Is Red Lobster Going Out of Business?

Filed under: World News |

red lobster

By Daphne R

Darden Restaurant chain has announced that it will either sell or spin off its once popular Red Lobster restaurants. This may come as a surprise to many, especially those who are found of their seafood delicacies such as lobster, shrimp scampi, scallops and Cheddar Bay Biscuits.

Darden restaurant properties aren’t doing as well financially since the economy’s downturn and the company reports that consumers don’t seem to want meals from Red Lobster and even Olive Garden much anymore. They’re experiencing fewer patrons at peak times. As a result, the company has also proposed that it will suspend opening any new Olive Garden restaurants and slow down new locations of Longhorn Steakhouse restaurants.

In this economy, consumers are choosing cheaper restaurant chains, like Chipotle, over Darden’s brand of casual, fine dining establishments. “The reduced unit growth will lower capital spending by at least $100 million annually,” the company said in a statement. Its last quarter earnings showed a 31 percent drop.

Now, by most standards it doesn’t appear that Red Lobster is really struggling financially. After all, it reports that Red Lobster, with 705 restaurant locations, still reported $2.6 billion in sales in 2013. Doesn’t seem like those number would be anything to sneeze at. But in the world of stockholder profits, execs feel they must do something to turn the tide. It’s pretty obvious that the company is feeling the pressure by its investors and being forced into doing something

Darden hopes to separate out Red Lobster from its portfolio of restaurants to increase its overall numbers and its investors believe this is the right move. They want Darden to focus on its properties that are showing growth. At the end of the day, the stakeholders in the company want to keep making money and they have spoken. Get rid of the weakest link and strengthen the chain.

 

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Daphne R is an experienced marketing and communications professional that provides social commentary, self-help, tips, and reports news of events that matter to African Americans.

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