Why Red Lobster, Olive Garden and Their Casual-Dining Bretheren Are Endangered Species

The past few quarters have been tough on shareholders of casual dining chains such as Darden International's (NYSE: DRI  ) Red Lobster and Olive Garden franchises, Bravo Brio Restaurant  (NASDAQ: BBRG  ) , and BJ's Restaurants (NASDAQ: BJRI  ) . While the stock market and the economy have improved, these restaurants have stalled mightily. 

The big question is whether these restaurants are going through a brief dry spell, or are they suffering a permanent trend downward? There's a few different ways to look at the problem. 

Stuck in the middle
The past few quarters have been good for restaurants in fine dining, quick service, and especially fast casual (the sector grew 12% year over year). The one area that is struggling is casual dining.

The numbers back this up. Just look at Darden Restaurants closely. Casual brands like Red Lobster and Olive Garden recently had comparable sales declines, of 4.5% and 0.6% respectively. Yet, the rest of their brands, including the up-scale Capital Grille, have done very well, prompting investors to push for a casual "spin-off" of Red Lobster.

Securities Analyst Andy Barish, of Jefferies Equity Research, recently predicted an oversupply of casual dining restaurant locations continuing in 2014. In short more consumers are opting for either cheaper (fast casual), or more expensive (fine dining), options which don't bode well for casual dining. This segment just seems to be stuck in the middle.

The most recent quarter for Bravo Brio was rougher than Olive Garden's, as comparable sales declined 4.5%, and EPS dropped by over 20%. The problem isn't limited to Italian food, BJ's third quarter also saw a comparable sales drop of 2.2%, and earnings are set to decline more than 20% year over year.

These businesses are losing market share to fast-casual. They're not offering a compelling enough value proposition, and they have expenses and capital expenditures (additional staff, equipment, long menus) that fast-casual chains do not have. 

Is the economy to blame?
I recently wrote that Ruby Tuesday's CEO J.J. Buettgen made a ridiculous statement, by blaming the economy for poor results, because GDP and restaurant industry traffic are at twelve month highs. To his (slight) credit though, recent studies have shown that increases in U.S. consumer discretionary spending have favored the wealthiest Americans. 

If this trend continues, we could see casual dining in the dumps for a while. Let's face it, affluent Americans aren't usually going out to dinner at BJ's or Red Lobster. No, these are the restaurants that middle class folks go to, when they're feeling a bit better about their personal finances. If they're feeling tight, they may opt for Panera and skip paying a tip. Meanwhile, the rise in discretionary spending for the wealthy explains some of the stabilization in higher-end dining.

If this trend continues, it could be a lag on casual dining for a few quarters. It's a part of the puzzle, but not an excuse on its own. 

Casual dining chains need to reconnect with customers
In my opinion, the biggest reason these chains are struggling is that they are missing what customers are looking for right now. In the aforementioned report from Jeffries, the Analyst noted that there "would still be ample opportunities for innovative brands to take market share in the new year." And while casual dining has cooled, chains that serve products customers want, like Buffalo Wild Wings, have flourished with similar cost structures.

The National Restaurant Association's recently released its trends for 2014 , which include locally grown produce, and a focus on natural ingredients. This could be an area that these restaurants, especially the Italian chains, could try to adapt to. If either restaurant chain can serve food that seems fresh, vibrant, and more natural, they may be able to justify their higher price tags.

At the very least menu and brand innovation is needed. I don't think Olive Garden's new burger will be enough to move the needle, but if you own shares of these chains you should watch for real innovation. 

Something needs to change, preferably in the menus, to reengage customers.

Foolish conclusion: focus on trends
To quote a recent post by fellow Fool Jason Moser, "you go to Chipotle because you know what you want; you go to Buffalo Wild Wings because you know what you want." So, do people only eat at Darden's restauarants, BJ's, and Bravo Brio, when they can't decide what they want? 

The customer is gravitating to higher-end, and lower-end, options. If these restaurants want to compete, they'll need to offer something compelling to off-set this competitive drag. It starts with menu innovation, focusing on trends, and reengaging the customer.

They need to offer a compelling reason to eat at their restaurants, until they do, they're an endangered species. 

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  • Report this Comment On January 11, 2014, at 1:38 PM, mbee1 wrote:

    While I cannot speak to all the casual restaurants I have been in Red Lobster and Olive Garden. My family of four has spent as much as 100 dollars for a meal if you add drinks to the regular meals. That is a lot of money so I suspect the real problem is they are way overpriced.

  • Report this Comment On January 11, 2014, at 1:41 PM, siphonhose wrote:

    In the last decade, Americans by the millions have been diagnosed with Diabetis Type II. During that period as the number of potential diners that needs to watch how many Carbs they ingest, what has Olive Garden done to their menu to accomodate these carb restricted diners...NOTHING!!!! Look at the nutritional information on Olive Gardens Entree's and they consistantly have twice to three times the allowable carbs for a Diabetic.

    The only menu change that Olive Garden has attempted is to add an "Italian" Hamburger to the menu. How about some chicken marsala served on broccoli, or chicken picata served on grilled asparagus???? Italian doesn't have to be served with a ton of pasta or breading, and it doesn't have to have 200 grams of Carbs, when 60 grams is the mex for most diabetic diners.

  • Report this Comment On January 11, 2014, at 1:51 PM, Gurudining wrote:

    Food industry needs to put its ear to the ground and listen to what it has to say .Average person 18-29 living in America making 10.00-12.00 an hour with no education(illegals, and others ) So that is why fast food is doing so well and then you have the educated family's average income combined $150,000 -175,000 who are looking to enjoy a good meal out ,but not at process restaurant as posted in this article. Better quality for the middleclass and more of a self serves restaurant like Clifton's back in the years past

  • Report this Comment On January 11, 2014, at 1:53 PM, Brian1 wrote:

    Darden Corp, owner of Red Lobster and Olive Garden went public with announcements that they would punish their workers over the Affordable Care Act (Obmamcare) and they also have made public some very bad wage policies.

    Fine, they are run by a far-right kook group. And in a service business your politics can turn off potential customers.

    In Darden's case, they are punishing people who are members of their target market. They will fail because of their silliness.

  • Report this Comment On January 11, 2014, at 2:36 PM, markw607 wrote:

    As a consumer, I can attest to why sales are down..firsthand. I recently had dinner at the Olive Garden, and I ordered the Chicken Gnocchi soup, and the Spaghetti as the entree. The soup had no gnocchis in it and the spaghetti was less than a third of the plate. At 15 dollars, I'm not expecting a feast, but to be told by my server there was nothing he could do does not make me want to return, especially when spaghetti is less than a buck a pound. Poor quality control and portion size make for poor dollar value in a tight economy. I'll spend make money elsewhere.

    A restaurant is a service, an optional service at that. Companies need to keep that in mind.

  • Report this Comment On January 11, 2014, at 3:06 PM, jbarger25 wrote:

    Darden has gone through a phase recently where they give more credence to the employees than the management. When they get a good team together that hold people accountable for recipes, temperatures, food cost, and customer service with respect, the employees don't like it, complain and then the management in turn is fired. It's no wonder people walk away from the Olive Garden. Lousy service with no accountability for the employees. And yes, I went through this and have over 22 years of restaurant experience. Olive Garden is doomed for failure unless upper management changes.

  • Report this Comment On January 11, 2014, at 3:11 PM, russell151 wrote:

    I have to agree with the other comments. Olive Garden is not too bad but Red Lobster is grossly over priced and the food mediocre at best. It has become too expensive to dine out even at so called casual restaurants.

  • Report this Comment On January 11, 2014, at 3:11 PM, RecognizedExpert wrote:

    Low food quality. High price. Poor service.

  • Report this Comment On January 11, 2014, at 3:19 PM, columnist77 wrote:

    Red Lobster is my favorite treat - Why cannot these restuarants pay their help instead of expecting the customer to? Reasonable drink prices would help also. In the meantime I will eat mostly at home

  • Report this Comment On January 11, 2014, at 4:27 PM, ScamuelJones wrote:

    You "financial analysts," so-called, just don't get it, do you? Many Americans still love their country and its flag, and they will NOT sorry, lying SOB restaurants that HATE the U. S. and its flag such as the Darden Restaurant Group that "flag-ship" its major names of Red Lobster and Olive Garden. After its refusal (Olive Garden) to let a civic group to display its U. S. flag and making them remove it, I know of several of my family and friends who have never set foot inside one of these sorry trash comununist, socialist loving restaurants that hate the U. S. and we NEVER WILL AGAIN in our life times!

  • Report this Comment On January 11, 2014, at 4:44 PM, bigalnc wrote:

    Does anyone at the Fool, or in it's body of readers get it?

    The middle class regarded these locations as our fine dining; we could likely never afford Ruth Chris, Morton's or the 4 star locations in Manhattan.

    Our unemployment and under-employment is vastly underreported and less appreciated; our prospects dim, our disposable income at the lowest points in memory.

  • Report this Comment On January 11, 2014, at 5:00 PM, spitzerone wrote:

    There is a niche market available for any chain willing to think just a little outside the box. I am diabetic, my mother is sodium restricted, and my wife wants us to eat healthy when we go out. Just last evening I went to Applebee's with my sister and the food (even the broccoli) was loaded with salt. Why is it that restaurants feel that the patron cannot salt their own food (or not)? With diabetes I am always very restricted on what I can order because there is no consideration for people with these problems. Therefore I do not go out to eat very often anymore. If a chain had the good sense and fortitude to offer healthy meals at a reasonable price, they will find that they have a neglected market that is looking to eat healthy. The key here is to have great selection offerings for ALL patrons walking in the door.

  • Report this Comment On January 11, 2014, at 5:06 PM, Jeffsd wrote:

    Sysco products are disgusting. Any restaurant that is going to serve me warmed up pre packaged Sysco food is also disgusting. They should go out of business.

  • Report this Comment On January 11, 2014, at 5:54 PM, rlgdguy wrote:

    I have been to both and actually like Olive Garden. Red Lobster on the other hand is a different story. While I LOVE seafood, Red Lobster falls very short with their menu selections. They have these commercials on television where they show mounds and mounds of lobster and shrimp falling all over the place or dripping in butter, but they never seem to actually have exactly what they advertise when you get there. Sure they have salads and chicken fingers, but you can get that anywhere and for a lot less money. For the expensive drink I did get, I got a little lighthouse shaped glass, which is the least they could have done, but then they ended up getting recalled for lead in the glass! Anyway, I haven't been back since and don't ever plan on going. I will continue to go to The Olive Garden. The food is decent and the prices are reasonable, at least I think so.

  • Report this Comment On January 11, 2014, at 6:16 PM, kdavis860 wrote:

    Tips are to blame, along with the way the government pushes higher tips. In many states you can't make servers share tips with cooks, and the tax evasion on tips is widely tolerated. Calculate some time what you tip at a restaurant like the ones in the article vs. how much time the server spent on you. I bet you get an answer like $10 for 12 minutes, so $50 per hour, and the restaurant still pays them a little and covers any insurance and payroll taxes. Even with the lost time when there isn't customers, servers often make over twice what cooks make. Note that you don't pay sales tax on the tips. That's one reason more places haven't gone as "no tipping zones" - still, some have.

    The problem is that as typical tips have crawled from 10% to 12% to 15% to 18%, it's made it much more pricey to go out to eat, except when you're traveling for work. We go to the Olive Garden rather frequently and skip drinks and appetizers. For two adults and two kids we spend about $50. I'll tip about $7 but a long of people will say that should be more like $9. There's a difference between $50 and $59, one people can feel.

    Even more dramatic than the effect of $9 on how many customers show up, consider the impact if the company could keep that $9. That's the difference between a Red Lobster making a ton of money and it going bankrupt.

    The bottom line is that the government doesn't tax tips like everything else, and it also allows some "price discrimination" - meaning you collect more from those more willing to pay. Still, aside from the reasons, the cost of tipping is undercutting these restaurants.

  • Report this Comment On January 11, 2014, at 6:41 PM, lilishane wrote:

    personally, i no longer enjoy paying extra amounts of money on tips, especially for a meal that took 2-3 times as long to serve than a fast food place. i also don't like spending all the extra money on drinks, appetizers, etc. and, i don't like having to get dressed up in order to get proper service when i go into a restaurant.

  • Report this Comment On January 11, 2014, at 6:52 PM, LadyMantle wrote:

    Luckily, I love to cook and majored in Human Nutrition and Food Science in college because it was the only major that made sense to me. Even though I do not work in the food or nutrition industry basically because it is a failed model and no one is hiring anyway, I love to buy fresh fruits and vegetables and lean meats and cook them with respect and reverence. I've only been to OG and RL once in my life and found them to be way over priced for what you get. Who can afford to eat out anyway? Even though they tout a growing economy in the new media, most are making very little these days.

  • Report this Comment On January 11, 2014, at 7:08 PM, jcar01 wrote:

    The problem with these restaurants is that diners who used to eat there are seeing the quality of the food decline with the profit margin. I used to be a regular diner at Olive Garden but my last visit a few months ago with my children made them lose me as a customer forever. Olive Garden used to have very good meals that were made of quality ingredients and the portions were in step with the pricing. The last time I dined at Olive Garden I was given a large plate of pasta with sauce and very little protein content (in this case shrimp). I would rather pay a few more dollars for my meal than see them start trying to make profits from the items used to make the meal or lack thereof. The funniest part of my situation is that they opened the Olive Garden right next door to a Fizoli's Restaurant and the quantity and quality of their food far surpasses Olive Garden now. I just dine at Fizoli's now and get a good quality meal full of chicken, shrimp or whatever else is part of the dish.

    Darden Restaurants Group has made profit at the expense of patrons their motto and by cheapening their meals by cutting quality and ingredients they are losing their customers. Their customer base isn't stupid and know that their dollars are better spent elsewhere. If I want real good dine in Italian with quality ingredients I now go to Carraba's Restaurant.

  • Report this Comment On January 11, 2014, at 7:33 PM, vtchick wrote:

    The reason that these places are going down the drain, is because there is no talent involved at all. They just cut open bags and reheat there is no prep at all. I have had a friend who works for olive garden and tells me that it is all they do in the kitchen. People want REAL FOOD!!

  • Report this Comment On January 11, 2014, at 7:58 PM, ozzlefinch wrote:

    It's no great surprise why these eateries are having a hard time. The economy is suffering so middle class families can't afford to eat out as often as they once did, taking a huge chunk of customer base away from Red Lobster and Olive Garden. The food is precooked at a factory, frozen, trucked to the kitchen, then heated up in a microwave before being served to the customer. Yech! Who wants to spend $20 per person or more on a TV dinner meal?

  • Report this Comment On January 11, 2014, at 8:05 PM, Sideways wrote:

    There's a major factor they aren't seeing: Today's 20-40 Year Olds, who should be their biggest customers, don't want to sit in a booth staring at each other for hours. It's not the price, although high. It's not the food, although bland. I've gone out to eat plenty of times knowing it was expensive and not as good as a burger. You go for the experience. Young adults text ALOT. They want things fast. An hour feels like an eternity. This is not a fun experience for them. Change the process - get rid of the check in, wait, sit down, wait, eat, wait for bill, formula.

  • Report this Comment On January 11, 2014, at 8:15 PM, tpicciani wrote:

    The reason that these companies are doing poorly is that they are serving what is essentially fast food. They prepare them at a factory, freeze them, then have preparers heat them up before service.

    Once upon a time restaurants put faith in the skills of employees, paid them a fair wage, and got fresh food cheaply. Now the trend has reversed. The use prepared food that is more expensive to purchase, they've hired low wage people who don't really care about their work, and care little for the skills of the employees. People see this! Nobody should pay $25 for a meal that you can get from the Frozen section of the local grocery!

  • Report this Comment On January 11, 2014, at 9:32 PM, birchmama wrote:

    We started to eat at Olive Garden in The Villages, FL until we saw the germen roach crawling on the wall. We left without eating and $40 worth of gift cards in our pocket. About a month later we used those gift cards at Red Lobster in Leesburg, Fl and the service was lousy and the food cold. We left there without using our gift cards and an additional $30 in gift cards. Aad they wonder why they are losing business and not making profits?????

  • Report this Comment On January 11, 2014, at 9:39 PM, aurareads wrote:

    The problem is prices are going up, and portion sizes and quality are going down. At Olive Garden you could get a plate of pasta that might last you as much as 3 meals for about 8 dollars, now you go in and get a single serving size portion and it's 12 dollars. If you have a family of 4 what used to cost you about 35 bucks with plenty of leftovers is now 50 dollars with nothing to take home for later and that is without tips or drinks. Why would a couple go spend 50 dollars to go to Olive Garden when they could spend 60 and go someplace that is less a 'family restaurant' and more upscale.

  • Report this Comment On January 11, 2014, at 10:08 PM, speculawyer wrote:

    The middle class is being destroyed so the middle class restaurants are feeling the pinch as their customers can no longer afford to eat out.

  • Report this Comment On January 11, 2014, at 10:15 PM, doxiemom2008 wrote:

    My husband and I used to eat at OG on the average of once a week. We quit going there when they started changing the menu to include heavy cheese and cream sauces on almost every dish. RL doesn't have a very good selection either, so we only go there if someone gives us a gift certificate to use. I would love to find a good quality Italian place that serves more than spaghetti, alfredo & pizza, but nothing like that exists in the Salem, Or area.

  • Report this Comment On January 11, 2014, at 10:33 PM, Springs1 wrote:

    The service at Red Lobster has just been bad over the years at times such as not knowing the what comes in something such as I have asked for the side salad to not have tomatoes and cucumbers, they decided I didn't want the onions even though I never once said the word onions even though their side salad COMES with onions.

    http://food.theplainjane.com/wp-content/uploads/2010/12/red-...

    Just look at the picture. Yes, if I order it as it comes I will get red onions.

    So the idiot manager tells me that "They are going by "most" people. I told them "Since when do you take any order of any kind according to "most" people, especially people that have allergies? Anyway, that is so idiotic, ridiculous. When I go to McDonald's if I would say on a big mac as most people know it comes with lettuce,special sauce, cheese, pickles, onions on a sesame seed bun as the song would go still has the same ingredients when they had that jingle when I was a young kid if I would say I wouldn't want lettuce, cheese, special sauce, and pickles, I should still receive onions on my burger and I normally wouldn't have an issue with the order taker(usually the kitchen staff, but it would be right on my receipt) with this order. But for some weird reason, at non-fast food restaurants, which Red Lobster seems to be an issue here, I have had several servers not "listen" to what I actually said and just assumed "you wanted it plain" one waitress told me. I was so floored, like huh? I didn't say I wanted just lettuce. If I wanted it with just lettuce I would have said so, duhhhhh. Anyway, that's a huge issue with Red Lobster like WHY can't they know how to take an order. I said "the side salad(which is part of their meal) with no tomatoes, no pickles" I never said no croutons or onions. Some of the servers didn't even give me croutons, I mean that's so ridiculous and then they wonder why I am mad? Seriously, any manager that has common sense would listen teach their servers to learn how to take an accurate order. Such as if they want to assume say "Would you like the croutons and onions?"

    They don't have the side salad ingredients listed on their inside menu so if I were a server, I'd make sure my customer knew what came with it in case if they were having it for the first time or didn't remember it came with that item. As a customer that has been getting their side salads since like 13 or 14yrs old(now 36yrs old, going to be 37 yrs old this year within a few months or so), it's ridiculous that servers are messing up like this just "assuming and not listening" to what you are ordering. To have several servers doing this, then a manager of all people backing up their servers, that is one huge reason why they are going out of business first. McDonald's cashiers know how to take orders and not assume, why not servers in non-fast food capacity can't do the same? What is the deal with servers not knowing how to take orders? Especially at Red Lobster? At the Chili's here in my area, servers are asking customers "Are fries ok" for example even if the menu says fries. They are making sure the customer knew what the item came with. That's how service should be. That's why Chili's is in business and why Red Lobster is losing business. Poor service. The going out of order as well have had several servers at Red Lobster serve food out of order after waiting 45-50 minutes a couples side salad off a tray rather than our hot food. Our food was ordered before that couple came in. I know because I saw. Her tip was like a dollar. She knew who ordered first, but gave someone else's food that ordered after us first when she had both our hot food (2 meals) and their 2 side salads on a tray. She should have not even taken the time to put them on the tray at that point since we had waited so long. To give them theirs first was unfair and that is the server's fault.

  • Report this Comment On January 11, 2014, at 10:38 PM, Springs1 wrote:

    Revised, sorry I made a typo meant to put no cucumbers. Please don't post the earlier version, thank you.

    The service at Red Lobster has just been bad over the years at times such as not knowing the what comes in something such as I have asked for the side salad to not have tomatoes and cucumbers, they decided I didn't want the onions even though I never once said the word onions even though their side salad COMES with onions.

    http://food.theplainjane.com/wp-content/uploads/2010/12/red-...

    Just look at the picture. Yes, if I order it as it comes I will get red onions.

    So the idiot manager tells me that "They are going by "most" people. I told them "Since when do you take any order of any kind according to "most" people, especially people that have allergies? Anyway, that is so idiotic, ridiculous. When I go to McDonald's if I would say on a big mac as most people know it comes with lettuce,special sauce, cheese, pickles, onions on a sesame seed bun as the song would go still has the same ingredients when they had that jingle when I was a young kid if I would say I wouldn't want lettuce, cheese, special sauce, and pickles, I should still receive onions on my burger and I normally wouldn't have an issue with the order taker(usually the kitchen staff, but it would be right on my receipt) with this order. But for some weird reason, at non-fast food restaurants, which Red Lobster seems to be an issue here, I have had several servers not "listen" to what I actually said and just assumed "you wanted it plain" one waitress told me. I was so floored, like huh? I didn't say I wanted just lettuce. If I wanted it with just lettuce I would have said so, duhhhhh. Anyway, that's a huge issue with Red Lobster like WHY can't they know how to take an order. I said "the side salad(which is part of their meal) with no tomatoes, no cucumbers"

    I never said no croutons or onions. Some of the servers didn't even give me croutons, I mean that's so ridiculous and then they wonder why I am mad? Seriously, any manager that has common sense would listen teach their servers to learn how to take an accurate order. Such as if they want to assume say "Would you like the croutons and onions?"

    They don't have the side salad ingredients listed on their inside menu so if I were a server, I'd make sure my customer knew what came with it in case if they were having it for the first time or didn't remember it came with that item. As a customer that has been getting their side salads since like 13 or 14yrs old(now 36yrs old, going to be 37 yrs old this year within a few months or so), it's ridiculous that servers are messing up like this just "assuming and not listening" to what you are ordering. To have several servers doing this, then a manager of all people backing up their servers, that is one huge reason why they are going out of business first. McDonald's cashiers know how to take orders and not assume, why not servers in non-fast food capacity can't do the same? What is the deal with servers not knowing how to take orders? Especially at Red Lobster? At the Chili's here in my area, servers are asking customers "Are fries ok" for example even if the menu says fries. They are making sure the customer knew what the item came with. That's how service should be. That's why Chili's is in business and why Red Lobster is losing business. Poor service. The going out of order as well have had several servers at Red Lobster serve food out of order after waiting 45-50 minutes a couples side salad off a tray rather than our hot food. Our food was ordered before that couple came in. I know because I saw. Her tip was like a dollar. She knew who ordered first, but gave someone else's food that ordered after us first when she had both our hot food (2 meals) and their 2 side salads on a tray. She should have not even taken the time to put them on the tray at that point since we had waited so long. To give them theirs first was unfair and that is the server's fault.

  • Report this Comment On January 11, 2014, at 10:57 PM, saratogarox wrote:

    Springs1 - what the hell are you babbling about?

  • Report this Comment On January 11, 2014, at 10:59 PM, dredpiraterocky wrote:

    i think it's a combination of reasons: the sucky economy, mediocre service and food. other things i can think of include awareness of the carbs, calories, fat, sodium.

    i know that there have always been long waiting lines for OG, at least in NE Ohio and L.A., nothing says "hard stop" like waiting for two hours, with gift cards in hand, only to see bad service, smaller portions, and wait staff that don't want to be there.

    poke around on yelp and you might find smaller/cheaper places that might appreciate your business. the big name franchise restaurants have little to offer when you're not flush with $$$.

  • Report this Comment On January 11, 2014, at 11:11 PM, 4mikie wrote:

    saratogarox

    Too funny!

  • Report this Comment On January 11, 2014, at 11:14 PM, dwduke wrote:

    I used to go to Red Lobster and Olive Garden but now like Logan’s, and Uccello’s. They may fall out of favor eventually too. Americans are fickle and if they get bored, they will go elsewhere.

  • Report this Comment On January 12, 2014, at 12:03 AM, klynn993 wrote:

    The answer to the casual dining slump is actually very simple. We have record numbers of welfare recipients and rising. Most states now pay these benefits on EBT cards which most casual dining establishments do not accept. On the other hand fast food and fast casual places generally DO accept welfare cards. This trend will continue as long as workers in the middle class find they are just as well off by joining the hand out state.

  • Report this Comment On January 12, 2014, at 12:04 AM, Charismatron wrote:

    Yet another article refusing to acknowledge the actual status of the middle class economy: it's decimated.

    People simply cannot afford to enjoy a breakfast, lunch, or dinner "out" anymore; these brands used to enjoy a customer base that simply cannot (rather than does not) exist in these hard times.

    Growing up, The Olive Garden (and restaurants like them) were places people went to after an afternoon of shopping, or where people met to enjoy their friendship, quality food, and service.

    Today, this option is too expensive to justify as a casual expenditure. No one that frequents these places has the money anymore; The Olive Garden and Red Lobster will completely sink just as soon as the credit debt of those that currently live beyond their means finally comes home to roost.

  • Report this Comment On January 12, 2014, at 12:16 AM, amisstree wrote:

    COUPONS COUPONS!!! That's the only way they'll come back. I'm NOT talking $5 off of $25 either. Make it worth it and don't serve bullchit food and have it served/prepared by idiots who can't spell/read NO ONIONS!!

  • Report this Comment On January 12, 2014, at 12:30 AM, jimatmad wrote:

    If you're going to spend significant money on a meal, you want something a little special.

    Olive Garden, Red Lobster and the rest give you assembly line food. That just doesn't cut it for a lot of people. It sure doesn't for me.

  • Report this Comment On January 12, 2014, at 12:58 AM, frellmedead wrote:

    Of course, as the middle class continues to be destroyed by both political parties and their masters, the restaurants that the middle class frequent(ed) most often are going to suffer along with them. The fine dining restaurants are booming because the greatest wealth transfer in the history of the world from the middle class to the wealthy has made the latter all the more richer. The ever fewer and poorer middle class (and former middle class) are stuck eating garbage, quick service slop.

    Another reason is that these restaurants (especially Red Lobster) have cut the quality of their food. While they used to be good for a meal on a business trip or a moderately-priced family meal, the food isn't worth the price anymore.

  • Report this Comment On January 12, 2014, at 1:27 AM, Wackyweedywoozy wrote:

    You know how these greedy people work. The cheapest quality for the highest price. Once these big businesses have drawn in customers and established themselves they no longer feel the need to provide and please their customers. They know you will come because of the name alone. They all think fk being customer oriented and helping and providing the best quality for our valued customers. Let's turn McDonald's into fine dining, and see if they'll put up with our overpriced sht. When they start to complain we'll pretend to give a sht. Let's shrink our portions, raise our prices, understaff, underpay, charge you for breathing, treat our workers like slaves, make money money money. Fk u people. You lose focus on whats important. The people who work for and frequent your business are the heart of the business. You get to big for your fkn britches. You stop caring about people.

  • Report this Comment On January 12, 2014, at 3:16 AM, StateofClass wrote:

    Like a lot of brand names, these restaurants have seen their day. The restaurants were built between 25 and 30 years ago for most. They have only stayed going because of brand name, and as stated by many above, who wants to pay for frozen TV dinners.

    It's time for Americans to rediscover their local diners and restaurants. Usualy the food is fresher and the portions larger. and cheaper.

  • Report this Comment On January 12, 2014, at 4:17 AM, imDanielle2 wrote:

    You support the far right wing BS and attack your employee's.. Then you are attacking the majority of the customers that would usually visit your restaurants .. Darden did this to themselves! I use to go at least twice a month to Red Lobster but have been stepped foot into on in over 2 years.. The local store is a graveyard most of the time these days...

  • Report this Comment On January 12, 2014, at 5:37 AM, RMengineer wrote:

    "I recently wrote that Ruby Tuesday's CEO J.J. Buettgen made a ridiculous statement, by blaming the economy for poor results, because GDP and restaurant industry traffic are at twelve month highs."

    Well, it seems to me that Buettgen isn't particularly wrong. The claim of "GDP and restaurant industry traffic are at twelve month highs" does not actually invalidate Buettgen's claim. What's ironic is that the article goes on with evidence of why it IS in fact the economy.

    It is stated that the wealth either do no patronize these establishments anyway or are moving upscale as the wealthy improve. On the other hand other people (ie middle class) are moving down scale into more "value" fare. The point being that the upticks in "twelve month highs" in the restaurant space is due to a rise in the upper and lower ends of the scale at the expense of the casual dining sector.

    That's not an issue with the restaurants in the casual dinning sector, that's an issue with the casual dining sector as a whole. The question is are people not going to fine dinning because of the restaurants, which is the conclusion posed, or because of the _economics_ that people are vacating patronage of that sector as a whole which the suggested by the evidence presented? That is, the article presents evidence and reads on that evidence that suggests that it's the economics of that sector (wealthy going up scale, everyone else going down scale - presumably from the hollowing of the middle class?) but then makes the conclusion that it's the restaurants not connecting with consumers. What if the reason they aren't connecting is because the economy simply isn't there for people to go at that price point?

    If that's the case then there is no amount of "connecting" that is going to change that and the only options are to move up or down scale in price point where the economy is.

  • Report this Comment On January 12, 2014, at 7:14 AM, Gritz wrote:

    As a restaurant owner, independent, I can attest to the fact that most of these "chain" operations are going to go through tough times as Obamacare takes effect.

    Our situation is simple, we are not big enough to have to follow the "same" rules going forward. We can offer better prices, better service, and what our customers would like to have on our menus. We can change overnight if need be. Chains cannot.

    It will be a tough sell to get folks to go in and spend $100 for two people for a simple, "night out" when the economy is stagnant and unemployment is continuing at the current pace.

    Add to that the cost from "all" our vendors for the healthcare mandate and you will see even even smaller portions, higher prices and less service from these chains.

    Our solution will be, like a lot of independents, look for ways to cut labor costs by using some technology. Keep our prices affordable by being creative and buying at prices we can afford to do so. It will take some smarts to survive Obama.

    As a business owner, nothing this administration has done has been to make it easier for businesses to succeed.

  • Report this Comment On January 12, 2014, at 8:46 AM, Demokrat wrote:

    BrethEren?? Making that mistake in your article heading is reckless. I reckon no one cares enough for grammar at Motley Fool to edit and seeing as how you are on your own, you should know that there is such a thing as spell check.

    When in doubt or not in doubt...

  • Report this Comment On January 12, 2014, at 9:35 AM, terriern wrote:

    There are a couple of reasons I know of as to why the restaurants are failing. First, they are overpriced. Next, the food isn't that great. Longhorns takes precooked, frozen food and serves it. It's nasty. Finally, Darden Restaurants are big supporters of obama so they are under a curse of their own making. Curse us and the people curse you.

  • Report this Comment On January 12, 2014, at 10:15 AM, imperfective wrote:

    Rather than add to the list of repeated (though not necessarily inaccurate) complaints on this page, I'd like to offer a more optimistic account based on personal experience. Our family, like many others, suffered significant financial setbacks over the past few years and we will probably never regain our lower-middle-class combined income. For the better part of two years we simply did not eat out at all; when the time came when we felt we could visit a restaurant once or twice a month, we chose local independent establishments because, well, we know some of these folks through everyday interaction. What we've learned is that our locals provide better food and better service than the chains, and in the bargain we contribute more directly to our community's economy.

    Best example: our son's high school basketball practices often end before I leave my work, so he walks straight to the neighborhood pizza joint where he and his teammates are allowed to order something cheap and small and enjoy it while they stay out of traffic -- they, the staff, and the owners all know one another by name. After three years of growth, the establishment's owner was able to purchase a second restaurant in an adjacent town, at which point he immediately offered our son a part-time job.

    My point is that I don't see this story unfolding over at the Applebee's down on Mall Road. The disconnect between chain eateries and their traditional clients may have caused some neighborhoods to appreciate the benefit of behaving like neighborhoods once again -- a good thing.

  • Report this Comment On January 12, 2014, at 11:01 AM, meeeto wrote:

    Were these not the companies that were cutting workers hours so not to have to pay for the ACA!!!!

  • Report this Comment On January 12, 2014, at 12:29 PM, Traidr977 wrote:

    we never go to these types of restaurants because i can make a much better dinner for a fraction of the price. ive never enjoyed the food at these chains.when we do go out its to the local family owned diner or to a beef stand

  • Report this Comment On January 12, 2014, at 12:56 PM, gimmethefacts wrote:

    I don't know how even a small family can afford all these places on a regular basis. Hate to burst these franchises bubble but they are very pricey and with the economy down like it is and has been these restaurants don't seem to get it. Sure they are trying to watch their bottom line but their bottom line depends on the rest of us to support them, maybe downsize like we have all had to and I don't mean cutting your hard working employees hours so you don't have to pay any benefits, could be many Americans are trying to prove a point that if you can't treat your employees fairly you don't deserve to compensate your shareholders and management better you see without the consumers you are nothing! And a side note to all this, downsize your portions and make them healthier, whether we like it or not people need to be lead to eat healthier, like they say, 'If you build it they will come.'

  • Report this Comment On January 12, 2014, at 1:41 PM, jonnull wrote:

    I wonder how much of this had to do with the tainted salads fiasco of this past summer? When one of Olive Gardens main advertising enticements is "All you can eat soup and salad"). Also, they'd changed their policy about all you can eat shrimp at Red Lobster (order one at a time). Another thing is that I haven't seen a commercial in some time (Red Lobster, OG).

  • Report this Comment On January 12, 2014, at 3:54 PM, ronaldzuprin wrote:

    Part of the problem lies with the (psychological) categorization consumers make with respect to these establishments. They are not "restaurants", nor are they a "fast food joint" ... they fall somewhere in-between. If you walk in expecting a quick meal, 'on-the-run', you are out of luck. The same holds true if you are expecting a personalized, home-cooked style dining experience. That is not what they provide - nor should they. We need to come up with a whole new category for places like this, so people can better prepare for the dining experience.

  • Report this Comment On January 12, 2014, at 3:56 PM, razzma wrote:

    Typo aside, in the headline...("Brethren" is the word).

    Olive Garden was never ever any good. It was, has been, is, the McDonald's of Italian food and people over-paid for it. Except for the bread sticks, it's not worth it.

    So, bad food, service and high prices...you can only fool the public for so long.

    I believe people that went to these places didn't know that it's bad. With the creation of city meccas where there is every restaurant in the world in a few block....the market place rears it's justified hand, in this case.

  • Report this Comment On January 12, 2014, at 4:28 PM, CC1971 wrote:

    I have worked part time for Red Lobster for a number of years. The CEO should have been fired along time ago. He has successfully screwed the very people responsible for making his company successfull, well done! I hope by breaking away from OG, BB, LH, EV, S52, YH will allow RL to focus on RL and get back to basics like taking care of their people and back to preparing food the way Mr Darden intended it to be prepared and served.

  • Report this Comment On January 12, 2014, at 5:40 PM, wkstar wrote:

    When the CEO said NO Health Care many people stopped going

  • Report this Comment On January 12, 2014, at 6:16 PM, SSKK wrote:

    We ate there last night because of a gift certificate and a $4.00 off coupon from the paper. Well There is no happy hour and a glass of house red wine was $8.00. That will lead us to eat elsewhere.

  • Report this Comment On January 12, 2014, at 6:40 PM, Ken123b wrote:

    Use to go to Olive Garden. But after the management said they were cutting workers hours so they could save more money to put into management overpaid bonuses I wont be going there anytime soon unless they start taking care of there workers instead of worrying about there 5 million dollar bonus check

  • Report this Comment On January 12, 2014, at 8:17 PM, hagar2935 wrote:

    Too Expensive for the average America for one thing... and horribly slow service for another. And the food is no longer well prepared, just warmed up FROZEN fast food TV dinners that I can cook better at home myself.. and I make it from scratch.

    I have better things to spend $50-$100 on.....

  • Report this Comment On January 12, 2014, at 10:04 PM, nbtc971 wrote:

    My family has very little extra money after paying all the bills in this economy. The middle class is being attacked and is nearly gone completely. I don't see this changing for a while.

  • Report this Comment On January 12, 2014, at 11:54 PM, awilldo wrote:

    I feel that it's a matter of service. I've been to an Olive Garden during the week and I had to wait for up to a half hour. They had one area closed. The servers that were working were slow. This is a result of the manager who will give the servers they like the better shifts and sections. As a result the good workers leave to work somewhere else. Since they have to keep labor costs down they keep the number of employees to a minimum. This would work if they had good employees but they don't.

  • Report this Comment On January 13, 2014, at 2:30 AM, johnestromjr wrote:

    The Olive Garden is a Great restaurant chain and should continue to do well. I've never been to the others - if they're dragging the Darden company down sell them.

  • Report this Comment On January 13, 2014, at 9:01 AM, IronyTag wrote:

    The problem with these chains, based on my experience, is that the food is mediocre. There are just too many non-chain local joints that use better quality ingredients and put out better tasting food at a similar price point.

  • Report this Comment On January 31, 2014, at 1:40 PM, DACircles wrote:

    These are all restaurants that middle class people frequent. They have been hammered by the economy, Obama Care, no jobs, no raises, lay offs. When they go to dinner now it is Taco Bell not Rio Bravo or long John Silvers instead of Red Lobster. They could very well go broke before the next president has a chance to turn this economy around.

  • Report this Comment On January 31, 2014, at 1:47 PM, DACircles wrote:

    I owned a restaurant, I have many friends in that business. The only full time employees are managers now in order to stay under 50 full time employees. Everyone else is now part time and under 29 hours per week. Most who got reduced to 29 just went to the restaurant next door and picked up 10 or 20 hours because they did the same thing to their staff. Many people are getting more hours then they had before but are now working two jobs to get them. When the swampers and dish dogs get the big minimum wage raise most restaurants will have to let one or two of them go. It is not good.

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