your resources...he has donated millions to the Republican party for years. A few crumbs to the democratic party, but top recipients were Republicans from Florida and Mitt Romney. His company has also led the charge against the ACA.

  • Report this Comment On September 21, 2013, at 8:49 PM, thunderbolt7 wrote:

    "Comps?" What is that? "Comps fell 4% at Olive Garden"

  • Report this Comment On September 21, 2013, at 8:50 PM, agase wrote:

    The food is extremely salty and unhealthy. But I have boycotted any Darden restaurant because of their ugly treatment of their employees with low wages, cut hours, and no healthcare coverage or even sick days. I won't enrich people who don't treat their employees well with living wages and adequate benefits.

  • Report this Comment On September 21, 2013, at 9:54 PM, Thearkeeper wrote:

    My husband refuses to spend any of his money at Red Lobster for the exact same reasons given here in these blogs. Too pricey, small portion size, and over the years the food has simply REGRESSED from what it once was. I have still visited our local red lobster chain and seriously folks, the last time I went, the food was just nasty and I promised myself I would never eat there again. I have kept that promise.

  • Report this Comment On September 21, 2013, at 10:20 PM, idadwarren wrote:

    Why should we pay for smaller portions. Even the salad portions are smaller....they don't fill the salad bowl anymore. That is sooo silly because we just ask for more refills which reduces employee productivity.

  • Report this Comment On September 21, 2013, at 10:33 PM, leelee5729 wrote:

    Over and above the shoddy way Darden Restaurants treats its employees, which is absolutely appalling, the food at each one of their establishments used to be of the finest quality and taste. Yet, for some reason, they have chosen to downgrade both of these areas in the sake of trying to come up with more economical ways, i.e. so-called deals, of getting people into the restaurants. Newsflash-if the food is flavorful and plentiful-we don't care how much it costs. I don't mind paying for decent food and service. Even the drinks are lousy. I no longer drink alcohol, but the other people who are usually with me do. If we want to go out for an enjoyable evening, we bypass all of your restaurants. If you don't get somebody who actually knows how to run these restaurants and go back to your original menus and food and drink qualities and quantities, you can pretty much hang up your corporate aprons and lock all the doors. I will not be back and neither will anyone else that I know. I, a knowledgeable consumer, am available for consultation if you need assistance. And trust me, you definitely need assistance...

  • Report this Comment On September 22, 2013, at 12:55 AM, keifer0117 wrote:

    My wife is a vegetarian and Olive Garden was once a great meal for both of us. Their food, now, has that "frozen dinner" flavor that is very close to disgusting. Last time I visited Red Lobster, the food was good but the portion size was unacceptable. I would rather eat at a local restaurant any time.

  • Report this Comment On September 22, 2013, at 12:59 AM, Caile76 wrote:

    I agree with you, Lodach, about boycotting restaurants that say they'll cut employee hours once Obamacare goes through. It's a boldfaced excuse to treat employees unfairly; and Ito patronize any business - restaurant or otherwise - that actually states this publicly - and over politics, no less - would be throwing good [money] after bad [business].

    As to Olive Garden - it's all boil-in-bag stuff anymore. Nothing is really 'cooked' on premises as shown in the commercials, just heated up. I can, and do, often make better 'Italian' food at home. More authentic, too.

    And the Steakhouse...well, if you can afford a meal that *STARTS* at 17.00 a plate, then you're a richer person than myself! Too bad - the food is much better than at the other two.

    I agree with many here, also, that it's better to patronize local restaurants versus corporate chain ones - at least you know any profit is likely to be spent in the local infrastructure.

  • Report this Comment On September 22, 2013, at 3:06 AM, TERESALEW wrote:

    OLIVE GARDEN?? who's kidding who, the quality and portion size has went way down and the cost has went way up, they're food is horrible!!

  • Report this Comment On September 22, 2013, at 7:22 AM, THEQueenDiva wrote:

    The food at Red Lobster is heavily salted and very greasy. If it were not for the overwhelming salt it would be extremely tasteless. Many years ago quality, flavor and presentation seemed to matter to them, but now it is just another grease pit with a salt shaker. Why pay their HIGH prices to get 'so-so' food (prepackaged) and feel awful for days after. (GA)

    Olive Garden used to care about quality, flavor and presentation as well, but now it is the almighty dollar. The LAST time my husband and I went to an Olive Garden they served us expired desserts- the cheesecake was so old it had a completely odd presentation and texture. It was extremely gross! And this was the 'complementary' dessert given by the manager because our meal had been so terribly messed up. (MA)

    We don't give their competition - Ruby Tuesdays- our business anymore either. Since they remodeled and hiked up their prices and reduced quality to cover the remodeling expense I have been tremendously disappointed each time we've gone to a RTs. They seemed to think remodeling put them in a new price point/class for dining- it didn't and the new menu selection may have made the attempt, but the kitchen staff and the wait staff are still stuck in 'greasy spoon' era, so that isn't happening either.

    Overall, we've written off Red Lobster as a lost cause- too high a price point for the prepackaged drowned in grease, drenched in salt menu selections.

    We might give Olive Garden a second chance if they do a MAJOR turn around w/ staff (management) quality and QA, but until then we aren't going to bother.

    Ruby Tuesdays is a write off as well. Cheap ingredients, poor quality, over priced and not at all friendly.

    Regardless of the economy SERVICE and Quality do matter to the consumer. Businesses need to invest in training and standards for their staff, maintain a better level of quality products and not take the consumer for granted.

  • Report this Comment On September 22, 2013, at 7:51 AM, Sarah40701 wrote:

    Is everyone forgetting about the salad scare a few weeks ago? Was that ever proven? I know several people that are basically waiting to go back to a couple of these restaurants because of that. jmo

  • Report this Comment On September 22, 2013, at 9:28 AM, lastdance729 wrote:

    I used to love these restaurants when I was younger, but as I got older I realized that the food served at these places could easily be made at home and that most of it appeared to be microwaved. The last time I remember going to an Olive Garden, I got a lasagna and it was hot on the outside and ice in the middle. The waitress with a bad attitude offered to bring me something else, but I declined because I was grossed out. Red Lobster also has always seemed like everything is drenched in grease.

  • Report this Comment On September 22, 2013, at 9:55 AM, Eyesraesopen wrote:

    The Darden company was one of the big boys talking smack about if Obama won what all they were gonna do. Anyone forgot that? Well a lot of us boycott them. There were others also. Talk smack, watch your bottom line drop!!!

  • Report this Comment On September 22, 2013, at 10:24 AM, Catheriena wrote:

    I think it has to do with Red Lobster and Olive Garden Tottin Obamacare. They supported the democrats with their money, and then said they'd be cutting employee's all to part time to avoid it. That tells me the company has no loyalty to those whom are self made. The self made are the ones who frequented their restraunts, and decided they weren't gonna feed those who feed bloated govt mobsters. I haven't eaten at any of these places for the exact same reason.

  • Report this Comment On September 22, 2013, at 10:51 AM, frivelli wrote:

    We use to go to Red Lobster. Red Lobster use to be good. Now they are way over priced, and not at all worth the money. The service just so-so. And for Olive Garden, their portions are way to small, and their so called 'Never Ending Pasta Bowl', the waitress gets lost after the 1st bowl. Both are not worth it. I'd rather go to a regular diner.

  • Report this Comment On September 22, 2013, at 10:52 AM, frivelli wrote:

    I guess they can't fool people anymore.

  • Report this Comment On September 22, 2013, at 11:13 AM, Czarcasm wrote:

    These companies were spewing,their tough guy mantra. That if/when Obama-care was passed. They would cut employees pay ,and hours to avoid paying their employees health insurance.

    A backlash went into full effect ,of twitter users tweeting these companies,and people flooding the CEO etc office with letters of disdain about their decision.

    People banned together and pledge that they will hurt these companies bottom line . By not going there to spend their money only so employees to be treated poorly.

    So now insiders ,and stockholders are wondering why profits are dropping ? Ha! Did you dolts forget about the MIDDLE CLASS promise? Yea of course you did. After all Americans have very short attention span.

    I used to take my family to Red Lobster every Mondays,Wednesdays, Fridays,and Sundays. My kid for the cheese garlic biscuits which I couldn't get him to stop eating. Me their Caesar salad ,and lobster.

    At times I would even take my kid there,after school and just get him the cheese garlic biscuits by it self,and order up to 50 as take out and freeze them so he can have here and there.

    But after finding out about what they did to their employees. That was it for me! I discovered Shawn's in the process and even better they sell the cheese garlic biscuits that my kid likes. & taste just as good as Red Lobster.

    Support your local "hole in the wall" businesses.

  • Report this Comment On September 22, 2013, at 11:16 AM, Czarcasm wrote:

    *schwans*

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