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Olive Garden's parent company rethinks image change to focus on deals

NEW YORK — After new ad campaigns touting the quality of its food failed to spark sales, the parent company of Olive Garden and Red Lobster is retooling its strategy to attract diners with more promotional deals.

The shift comes after Orlando-based Darden Restaurants earlier this fall moved to update the image of its flagship chains and appeal to younger diners in their 20s and 30s, who increasingly prize fresh, high-quality ingredients. The problem is that many of those same diners also want cheaper prices and convenience, reflecting the rise of chains such as Chipotle Mexican Grill and Panera Bread, which offer food that's a step up from traditional fast food for slightly higher prices.

To address the "affordability many guests need right now," Darden plans to dial back on its efforts to build revamp the image of its chains for now and increase the frequency of promotions that underscore value, said Drew Madsen, the company's chief operating officer. He declined to specify the exact nature of the revamped strategy, however, noting that the element of surprise is critical in a "highly competitive" industry that is once again expected to see only modest growth in the year ahead.

At Olive Garden, executives noted that a "Dinner Today, Dinner Tomorrow" promotion didn't clearly communicate the nature of the deal, which gave customers who ate at the restaurant a free second meal to take home.

In cutting its forecast for the year earlier on Dec. 4, Darden also said that it was hit by a publicity backlash from tests intended to gauge how it could limit costs for workers' health care.

Starting in 2014, big employers such as Darden will be required to provide health insurance to full-time workers.

The company had tested hiring more part-time workers and replacing full-time workers who left with part-time workers in select markets to gauge how it could mitigate those costs.

Darden CEO Clarence Otis said the media coverage was a "secondary issue" that hurt the quarterly results. He said the coverage "misinterpreted our actions as a stand against health care reform." The company has since said it will not move any full-time workers to part-time status as a result of the regulations.

>>Fast facts

Earnings fall

Darden's fiscal second-quarter net income fell 37 percent to $33.6 million, while total revenue for the quarter climbed 7 percent to $1.96 billion for the period, meeting Wall Street's forecast. But for U.S. restaurants open at least a year, a key measure, revenue fell 3.2 percent for Olive Garden, 2.7 percent for Red Lobster and 0.8 percent at LongHorn Steakhouse.

Olive Garden's parent company rethinks image change to focus on deals 12/20/12 [Last modified: Thursday, December 20, 2012 10:25pm]
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