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Orlando's Darden pairs Olive Garden, Red Lobster in same store

Brunswick, Ga., has a new two- for-one deal: an Olive Garden-Red Lobster combo store.

This is Orlando-based Darden Restaurants' third such location, as the world's largest casual-dining chain seeks to cash in on smaller U.S. cities such as Brunswick, an industrial port town of about 16,000.

If the strategy works, Darden will have created a new revenue stream and action plan for expansion, allowing it to move into markets that would not have previously been economically viable. For the past three years, the company's average sales growth has trailed that of BJ's Restaurants, Texas Roadhouse and Bravo Brio Restaurant Group, according to data compiled by Bloomberg News.

Still, the combo strategy, which has been tried with mixed results by fast-food chains, won't necessarily turn things around, said Sara Senatore, an analyst at Sanford C. Bernstein.

"This is really the first casual diner, full-service restaurant that I've seen do this," Senatore said. "You have to ask: 'Why has nobody else done it?' Sometimes it's because it's not a great idea."

Darden's origins go back to 1938 when Bill Darden opened a 25-seat luncheonette in Waycross, Ga., called the Green Frog. Thirty years later, the first Red Lobster opened in Lakeland; Olive Garden in 1982.

In 1970, General Mills acquired Darden, spinning it off as a public company in 1995. The Darden empire consists of Olive Garden and Red Lobster, its two biggest brands, along with such smaller chains as LongHorn Steakhouse, the Capital Grille and Eddie V's.

After the downturn, Americans began eating out less, and comparable-store sales dipped at Olive Garden and Red Lobster. Efforts since to woo diners with cheap eats, including a Taste of Tuscany meal for $10.95 and a $12.99 Festival of Shrimp, didn't goose sales.

The company hit on the small-town strategy because there aren't "a lot of sites in major metropolitan and suburban areas that we're not in already," said John Caron, president of Olive Garden.

The first combination store opened in March 2011 in Flagler County. The locations, which are typically about the same size as a single Darden restaurant, have a separate entrance and dining room for each brand while sharing bathrooms, the bar area and the kitchen.

While the combo stores are a test, sales at the Flagler County restaurant are "up to expectations," Caron said. "We think there's opportunity there."

Orlando's Darden pairs Olive Garden, Red Lobster in same store 07/04/12 [Last modified: Wednesday, July 4, 2012 7:47pm]
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