We’ve all just learned that Darden is planning to purge itself of Red Lobster. Did anyone see this coming? Interestingly, I ate there last Friday night for the first time in decades. I’m just not a seafood person, which may be part of the chain’s problem. I must not be alone. I was surprised that there was no wait, and the restaurant didn’t fill up while we were there. It was Friday night! Had we gone to Olive Garden down the street, we would have had a long wait.
But I think I know the reason Red Lobster has struggled. It’s apparent from the consumer research I’ve been studying for Mintel’s upcoming report Dining Out: A 2014 Look Ahead—U.S., January 2014.
During the recession, restaurants found that the only way to attract customers was to offer value menus and value meals. But now we are out of the recession. Restaurant industry sales grew 6.1% in 2012 and another estimated 5.1% in 2013. You would think the need for value meals is gone. But no. The industry has unwittingly conditioned consumers to expect a big discount somewhere on that menu. Truly.
When survey respondents were asked to rate a list of factors that influence them in their choice of restaurant, leading at 90% was “Has a wide variety of value menu options.” When given a list of things they have ordered from a menu in the past month and would order again, the leading response at 84% was “Dishes from a value menu,” and close behind at 83% was “Special meal deals (e.g. 2 for 1, $10 off on Wednesdays, etc.).”
All this bodes well for quick service restaurants and fast casual. Price value is what they are all about. So what about casual dining restaurants like Olive Garden and Red Lobster? Value is not their middle name.
According to today’s USA Today, “Red Lobster has been losing importance with consumers, due to the rise of newer concepts that pitch better value.”
Interestingly, my husband and I weren’t looking for value when we visited Red Lobster. We were celebrating his birthday, and that was where he wanted to go. We were set to pay full price, until we saw a panel running down the side of the menu that said to pick 4 for $14.99. We could have a salad, soup, entrée and dessert. We nearly spit out our water. “You’ve got to be kidding! Of course we’ll get that!” It was such a good deal for us, but the restaurant could have made so much more off of us without that deal. It’s a Catch 22. Should they not offer the value meal and make money off of people like us, or should they offer the value meal in hopes it will draw people in who wouldn’t come in without the deal?
This is how casual dining restaurants will be challenged going forward. They have to be on their toes in many other ways… with technology, with entrée innovation, but also with expanded appetizers and side dishes, because 80% of those surveyed in Mintel’s survey have ordered several appetizers instead of an entree, and 80% also have ordered several sides to make up a meal. Marketing appetizers as meals could be the next play in the casual dining playbook.
Tell me what you think.
Jody
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