Red Lobster 2012 Annual Report Download - page 7

and décor. They show as well in the fundamental strength
of Olive Garden, which – in its fourth decade of operation –
has average sales per restaurant that are among the highest
in the industry for nationally advertised casual dining chains.
Our brand management capabilities also show in our
comprehensive action plan to address Olive Garden’s recent
same-restaurant sales softness. We believe the loss of sales
momentum is the result of erosion over time in the value
leadership position Olive Garden has long enjoyed compared
to competitors. In response, we are taking a number of steps.
For one, we have been changing Olive Garden’s promotional
approach. In the second half of fiscal 2012, we accelerated
our movement away from promotions that feature one or two
new dishes, sometimes at a price point – an approach that
worked well for over a decade but has grown increasingly less
effective over the past 18 months. Our new approach is
consistent with Red Lobster’s and LongHorn Steakhouse’s
strategy for the past two years. We are featuring a wider
variety of dishes that are part of a broader value and/or
culinary theme, and when there is a price point, our adver-
tising is focusing more intensively on price and affordability.
In fiscal 2013, we will also introduce a new advertising
campaign at Olive Garden that communicates key brand
attributes, including value and affordability, in a fresher
way. In addition, we will make meaningful changes to the
core menu to increase the number of approachable price
points in each menu category and begin ramping up the
remodeling of our earliest 430 Olive Garden restaurants.
With these and other enhancements at Olive Garden and
continued momentum at Red Lobster, LongHorn Steakhouse
and our Specialty Restaurant Group brands, we continue to
target compound annual same-restaurant sales growth of
2 percent to 4 percent over the long-term. We expect, however,
that fiscal 2013 will be another year of below normalized
economic growth. Therefore, we are planning same-restaurant
sales growth of 1 percent to 2 percent this year.
The performance of our new restaurants, which are generating
value-creating returns on an overall basis, is another indication
of the strength of our brands. In fiscal 2013, we will once
again accelerate new-restaurant expansion, opening a total
of 100 to 110 net new restaurants, excluding Yard House,
up from 89 in fiscal 2012. At LongHorn Steakhouse, which
remains on track to become a national brand, we plan to add
44 to 48 net new restaurants in fiscal 2013 and 200 to 220
new units over the next five years. At Olive Garden, which
continues to have an ultimate unit potential in North America
of 925 to 975 restaurants, our plan is to open 35 to 40 net
new restaurants in fiscal 2013 and 125 to 135 new restaurants
over the next five years. Excluding Yard House’s addition
to the Group, we plan to add 14 to 16 net new restaurants
at our Specialty Restaurant Group in fiscal 2013 and 100
to 110 over the next five years.
In total, excluding Yard House, we expect overall new-restaurant
growth for the Company to be approximately 5 percent in
fiscal 2013, reaching what has been our long-range target
for some time now. And including or excluding Yard House,
we expect to meet or exceed that level of growth each of
the following four years.
A WEALTH OF COLLECTIVE EXPERIENCE
AND EXPERTISE
We believe the breadth and depth of our collective experience
and expertise – which the addition of the talented team at
Yard House will only increase – sets us apart in the full-service
restaurant industry. This collective capability is the product
of investments over many years in areas that are critical
to success in our business, including brand-management
excellence, restaurant operations excellence, supply chain,
talent management and information technology, among
other things. To support future growth, we are changing in
two important ways. We are modifying our organizational
structure so we can better leverage our existing experience
and expertise. And we are adding new expertise in additional
areas that are critical to future success.
A significant structural change occurred in fiscal 2008, with
the acquisition of LongHorn Steakhouse and The Capital
Grille, when we created the Specialty Restaurant Group.
The Specialty Restaurant Group provides our smaller brands
with world-class leadership and with support that is tailored
to meet their needs, without burdening them with costs
that compromise their ability to create value.
Several more recent structural changes reflect the recognition
that, with the tremendous day-to-day retail intensity of our
business, we were not paying sufficient attention to major
sales-building opportunities that have longer lead times.
To take full advantage of these opportunities, in the past
two years we have created enterprise-level Marketing and
Restaurant Operations units and established forward-looking
strategy units in our Finance and Information Technology
functions. These teams have been resourced with talented
leaders who have long tenure with the Company and with
talented professionals new to the organization. Together, the
teams are developing a more robust longer-term growth
agenda to supplement the ongoing work of our brands. In
fiscal 2013, we will be in the marketplace with two of the
resulting initiatives – a greatly enhanced “To Go!” takeout
operation at Olive Garden to respond to guests’ increasing
need for convenience, and a national Spanish-language
advertising campaign for Red Lobster to increase awareness
“As we look forward, we believe that over the next five years we have the opportunity
to increase our annual revenues by $3 billion to $4.5 billion...”
Darden Restaurants, Inc. 2012 Annual Report 3