The $75,000 question

Never mind the fireworks. The boom that should’ve had restaurant executives covering their ears last week was the bombshell observation by the company that runs Olive Garden.

The comment slipped past almost unnoticed during a routine presentation to Wall Street analysts. That’s ironic, since the aside was a DefCon 4 alert for casual dining to reassess what market it serves.

Most of that sector stands in awe of Olive Garden, a concept whose middle American take on Italian fare generates $4.8 million in sales per restaurant, much of it from high-margin pasta choices. But lately, the bloom has been off the rosè.

Sales have uncharacteristically stagnated for the brand, while sister concepts like Red Lobster, LongHorn and Capital Grille have enjoyed the sort of same-store sales increases (3.8%, 6% and 7.9%, respectively) that make you suspect steroid use.

“It’s worth noting,” observed Darden president and COO Drew Madsen, “that we’re continuing to see a narrowing in the casual-dining user base.”

He explained that the percentage of customers from households with an annual income of at least $75,000 “has significantly increased their share of traffic, both during the recession and after.” Not coincidentally, patrons from homes with paychecks of $60,000 now account for an appreciably smaller part of Darden’s clientele.

Madsen didn’t specify if the rising share of traffic was the result of an increase in visits by the higher-income group, or of a drop-off by the lower-income crowd. Even when pressed by financial analysts participating in the call, he and other Darden officials would only talk in terms of “share of traffic,” not absolute changes in visits by either group.

They were more forthcoming about the implications of the shift. To appeal to both the higher-income customer and the one with less than $60,000 in annual income, Olive Garden will strive to deliver what the execs termed “price certainty,” or a clearer idea of what a customer will pay.

“Customers aren't looking for a discount,” explained Clarence Otis, Darden’s CEO. “But they want to kind of know a little bit more, with a little bit more precision, what they're going to spend when they choose to go out.”

The execs noted that a similar strategy has worked well for Red Lobster. They cited the example of the seafood chain’s current promotional deal, a four-course meal for $15 per person.

Madsen noted that Olive Garden will take a more tactical approach with its advertising in the near future, delivering more of a “short-term call to action” than “longer-term equity building.” Deals will also give a set price, rather than the “starting at” level of past promotions.

Simon didn't say 'do that'

The following is a public service announcement to the nation’s casual restaurant chains.

Have you lost your minds?

Part of the reason you’re currently living a blues tune is a lack of differentiation in your menus. Every concept could rename itself That Place Serving a Bloomin’ Onion, Nachos, Fajitas, Burgers, Spinach Dip and Margaritas, and it wouldn’t be lying. A follow-the-leader approach led everyone toward a cliff.

So how are you trying to right the situation? Consider the latest promotion from Applebee’s: A $9.99 sirloin served with two sides. In a stunning coincidence, the LongHorn casual chain is also featuring a $9.99 steak dinner as of this month. And Outback has been selling a 6-oz. sirloin as part of a dinner for a penny less than $10 for a number of weeks. What are the odds???

At least Ruby Tuesday and T.G.I. Friday’s, two concepts that had their starts as “fern bars” (youngsters, ask your folks, but DO NOT bring up leisure suits), are resisting the temptation to copycat. As Ruby CEO Sandy Beall told investors last week, “We believe our burgers offer [an] incredible, differentiated and value category that resonates well with our guests.”

Okay, the chain also noted during the conference call that it was pushing a $5.99 burger with all-you-can-eat fries. But it’s sticking with a key point of differentiation. I mean, what other casual chain offers burgers? It’s not like Chili’s or Red Robin are known for that item.

And Friday’s? Well, consider the promotional head-turner it started pushing yesterday. Here’s the headline from the announcement: “T.G.I. Friday's Restaurants Unleash The 'Ultimate' Burger.”

I think I need a margarita. Or a ‘Rita. Or maybe a Lobsterita.

What are the odds???

Take that, Outback

The LongHorn steakhouse chain is responding to Outback’s head-turner of a $9.99 sirloin dinner with a new steak bargain of its own. Executives of parent company Darden Restaurants said Friday that the chain is about to start pushing “a new signature steak dish” priced at under $10.

The officials didn’t reveal what type or sized steak would be offered at $9.99, but said the promotional item would be rolled out in January and backed by a new commercial. Outback's $9.99 deal consists of a complete meal centered around a 6-ounce steak.

Meanwhile, Darden's main suits told investors, LongHorn is testing a new ad campaign in 30 markets, with an introduction target of March.

LongHorn, which the company acquired in its 2007 purchase of Rare Hospitality, is the weakest of Darden’s three major brands. Olive Garden and Red Lobster are still posting positive comparable-store sales, a monumental feat in the current environment. The gains may be slight (each is under 1%), but reason to have one more glass of Chablis during LobsterFest when compared to the results for LongHorn’s last quarter. The chain’s comps fell 5.7%, while net sales increased only 2.4%, even with the opening of 19 additional outlets.

The biggest of Darden's so-called specialty brands are also feeling the recession, with significant comp declines posted for Capital Grille and Bahama Breeze. It did not break out results for Seasons 52.