Is Olive Garden a symptom of a sick USA?

Restaurant Industry News: Darden restaurant group, the world’s largest full service restaurant company, with approximately 6.3 billion in annual sales, announced its fourth-quarter earnings this past Friday.

(Update on analyst reaction today from Nation’s Restaurant News…)

Olive Garden and Red Lobster, Darden’s largest casual dining brands, are aimed at middle class customers.  They are slumping in sales, and Darden is in the process of selling Red Lobster.  Meanwhile, Darden’s high end brand Capital Grille is doing the best out of all its concepts.  This article views these developments as a symptom of weakness in the US economy due to the growing concentration of wealth among society’s wealthy top few percent.  Is the middle class dying off along with mid-scale sit down restaurants?

I think it is more complicated than that, and Darden’s sales fluctuations are primarily due to the relative theme appeal of each restaurant concept. For example, Longhorn Steakhouse which is mid-scale was up in sales, although traffic and profits dropped.

But overall industry trends show mid-market consumers “trading down” from sit down casual dining to cheaper fast casual outlets such as Chipotle and Panera and even down to QSR fast feeders like Subway and Taco Bell.  How much of that trend is driven by shrinking middle class paychecks, how much is better marketing, service and theme relevance by Fast Casual and QSR, and how much is cultural with the quickening pace of American life, especially for younger demos?

There have  been a growing number of analyses that widening wealth disparity between the top and bottom earners in society is a drag on our economy, is that something to be considered?  Consumer spending is 70% of economic activity, driven primarily by the middle class.  Food for thought.

olivegardennewlogo Capgrille

 

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