Darden Restaurants just sold Red Lobster to the private equity firm Golden Gate Capital for $2.1 billion in cash. Is this good news or bad news for the sea food chain?
Some might see this as a sign of failure. Darden Restaurants has lost faith in Red Lobster, or at least lost interest in maintaining it as part of its multibillion dollar portfolio.
Personally, I’m happy hat Red Lobster is no longer owned by the same parent company that also owns Olive Garden. Though wildly popular, Olive Garden dishes are nothing but overpriced, butter-filled, Americanized foods parading as healthy Italian cuisine. The disassociation with Olive Garden could be a healthy change for Red Lobster’s brand authenticity.
By contrast, Golden Gate Capital has a majority stake in Romano’s Macaroni Grill, which sells much higher quality Italian food than does Olive Garden. Perhaps the San Francisco-based private equity firm has a vision for product integrity in the restaurants it owns. I would much rather ally with Romano’s Macaroni Grill than with Olive Garden. The new arrangement could be a healthy one for Red Lobster.
When it comes to–oh, just about everything–I have a habit of loving things that aren’t popular. This past year I discovered my passion for Red Lobster just as the restaurant chain experienced declining sales.
Recent press identifies several reasons for Red Lobster’s decline in sales: difficulty attracting higher income patrons, price hikes driving customers away, and a failed attempt to captivate new customers with a wider selection of non-seafood items. Oblivious to all of these failures, I fell in love with the restaurant last year.
Before reading about Red Lobster’s declining sales, I had the false impression that they were doing well last year. I noticed that Walmart and other grocery stores were selling boxes of Red Lobster’s beloved Cheddar Bay Biscuit mix. (Yes, I bought some boxes.) Said grocers were also selling Red Lobster gift cards at their checkout counters. I saw several Facebook advertisements for various promotions, including one that offered a free lobster pizza with any purchase of a Shrimp Festival item. I usually ignore promotions, but having become a recent convert of their delicious lobster pizza, I followed through on that promo.
This is yet another reminder to me that an increase in product or advertisement visibility is not necessarily a vital sign of a company’s good health. In the case of Red Lobster, I can deduce that they were somewhat desperate attempts to bolster their waning profits. Evidently, these efforts failed to achieve the intended results.
Despite last year’s lackluster performance in sales, I will continue cheering for the company. I hope Red Lobster can regain profits this year. To assist the company in this goal, I will be purchasing more Cheddar Bay Biscuit boxes and frequenting the restaurant as often as my tight MBA student budget permits.
Doesn’t reading this make you crave some lobster pizza? Go get your hands on some of those amazing Cheddar Bay Biscuits!