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Thursday, July 24, 2014

Dread lobster

The first Red Lobster opened in Florida in 1968. A few years later, one came to Roswell Road in Atlanta and entered the restaurant rotation for a number of us living in an undergrad dorm at Georgia Tech. The original menu at RL was deep-fried, frozen, low-end seafood — but it was affordable, predictable, and unpretentious. Almost everyone could find something to like there.

Fueled with capital from then-owner General Mills, RL grew to 400 locations by the mid-1980s. During this period of success General Mills launched a second chain, Olive Garden, that also grew rapidly. General Mills eventually spun out both chains into an independent company, Darden, that repositioned RL upscale in the 1990s. Menu prices rose, but the restaurants became nicer and more spacious, the cooking techniques more varied and more healthy, and the quality of the seafood itself improved. Cheese biscuits, too. Profits increased. Along the way, the Atlanta location that I had patronized became passé and its land was redeveloped.

Twenty years later, however, the upscale RL is struggling. Millenials prefer localized, inventive cuisine in more convivial, city-center surroundings; the demographics of RL customers have turned unfavorable. Unable to reverse the downtrend, Darden recently sold RL to a private equity company that owns California Pizza Kitchen and On the Border. What will happen to RL under new ownership is anyone's guess, but I've read reports that the real estate underneath the RL restaurants is far more valuable than the restaurant operations themselves. A revitalization of RL is not inconceivable, but the more likely trajectory is slow, steady shrinkage as the value of the real estate is harvested. The fact that the new owner of RL just lost a lot of money in the bankruptcy of Coldwater Creek does not inspire confidence in them.

It's a cautionary tale for other chains in the upper half of the casual dining segment. Bloomin' Brands, which owns Bonefish Grill, Carrabba's Italian Grill, and Outback Steakhouse among others, must be wondering in dread: Are we next? Perhaps. I like Bonefish, but the two most recent meals I had at Outback were very disappointing — and I am not a picky eater. There's a good chance that Olive Garden and the Bloomin' brands will face the same demographic challenges that RL found first.

By the way, I've never eaten lobster at Red Lobster or, as some people call it, Dread Lobster. Has anyone?