Traffic Slump at Olive Garden, Red Lobster, LongHorn; Smaller Plates, Cheaper Items at Olive Garden

Townhall.com ^ | March 4, 2013 | Mike Shedlock

[Kaslin]

High gasoline prices coupled with 2% payroll tax hikes is going to take a bite out of restaurant sales this year. For some chains the slump has already started.

Consider Darden Restaurants, the owner of Olive Garden, Red Lobster, LongHorn Steak House. Darden Restaurant Traffic is down an average 4.5, with Red Lobster leading the pack down 7.5%.

Smaller Plates, Cheaper Items at Olive Garden

At Olive Garden, Smaller, Cheaper Plates are on the way, along with new uniforms including a more contemporary black button-down shirt and black slacks.

Don't worry, endless breadsticks remain.

Olive Garden is also creating a new logo and toning down its the "Old World Style" Tuscan stonework and wooden archways that have been a signature part of Olive Garden restaurants since 2000.

Saturation Everywhere

The main problem is saturation. I see endless miles of restaurants on strips nearby. Those restaurants include Steak & Shake, Red Lobster, Olive Garden, Pizza Hut, Subway, China Express, Chili's, Chipotle, Panera, and other chains intermixed with some local eateries.

If the problem is saturation (and it is), spending money on architecture style changes, creating a new logo, and the new uniform changes is a waste of money, especially the architectural revisions.

People want good food, fast friendly service, and good value.

To pick up market share, restaurants need to lower prices, not make logo changes. And lower prices will take a bite out of earnings. One final point: as soon as restaurants stop expanding (and they will), the hiring will stop with it.

Japan Central Bank Nominee Pledges to Do Whatever Needed to Combat Deflation; Mother of all Pyrrhic Victories

Those who thought Japanese Prime Minister Shinzo Abe was not serious in his pledge to defeat deflation (and destroy the Yen in the process) need think again.

Haruhiko Kuroda (Abe's nominee to head Japan's central bank) pledges to do Whatever Needed to Combat Japan Deflation.

Haruhiko Kuroda, nominated to be the next Bank of Japan governor, said that a central bank under his leadership would do whatever is needed to combat 15 years of deflation.

“I would like to make my stance clear that we will do whatever we can do,” Kuroda, the president of the Asian Development Bank, said in a confirmation hearing in the parliament in Tokyo today.

Prime Minister Shinzo Abe’s nomination of Kuroda has raised expectations for more aggressive monetary easing to revive the world’s third-biggest economy after Masaaki Shirakawa exits the job on March 19. The opposition Democratic Party of Japan, the largest party in the upper house, has signaled it will back Kuroda, easing his passage through a split parliament.

Kuroda said in an interview this month that falling prices exacerbate real debt burdens, and give an incentive to companies and households to postpone spending. Consumer prices excluding fresh food fell 0.2 percent in January. The price gauge hasn’t advanced 2 percent -- the central bank’s new target -- for any year since 1997, when a national sales tax was increased.

Mother of all Pyrrhic Victories

Any country determined to wreck its currency can indeed do just that. However, QE alone will not suffice if all the printed money sits as excess reserves. If QE fails, what's next? More bridges to nowhere?

Regardless, the idea that higher prices are a blessing is blatant stupidity. The last thing aging Japan citizens need is rising prices.

If anything, low interest rates are counterproductive because Japanese savers get zero % on their savings (having less interest income to spend). Sound familiar? It should because Bernanke has the same preposterous ideas.

Once sentiment turns (and it will - but I do not know when), Japan is going to have a hard time preventing the bottom from falling out of the yen. When that happens, the defeat of deflation is going to be the mother of all Pyrrhic victories.

[bert]

It would appear that what you describe is anomaly. The article was written using data including all of the depressed Yankee hell holes that are the northern blue tier.

The depressed areas suffer from self imposed regulatory excess. The mandates have stifled growth. The peripheral businesses described are suffering from the negative trend in sales.

[max americana]

Thanks for the story. Me and my Gf do our best to discover small restos that no one found out yet. I’m not a “wait in line to get in” kind of guy. I was in-line more than a few times and our group ended up going to In N Out instead.