Red Lobster Appears Doomed For Failure

Ever since I was old enough to actually enjoy eating fish, Red Lobster has been a pretty solid option for getting some seafood.  We don’t go very often because we have a local place that we enjoy much better, but we’ve been a number of times over the years.

Recently, Red Lobster was sold by their former parent company, the Darden Group (who also owns Olive Garden as the most comparable type of restaurant), and the new holding company, Golden Gate Capital, just completed the sale, and has already announced some changes.

They boil down to two changes: They’re going to charge more money and they’re going to try to present the restaurant as more fancy.  Both of these things are with the intent to curb years of steadily declining sales.

After reading the article and absorbing the strategy, I think that Golden Gate Capital may have just wasted a whole lot of money.  Personally I don’t see things working out.  Here is why I think that Red Lobster may be doomed for failure based on the strategy and their history:

  • People love promotions – Red Lobster wants to get away from low priced specials and many promotional items.  On paper their reason looks good: Promotions like that tend to erode the brand, so why not end the erosion?  In reality, the damage has been done and it’s going to be next to impossible to unwind that clock.  People are used to promotions, and by eliminating them, the people that would have come in the door are now going to go elsewhere.  If you want to see how eliminating promotions works out, let’s remember the massive failure that almost sent an iconic department store chain into bankruptcy.
  • Chain restaurants aren’t fancy – Apparently laying food out on the plate is another big part of the turnaround strategy.  Instead of having the fish side by side with the other items (potatoes, rice, vegetables), the fish will now be placed on top of those items.  This will make the fish the centerpiece of the…..You know what?  I can’t even finish the sentence.  This strategy might make a difference in a high end restaurant with one or two locations, but for a chain restaurant with thousands of locations, this is not going to be a difference maker.
  • Things run their course – I was originally going to split this post into two parts, the reason I think the strategy stinks (which I did), and what they should do instead.  Then, I got to thinking that maybe there really isn’t anything much they can do.  Many things simply come and go in terms of popularity.  Maybe Red Lobster has been around for long enough that it’s simply run out of steam.  It happens.  Especially in the food industry where tastes change and what’s cool one day is replaced by the new cool thing down the street the next day.

Simply put, I think Red Lobster is going to continue on the downtrend.  I just don’t see how different pricing or plate arrangement is going to change that.

Readers, what do you think?  Is Red Lobster a brand that can be revived or is it a brand that has run its course?  What do you think about the new approaches?

17 thoughts on “Red Lobster Appears Doomed For Failure”

  1. I think you’re right….I think they’re doomed. They’re not even trying to change their customer base’s perspective of the restaurant – they’re really trying to change their customer base. Like you said, you can’t unwind that clock. Quite frankly, eating at a Red Lobster was already fairly expensive if you go there with a family. If I wanted “high end” seafood I have a different restaurant near me that I go to. I’ll never think of Red Lobster as a high end place….just can’t do it.

  2. I don’t eat at Red Lobster, but I can’t imagine people buying into their new “fancier” restaurant. Chains are seen as moderately priced family-oriented restaurants. I think you may be right about their impending doom.

  3. You know, I haven’t been to one of those in years. When younger, I went a few times with the lunch crowd where a I worked. They did serve these cheesy biscuits that were pretty good, that’s one thing I do remember!

    Bigger picture, I wonder how many analogs there are for repositioning a mature brand into something more upscale. That seems like going against the grain for most businesses. We’ll see what happens.

    • I agree. I think the problem will be the number of restaurants they have. An upscale migration could have a chance of success with a handful of locations, but to apply that to thousands of locations, I just don’t see how they expect that to work.

  4. Bet you’re right. I sure wouldn’t invest in their stock.

    I’ve never thought RL’s food was anything more than meh! At least it’s not hamburger, but as seafood goes, it’s pretty boring.

    However, during the chain’s heyday, that’s exactly what Americans were looking for…especially if they had kids in tow. Tastes have changed. For the price, there are better chains out there serving better food. And I dunno how things look in your parts, but hereabouts, two of the outlets are in a) an aging, down-at-the-heels ghost mall and b) a tired, low-rent neighborhood. They’ll need to move those things out to the suburbs or into higher-end areas if they think they’re going to attract a better-heeled clientele.

    • Exactly. Right there is a demonstration of the issue. They are in so many markets with so many different demographics, I just don’t see how they expect that blanket strategy to work.

  5. I don’t think we have Red Lobster in Canada, though even if we did, I wouldn’t visit; I don’t like to support chain restaurants like that. We do have a couple of upscale chain options here, and they seem to do well though.

  6. I immediately though of JCP when you were talking about them getting rid of promotions so I’ll have to read the article you referenced next. They are going to have to do a lot more than eliminate/decrease promotions and reorg a plate if they plan on bringing in customers looking for a fancier dining experience.

    Instead, I think they need to figure out how to appeal to their current demographic and keep them coming back.

  7. I actually like Red Lobster…even though it’s a chain restaurant. My wife loves seafood, especially shrimp (Oh Endless Shrimp!)…and the biscuits they give you…so good! I don’t know why they would end the promotions, it’s not like they can switch to a high end clientele…it is what it is…a chain restaurant.

    • Exactly. I like (don’t love) Red Lobster (though the biscuits…definitely love those) but if they try being something that they’re not, it’s bound for doom.

  8. I’ve only been to Red Lobster once in my life and to be honest I wasn’t that impressed. Chain, seafood just doesn’t appeal to me. I’m originally from Maine, so when we want seafood we just go home to my parent’s house and eat it fresh off the boat.

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