Brunswick, Ga., has a new two-for-one deal: an Olive Garden-Red Lobster combo store.
This is Darden Restaurants third such location as the worlds largest casual-dining chain seeks to cash in on smaller U.S. cities such as Brunswick, an industrial port town of about 16,000.
If the strategy works, Darden will have created a new revenue stream and action plan for expansion, allowing it to move into markets previously not economically viable.
For the past three years, the companys average sales growth has trailed that of BJS Restaurants, Texas Roadhouse and Bravo Brio Restaurant Group, according to data compiled by Bloomberg.
The combo strategy, which has gotten mixed results for fast-food chains, wont necessarily turn things around, said Sara Senatore, an analyst at Sanford C. Bernstein in New York.
This is really the first casual diner, full-service restaurant that Ive seen do this. You have to ask: Why has nobody else done it? Sometimes its because its not a great idea.
The Darden empire comprises Olive Garden and Red Lobster, its two biggest brands, along with such smaller chains as Longhorn Steakhouse, The Capital Grille and Eddie Vs. Darden has advanced 11 percent this year, compared with a 17 percent rise in the Bloomberg U.S. Casual Dining Restaurant Index.
Since the downturn, Americans have been eating out less, and comparable-store sales dipped at Olive Garden and Red Lobster. Efforts since to woo diners with cheap eats didnt goose sales.
The company hit on the small-town strategy because there arent a lot of sites in major metropolitan and suburban areas that were not in already, Olive Garden President John Caron said.
The first combination store opened in March 2011 in Flagler County, Fla. The locations, typically about the same size as a single Darden restaurant, have a separate entrance and dining room for each brand while sharing bathrooms, the bar area and the kitchen.
While the combo stores are a test, sales at the Flagler County restaurant are up to expectations, Caron said. We think theres opportunity there.
Still, even as Darden embraces the strategy, other chains are reversing course. Until the late 2000s, putting two brands under one roof was Yum Brands key strategy to boost U.S. sales. No longer, said Virginia Ferguson, a spokeswoman for the Louisville, Ky.-based company that owns Taco Bell, KFC and Pizza Hut.
Yum expected one plus one to equal three, Senatore said. It was more like one plus one maybe equals two, she said.
While Darden says its restaurants create 170 jobs on average, not everyone is keen on the company moving into their town, especially since Darden gets property tax breaks to do so.
The Brunswick combo store, for example, is worrying some mom-and-pops, according to Nathan Sparks, executive director at the Brunswick and Glynn County Development Authority.
The community as a whole has been ecstatic about the store, he said. Still, there have been some concerns expressed by local restaurateurs who see a competitor coming in to the market and one that has tremendous resources.