Red Lobster Denies Closing RumorsBy: Courtney Wills - December 27, 2013
Rumors have been swirling recently that Darden Restaurants, Inc., an Orlando-based Fortune 500 company that owns the seafood restaurant chain Red Lobster, will be closing the popular eatery’s doors in 2014. Now, those rumors have been addressed and squashed by Darden executives.
An annual earnings report released earlier this month indicated that the company would soon be indefinitely closing the 705 Red Lobster restaurants scattered throughout the U.S. and Canada. However, according to Rich Jeffers, Darden’s director of media relations, that isn’t the case. Jeffers said Friday, “Never have we said we would be closing restaurants.”
The notion that Darden would be closing Red Lobster could have possibly stemmed from a report earlier this year released by Barington Capital Group LP, an investment company now working with Darden to boost profits. Barington stated publicly that their plan for increasing sales for Darden Restaurants, Inc. would include a cut back on specials and promotions offered to customers, as well as money spent on advertising. They also suggested that some of the restaurants may need to be closed.
According to Barington, the current fiscal year has seen investors in the company acquiring over 2% of the company’s stock, and a 19% drop in annual earnings in 2012. The investment firm also indicated that they believe the issues within Darden Restaurants, Inc. stem from the constant growth in the company’s size.
The firm showed that Darden spent almost twice as much on advertising as their competitors in the previous fiscal year. Darden and Red Lobster apparently invested 4.8% of their revenue on television ads in 2012 and 2013, compared to the 2.5% spent on average by similar companies.
Nonetheless, Jeffers assured upset customers that Red Lobster has no intention of closing the franchise entirely; on December 19 Darden announced that it was investigating the possibility of selling the chain or completing a spinoff of the restaurant, but either scenario would simply be a “change in ownership.”
Red Lobster averaged sales of roughly $2.6 billion this year, and is estimated to be looking at a total revenue of $8.6 billion for the year when combining the profits from all 8 Darden-owned restaurant chains.
Main image courtesy @redlobster via Twitter.