Olive Garden & Red Lobster to raise prices after a painful quarter
Not even a Playboy centerfold can boost Olive Garden's profits in this economy, so the restaurant is taking matters into its own hands and raising its menu prices to offset skyrocketing costs. Parent company Darden Restaurants will be raising menu prices at its Olive Garden and Red Lobster restaurants by about 3% to start its 2009 fiscal year.
The price increase is not huge, but it is on the higher end of standard for the company, which generally raises prices between 2% and 3% each year. Several economic factors have hurt Darden's profits recently, including record high meat and grain prices, minimum wage increases, and slower sales, as many customers are feeling financially pinched as well. They are either staying home or opting instead for cheaper dining options, like fast food restaurants.
Darden's first quarter profit sank 23%, and same store sales were down 1%. Like so many other businesses, these restaurants simply cannot cope with rising operational costs unless they pass some of those costs onto the consumer.
The question remains, though, as to whether customers will be willing to take on these costs. Most people are getting tighter with their money each day, and these small price hikes could be the breaking point for some. Darden recognizes the need for incentives, and plans to offer more coupons at its higher end LongHorn Steakhouse chain. The company will also offer more lobster-based promotional bargains at the Red Lobster chain, since lobster prices have declined, and will continue to look for more ways to reach out to its "price sensitive" customers -- a group that is rapidly expanding. With challenges coming from all angles, the restaurant industry is going to have to get creative if they want to meet their financial goals in 2009.
The price increase is not huge, but it is on the higher end of standard for the company, which generally raises prices between 2% and 3% each year. Several economic factors have hurt Darden's profits recently, including record high meat and grain prices, minimum wage increases, and slower sales, as many customers are feeling financially pinched as well. They are either staying home or opting instead for cheaper dining options, like fast food restaurants.
Darden's first quarter profit sank 23%, and same store sales were down 1%. Like so many other businesses, these restaurants simply cannot cope with rising operational costs unless they pass some of those costs onto the consumer.
The question remains, though, as to whether customers will be willing to take on these costs. Most people are getting tighter with their money each day, and these small price hikes could be the breaking point for some. Darden recognizes the need for incentives, and plans to offer more coupons at its higher end LongHorn Steakhouse chain. The company will also offer more lobster-based promotional bargains at the Red Lobster chain, since lobster prices have declined, and will continue to look for more ways to reach out to its "price sensitive" customers -- a group that is rapidly expanding. With challenges coming from all angles, the restaurant industry is going to have to get creative if they want to meet their financial goals in 2009.
Reader Comments (Page 1 of 16)
9-18-2008 @ 2:53PM
JILLY said...
WHEN RED LOBSTER FOOD STARTS LOOKING LIKE THE PICTURE IN THE AD I WILL START EARING THERE AGAIN. OTHERWISE I WOULDN'T GO IF THEY REDUCED THE PRICE BY 3%
Reply
9-19-2008 @ 1:22PM
rennie said...
I agree with you, their shrimp is so tiny, I call it bait for fishing. the biggest thing on the plate is the potato, and I hate those awful nasty cheese rolls .....gross. their prices are too high as it is
11-04-2008 @ 2:34PM
DEE said...
I TOTALLY AGREE, IT'S SO DISAPPOINTING. YOU SEE THIS ITEM BEING ADVERTISED ON TV, AND YOU SAY TO YOURSELF . "YEAH RIGHT LIKE IT EVER REALLY LOOKS LIKE THAT, OR TASTES AS GOOD AS THE ACTOR PORTRAYS IT!
IF ONLY, MORE OF US BANDED TOGETHER AND LET THEM KNOW HOW WE FELT AND WROTE LETTERS OR EMAILS. I PERSONALLY, EVEN THOUGH IT MIGHT SOUND SILLY. I WRITE TO HEADQUARTERS WHEN I'VE HAD AN ISSUE THAT I THINK REALLY DESERVES THEIR ATTENTION.
I FIGURE IT CAN'T HURT!!!
9-19-2008 @ 3:11PM
Jeff said...
I totally agree with you. Not only does the food look nothing like the ads but the service is worse.
9-19-2008 @ 4:39PM
Donna West said...
I agree. Red Lobster has been horrible for years. Either overhausl it or close it.
9-19-2008 @ 6:34PM
Lizard said...
Hey, there's a "great" idea...In a tough economy and high gas prices, announce that you're going to raise your already over-inflated prices. What arrogance thinking that people NEED to go there. Go ahead, raise your prices; guess what we can live without? Whatever rocket scientist that came up with this stradegy should be fired on the spot.
9-20-2008 @ 12:01AM
robin said...
I agree. We just ate there and it was horrible. We had the New England Sampler and then the Crab linguini. It looked as bad as it tasted. Hadnt been there for awhile and it will be along time before we would go back!
9-30-2008 @ 9:32PM
Jesse said...
Red Lobster needs a complete overhaul.
9-18-2008 @ 5:48PM
GoodGrief said...
The problem is that they already charge too much! These are NOT high end eateries. This is were normal people go for a sit down meal. At Red lobster, I normally get a Seafood Caesar Salad ($11.25) and Ice tea (No price on online menu, but usually $1.75) plus 8.25% tax = $14.07 plus 16.50% tip =$ 16.21 total...
Let me repeat....$16.21 for a salad and tea!
Reply
9-19-2008 @ 5:00PM
tr said...
If you're that cheap eat at home.
9-19-2008 @ 6:17AM
Rose said...
Olive Garden and Red Lobster would be better off if they had more specials on the menus. This would bring more customers in and they wouldn't have to raise their regular prices. I do not understand where companies get the idea they should make a lot of money on a few customers, instead of a litttle on a lot of them. This will just make less people enjoy eatting out.
Reply
9-19-2008 @ 9:47AM
betty said...
I agree. lower your prices a bit and maybe lots more of us would come through your doors more often! Raising the price is just pushing us home or to lower priced places. You know I haven't seen a change on my paycheck because the ecomony sucks! Heck just glad to still have one so I have to be smart how and WHERE I spend it.
9-19-2008 @ 11:43PM
Kathy said...
Problem is folks, the fuel costs are passed on to the consumer, no matter what. If it's too expensive to eat out then cook @ home then figure the price of the meal with the cost of the gas to go to the store to pay for the food, the fuel to cook it with and the electricity so u can see what you're eating. The price of a home cooked meal may surprise and be the same amount or more than the Olive Garden or Red Lobster. so think twice before lambasing the restaurants.
9-19-2008 @ 6:28AM
phyllis263 said...
I'm glad to see restaurants are doing worse. I hope they all go out of business until they start serving healthy vegetarian/vegan food. Red Lobster deserves to go bankrupt for boiling lobsters alive (cruel and inhumane). I cook at home, healthy and wholesome vegan meals and feel great, and am ahead of the curve healthwise and budgetwise. Meat is just gross dead flesh from an animal that suffered greatly to be slaughtered that is spiced up. It would taste awful by itself.
Reply
9-19-2008 @ 7:33AM
atldurtyburd said...
Ohhh, come on Phyllis, Meat is what makes a meal. Good thing we are all not like you or this would be a boring world. I don't even call it a meal if there is no meat present at the table. As for the lobsters, maybe you should try one because they are incredible and I love them!! You can either boil them or stick a knife through their shell, either way it is a tasty treat!!!
9-19-2008 @ 8:24AM
Chris said...
hey phyllis I am sure Hitler agrees with you on that. Maybe you should realize they don't care about vegans because a majority of you seem to be idiots who wan't to force people to your lifestyle because you think you're so much better than normal people. Meat tastes good, thats why people eat it and I am sure all of your meals aren't prepared with any spices because obviously all fruits and vegetables taste great by themselves.
9-19-2008 @ 8:42AM
Jim Bob said...
Vegtarian is just another word for can't hunt.
9-19-2008 @ 9:19AM
Jan said...
Well, I may eat meat and be terrible for doing so, but it has been researched that people who are Vegans, brain shrinks 23% more than meat eaters. Hmmm. I think I will eat meat. Makes sense, but then, your brain has shrunk so you dont understand.LOL
9-19-2008 @ 9:14AM
Jennifer said...
well isn't that just a one sided view on a situation lol
9-19-2008 @ 9:28AM
GamerAngel said...
Honestly I also hate the cruel ways they slaughter animals. I think laws should be made to stop this disregard for life in all its forms. I however also believe in eating meat. We were made as omnivores after all and there is nothing wrong with eating animals and plants and such. Just look at the way our teeth are. They are built for consumption of both. As far as lobsters go unfortunately there are reasons cooking alive is necessary or killing them with a knife quickly first can be done. I am sure you already know why but for other readers, it is because after they die they deteriorate very quickly and will present very serious health risks when consumed. As an aside, I don't believe in harming any creature except for food or self defense. I also don't believe in killing anything cruelly or using them to make furs. I don't let anyone kill anything when I am around. And I but up a huge argument or reasonable discussion over anyone who tries to hurt anything. I won't even let people kill flies and they annoy me. I bought a bug vac to remove the critters I can't catch and put them outside. I refuse to harm even things that make me nervous or anything. Though it makes me very upset, sometimes in the rare occasion there is an infestation in a home or a dangerous creature in the area threatening our safety, I realize the need to get rid of, but in the most humane and reasonable way possible. I am wondering if when you feel that eating animals is cruel what you think about needing to feed other pets. Many pets require meat in their diet, cats, dogs, fish, etc. I used to have to feed live feeder fish to some of my fish or eels. I have to feed my snake mice (though I use frozen, it is less cruel and safer for him). I mean what do you feel about feeding pets and other creatures that require meat in their diet their food?
Lol, what is with me and always getting off topic. But if you have the time answer my question about the care of other animals. I really want to know.