Red Lobster 2013 Annual Report Download - page 12

…we are investing in a
select few initiatives to reshape
the guest experiences we provide
in ways that further respond
to the dynamics that are
the New Era.
8 Darden Restaurants, Inc. 2013 Annual Report
more quickly with the reorganization of
the Marketing and Operations teams at
our three large brands and ramping up
investment in enhancing our digital and
targeted marketing capabilities.
Our same-restaurant traffic results in the
third and fourth quarters of fiscal 2013
are evidence that these steps provided us
with some traction. In the third quarter,
our results matched the results for the
industry, although it was not a strong
quarter, given the magnitude of the traffic
decline for us and for the industry. In the
fourth quarter, however, we achieved
solid same-restaurant traffic growth, and
our results were well ahead of those for
the industry, which had a decline.
There is no question that there was
considerable cost associated with the
changes we made. Many of our promo-
tional and core menu affordability efforts
involved margin pressure and, in some
cases, there was more pressure than we
initially anticipated. In addition, as we
reorganized Marketing and Operations,
which involved putting tenured leaders in
new places and adding new leaders, there
was some adverse effect on execution that
likely resulted in meaningful but difficult-
to-measure cost. And, of course, there
were the direct costs of the technology
and other investments in additional
capabilities that we made. However,
we firmly believe that, given the criticality
of arresting the same-restaurant traffic
erosion we have been experiencing,
these were costs worth incurring.
Looking Forward
As we look forward to fiscal 2014 and
beyond, our top priority is to reestablish
consistent same-restaurant traffic growth.
And to achieve this goal we must respond
more quickly and more effectively to the
consumer and competitive dynamics that
define our industry today.
As a result, we are tempering check
average growth in fiscal 2014 because
we think that is necessary to support
traffic growth in the near term. As we do
so, we are refining our affordability tactics
based on what we learned during fiscal
2013 to moderate the margin pressure
that often comes with lower check growth.
In addition, we are significantly reducing
new restaurant expansion at Olive Garden,
going from the 35 to 40 net new openings
we have had each year for the past few
years to approximately 15. With this
change, we believe the brand can better
focus on regaining same-restaurant
traffic momentum and on making the
guest experience changes required for
sustained success.
Finally, we are continuing to make other
investments in future success. More
specifically, we are investing in a select
few initiatives to reshape the guest
experiences we provide in ways that further
respond to the dynamics that are the New
Era. These include offering small plates at
Olive Garden that can be enjoyed individu-
ally as a more affordable appetizer choice
or combined to create a customized meal,
introducing more up-to-date seafood
options at Red Lobster like shrimp tacos
and lobster tacos, and adding a new
Chef’s Showcase section at LongHorn
that highlights innovative and distinctive
new items. In addition, we are investing to
transition to the new healthcare landscape
in a way that maintains strong employee
engagement. And, we are continuing
to invest in commercializing lobster
aquaculture because such a breakthrough
can help preserve Red Lobster’s ability
to provide guests with price-accessible
offerings for years to come.
Conclusion
As we make the changes required to
operate successfully in a New Era, we
have the needed resources. We have
strong brands, considerable collective
expertise and experience and a cost-
effective operating support platform.
Most important, we have a winning culture,
with people who remain highly engaged
despite a difficult fiscal 2013. A measure
of the strength of our culture is our
recognition by FORTUNE magazine in
2013 for the third consecutive year as one
of the “100 Best Companies to Work For™.”
We are particularly proud because selection
relies on an independently administered
survey of employees – which, in our case,
are largely hourly restaurant employees –
and Darden is the only restaurant company
to receive such recognition.
Looking forward, the strong culture and
wonderful people we have at Darden are
the single biggest reasons why we are
confident we will successfully make the
changes required to better compete today
and remain the industry leader tomorrow.
Thank you for being a stakeholder.
Clarence Otis, Jr.
Chairman and Chief Executive Officer
Andrew Madsen
President and Chief Operating Officer