Red Lobster to open ghost kitchen, emphasize delivery in 2020

Red Lobster to open ghost kitchen, emphasize delivery in 2020

Dan Weber works in KitchenAF, a Central Florida ghost kitchen.

Dan Weber works in KitchenAF, a Central Florida ghost kitchen. (Sarah Espedido/Orlando Sentinel/TNS)

ORLANDO, Fla. - This year won't be the first time Red Lobster has been around for a presidential election or the Summer Olympic Games.

But this time around, the Orlando-based seafood chain of more than 700 restaurants will offer delivery for customers who would rather eat at home.

"We view this as an opportunity, not as a problem," said CEO Kim Lopdrup in an interview Thursday.

Red Lobster, which offers its menu on apps like Uber Eats, also added a delivery option to its website in October that uses DoorDash drivers to bring customers their orders, Lopdrup said. The restaurant also expects to soon open its first prototype ghost kitchen - a new kind of restaurant without a dining room that focuses on delivery.

Moves like the innovations at Red Lobster will be worth noting in 2020, which analysts say could be another challenging year for the restaurant industry.

"We expect restaurant industry traffic to continue its negative trajectory this year," analyst Peter Saleh, of BTIG, wrote in a report. "However, we believe the decline could be a little steeper than recent years as consumers stay home to watch political debates and the summer Olympics."

Those events could mean customers "stay in" instead of going to a restaurant, continuing the trend toward takeout and delivery, Saleh wrote.

How will Darden Restaurants adjust in 2020?

Orlando-based Darden Restaurants, with nearly 1,800 restaurants including Olive Garden and LongHorn Steakhouse, is looking to improve takeout for customers, CEO Gene Lee said during a December earnings call. Darden sold Red Lobster in 2014.

"We're investing capital dollars into our restaurants to ensure that we have the space and the right equipment to handle the additional demand," Lee said. "That will be a big effort over the next 12 to 18 months."

In September, more than half of LongHorn restaurants had a to-go area. Olive Garden restaurants already had takeout areas, but those spaces are evolving in look and function. At the new-look restaurant near Orlando Fashion Square - which opened last year - there is a dedicated to-go area with a separate entrance.

Also in September, Lee talked about Darden testing a delivery provider at its smaller Yard House brand, saying he didn't think about that as a way to grow the business.

Saleh said in an interview that promotions could be a way to drive traffic for Darden and help alleviate pressure from the Olympics and debates.

"I think they could step up their discounting, their promotions a little bit more," Saleh said.

Saleh's report also said political campaigns could drive up the rates for television advertising, an issue Lee addressed during the December earnings call.

"As you get around the elections, especially when you're doing a lot of national stuff and some spot television, you can get bumped," Lee said. "And trying to make sure that we get our full complement of advertising as we move into the last six months prior to the election, depending on the marketplace, will be a challenge, but we'll try to work around that."

'2020 is going to be a great year'

At Red Lobster, Lopdrup did not reveal many specifics on its ghost kitchen, such as where it would be located.

"It provides an efficient way to get closer to consumers who do not happen to be located near our existing restaurants," Lopdrup said.

The ghost kitchen concept has already landed in Central Florida, with KitchenAF serving its burgers, pastas and pot pies through delivery apps such as Uber Eats and DoorDash. Owner Jim Marshall said in October his business spent about $1,500 a month for its space and had six kitchen staffers.

"We have a tremendous overhead advantage, and a tremendous labor advantage," Marshall said. "We have a bare minimum crew."

Other off-premise improvements at Red Lobster include curbside pickup at a majority of its restaurants and improved takeout packaging, Lopdrup said.

"We've already almost tripled our off-premise business," Lopdrup said, comparing it to two years ago.

Looking toward the year ahead, he noted the company's investments in quality, value, convenience, health and social responsibility.

"I think 2020 is going to be a great year," Lopdrup said.

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