ORLANDO (March 15, 2010) Darden Restaurants Inc. president and chief operating officer Andrew Madsen laid out a plan last week that calls for more growth for the casual-dining company, to the tune of more than 1,000 additional units.
During a fast-paced luncheon presentation at last week’s International Council of Shopping Centers, Madsen highlighted Darden’s various brands, their market positioning and strategic initiatives underway to drive continued growth.
What had tongues wagging in the audience of financial types, leasing representatives and shopping center developers who’ve seen their industry wracked by the recession was Madsen’s optimistic view of Darden’s growth potential along with a compelling articulation of how the company intends to execute its strategy.
Orlando-based Darden, which operates nearly 1,800 restaurants under six brands, the largest of which include Olive Garden and Red Lobster, has been one of the best performers in the casual-dining space during the long economic downturn. It most recently upped its annual sales and earnings guidance on signs of stronger customer traffic trends.
Speaking to the company’s potential for growth, Madsen said Darden has the potential to increase its base by roughly 1,000 units as it exploits its scale, a strong balance sheet and a culture focused on reducing expenses.
Read the rest of this amazing article at: http://www.nrn.com/breakingNews.aspx?id=380618&menu_id=1368
Apparently, some haven’t learned the lesson of the financial crisis. Just as banks have returned to paying executives exorbitant profits in the face of public disapproval and the same institutions have not taken care of their toxic assets, and, as the government blithely goes along failing to enact the regulations that would prevent more financial chaos, Darden, through its rather megalomaniacal // CEO, just wants to plow ahead like a mad General Sherman overamped on coffee, Red Bull and raw lobster meat.
Listen, I have nothing against Darden per se. But basically wanting to be the WalMart of restaurants (yes, read the article to see that they will be tapping WalMart to learn about their streamlined distribution methods) doesn’t instil a lot of confidence in a business that’s based on a completely different set of standards and practices as retail.
I’m all for efficiency. I don’t mind frozen lobster tails and Sysco sauces and cheap Chinese flash frozen shrimp per se. We’re seeing even high-end, previously haughty restaurants using these things. Not everyone lives in Maine, nor every kitchen filled with Charlie Trotters.
What I am against is arrogance and the belief that economy of scale and a decent quarterly report indicates that it’s back to business as usual. It’s another couple of steps towards treating the consumer as just an end product of an assembly line (which is fine for the production of products but not for maintaining a dining experience, whether it’s the most humble meat and three, the fanciest townhouse white tablecloth restaurant or a churn and burn place like The Olive Garden). Yes, I hear you grumbling, “But that’s what a mass market Darden restaurant is like already”. Yep. True enough.
I guess what galls me is the idea isn’t to consolidate and reduce debt as P.F. Chang’s has (see previous articles from Nation’s Restaurant News on Chang’s stewardship of their brand during the financial crisis). Granted, Chang’s is less than 1/10th the size of Darden’s. But this would be like Chang’s announcing because of their recent quarters of bucking the trends in the industry, they ”have the potential to open another 70 stores”. Sure, they aren’t as diversified as Darden, only operating two smaller specialty chains of relatively decent size.
But this is where the megalomania of Darden comes in. They seem to have the blinders on. Their steakhouse concept, The Capital Grille, has been one of the worst performers of the segment. There is no indication that the Capital Grille has done anything substantial to try to stop the erosion. Sales weren’t down nearly as much last quarter, but the rest of the segment has improved as well and made even better strides through creative marketing efforts, new menu concepts and expansion into fresh markets in a smart, targeted style (I’ve written about some of the efforts in the past). There have been anecdotal accounts of middle management not adhering to the ”core principles” of the business, which Darden calls ”Darden’s Core Purpose”. I know that stuff like this happens in every organization, but stories like the ones outlined in “The Red Lobster Blog” and “In the Weeds”, especially this post, http://frothygirlz.com/2010/03/09/in-the-weeds-the-pig-farmer-and-the-regional-director/ , are particularly telling.
Look Darden, it’s better to get your shit together and hunker down rather than deciding to be a Hitler steamrolling over Poland. Why is bigger automatically better? Why is “business as usual” the theme of the day? I’ve got nothing against “efficiency”. In fact, it’s crucial. What bugs me is the idea that you immediately jump to the “let’s create another 1000 stores” and you tap WalMart to boot. Maybe you can require all of your food vendors to have an office in Orlando and you can do a “just in time” inventory system (should work great when your Red Lobster gets a strange unanticipated pounding due to a strange confluence of a full moon, a big high school football game that unexpectedly invades the restaurant and a bus that saw a “Bus Drivers eat free sign” on a neighboring restaurant and confused it for Red Lobster’s policy). Yes, building a meal is just like building a car – if you are a Capital Grille chef, you don’t want the spinach to arrive until 20 minutes before you build the spinach salad because you have to count the excess as inventory against food costs. Eventually, perhaps you can get by with a tiny freezer walk-in despite the fact that most of your product becomes frozen because it fits an “efficient inventory system”.
C’mon Darden, get smart. Don’t emulate Wall Street. I know how badly you want to dominate and all, but a little common sense is in order.
Disclaimer – I have never eaten in a Darden restaurant. It isn’t snobbery – it’s just that I don’t live near one (they are all in hyper-suburban settings miles away from my urban setting). The only three Darden concepts that my city has are Olive Garden, Red Lobster and Longhorn Steakhouse – I neither have a huge family that likes to get together over endless pasta bowls, a desire to eat an unending supply of cheap Chinese shrimp, nor am I a “Rodeo Cowboy” (thanks to the great Golden Corral “steak buffet” commercial for the last one). Well, maybe I am a snob. But let me tell you, if I had an Olive Garden near me, I would certainly take advantage of a few cheap meals because I do my fair share of buffets during lean times (and times have been lean, let me tell you). I do work in a direct competitor to The Capital Grille, one that has done far better during this financial crisis, which I guess makes me more than a little smug, I suppose. They would never be able to penetrate this market (we already have 4 big players and two local players in the segment, as well as the Longhorns and the like). In fact, one pretty big midwestern player was set to come in and then the crisis hit. Those plans died quickly on the vine.