Red Lobster Founded in 1968 by Bill Darden
A. Introduction –
Red Lobster was founded in 1968 by Bill Darden who saw a segment of the seafood market that was untapped. During this time, mainstream America, particularly those living in non-coastal regions did not have the opportunity to eat much seafood. It was hard to find, difficult to cook at home, and often too pricey for many American families to afford. In response to the these trends, Darden designed a restaurant built on the premise of bringing affordable, quality seafood to mainstream America. When Kim Lopdrup, took over as President in 2004, and conducted a consumer survey which found the most important characteristic of a seafood restaurant were: freshness, quality, and taste of the seafood. Red Lobster was lagging behind the competition in all three areas. Lopdrup new significant change in positioning was just what Red Lobster needed. Currently, Red Lobster is 6 years into Lopdrup’s 10 year rejuvenation plan. In this analysis, I as the External Consultant will discuss and analyze the changes that have been made, the impact of those changes, market research findings, and make suggestions for additional changes that could be made to benefit the company.
B. Situational Analysis
•Current Competitive Situation:
In 2009, the typical American family spent 40% of their food budget eating out. While that is a significant percentage, 48% of consumers’ budgets were spent on fast food chains. Casual dining restaurants, like Red Lobster brought in 31% of a family’s food budget. The Big 7 casual dining restaurants (in order from most locations to least) are: Applebee’s, Chili’s, TGI Fridays, Rudy Tuesdays, Outback Steakhouse, Olive Garden, and Red Lobster. The Big 7 casual dining restaurants account for 33% of 22,000 casual dining chain restaurants in America.
When considering only the casual dining seafood locations, Red Lobster is in a much less competitive segment of the casual dining market. Joe’s Crab Shack is the only national casual dining chain with a price point similar to Red Lobster. The next closest is the limited location chain of Bonefish, but the price point is significantly higher at $26 average per check. This leaves Red Lobster with the 43% of the market share, which is the highest among casual dining seafood chains. However, the rise of aquaculture has led to dramatic declines in the cost of salmon and shrimp. These items were once considered luxury food but with the increase in availability, the costs had plummeted. This has allowed for mainstream casual dinning chains to add seafood to their menus causing seafood restaurants to be less of a segment.
Despite the new competition in the seafood casual dining segment Red Lobster is making steady improvements in three main phases; operational excellence, repositioning to fresh seafood, and remodeling all restaurants to better appeal to their target market. From 2004 to 2010, the overall satisfaction of guests have increased by roughly 14 percentage points and after renovations restaurants were able to increase their patron capacity by 50%.
•A Brief SWOT Analysis
-Red Lobster has a loyal customer base whose satisfaction with their dining experience has increased by half over the last 6 years. Seventy-eight percent give the restaurant an “excellent” rating.