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The demise of Red Lobster is a perfect case study in how to kill a business

DrQ

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The demise of Red Lobster is a perfect case study in how to kill a business​

 

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Here where I'm packing and stacking boxes in a shipping container, there is a crab restaurant on every other corner. "The Boiling Crab." "The Angry Crab." "The Steamin' Crab." "Crazy Cajun Crab." And "Psycho Stabbin' Hobo Crab."

Only one of the above isn't a real name. Wall to wall crab joints -- with full parking lots.

Why? They do precisely one thing and they do it well. And (this is the big one), it's not bland or boring. I went to one of these crab joints that locals rave about. And their XXX-hot dipping sauce was properly hot. Not Thai hot. Not Howlin' Ray's hot. But hotter than anything I've tried in a restaurant in a very long time. It was good enough that I took some home and copied the recipe so I can make it in Hawaii. (We have a crab farm nearby.)

Meanwhile, Red Lobster is selling the same "bland Cracker Barrel/Olive Garden except with Seafood" menu they offered in the 1970s. I see no problems at the various sushi and poke places around town. They're popping up all over. Best of all, they're replacing failing chains.

The venture capital companies saw that Red Lobster's biggest asset was the real estate they held. So that got spun off, leaving last century's restaurant chain relying on last century's customers.

It's the same with the Mexican place we enjoyed this afternoon. (We're eating at all our favorite places because this is the last time we ever will.) Mid-size restaurant which prides itself on serving one region's cuisine and only that one region's cuisine. The quick-service Mexican chain across the street had an empty lot the entire time we were dining. Meanwhile, this place turned over twice while we ate.

The big picture problem is that people aren't interested in what the chains are selling.
 

Dori

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Yikes! We only have two Red Lobster restaurants that would be close enough to visit. Each one is about 25 minutes away. I guess I will dig out all my Red Lobster gift cards and take the family out for Mother’s Day!

Dori
 

bizaro86

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Here where I'm packing and stacking boxes in a shipping container, there is a crab restaurant on every other corner. "The Boiling Crab." "The Angry Crab." "The Steamin' Crab." "Crazy Cajun Crab." And "Psycho Stabbin' Hobo Crab."

Only one of the above isn't a real name. Wall to wall crab joints -- with full parking lots.

Why? They do precisely one thing and they do it well. And (this is the big one), it's not bland or boring. I went to one of these crab joints that locals rave about. And their XXX-hot dipping sauce was properly hot. Not Thai hot. Not Howlin' Ray's hot. But hotter than anything I've tried in a restaurant in a very long time. It was good enough that I took some home and copied the recipe so I can make it in Hawaii. (We have a crab farm nearby.)

Meanwhile, Red Lobster is selling the same "bland Cracker Barrel/Olive Garden except with Seafood" menu they offered in the 1970s. I see no problems at the various sushi and poke places around town. They're popping up all over. Best of all, they're replacing failing chains.

The venture capital companies saw that Red Lobster's biggest asset was the real estate they held. So that got spun off, leaving last century's restaurant chain relying on last century's customers.

It's the same with the Mexican place we enjoyed this afternoon. (We're eating at all our favorite places because this is the last time we ever will.) Mid-size restaurant which prides itself on serving one region's cuisine and only that one region's cuisine. The quick-service Mexican chain across the street had an empty lot the entire time we were dining. Meanwhile, this place turned over twice while we ate.

The big picture problem is that people aren't interested in what the chains are selling.

Any restaurant (or business of any kind really) that can't afford to pay rent for the building it operates from is fundamentally unsound.

I don't think it's necessarily all chains (eg former corporate sibling Olive Garden always seems busy and makes money) but this one has gone down hill.

We hadn't been for at least a decade until early January. We were at an NFL game and couldn't get an Uber back, so thought we'd stop for supper and walked over. The restaurant was only half full but quoted us a 30 minute wait. Since we had no way of going elsewhere we stayed. We got a table an hour later. Then waited 30 minutes to order. Then waited an hour for the food. When the food came, the biscuits were burned and they didn't have enough clean cutlery for our entire party. I mean, I could have walked to the ocean, caught a fish and cooked it myself in how long this took, and I'll certainly never go back.

None of those are "chain" issues. They're "poorly operated restaurant" issues.

A chain is never going to be top-quality fine dining with fresh local ingredients. But many people don't want that and the vast majority aren't willing to pay for it.
 

ScoopKona

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None of those are "chain" issues. They're "poorly operated restaurant" issues.

A chain is never going to be top-quality fine dining with fresh local ingredients. But many people don't want that and the vast majority aren't willing to pay for it.

While I agree that your experience screams "amateur hour, both front and back of the house," I have to disagree with the above.

Those crab joints I referenced are selling reheated frozen snow and dungeness crab. We don't have an ocean anywhere near, so they're doing the same basic business model as Red Lobster -- modernized for today's palate. I would much prefer an off-boat crab -- from Pier 45 & 47. But that isn't the point. These "Criminally-Insane Stabbin' Crab" (there are literally dozens in this town, same basic restaurant, different names) restaurants are offering food that would have most Red Lobster guests screaming for a glass of milk. The fact this town can support dozens of hot-cajun-crab joints but is closing Red Lobsters tells me everything I need to know about that market segment.

Red Lobster isn't going to adapt because they're afraid of alienating what little market share they still have. It would not surprise me in the least if the Red Lobsters which close are replaced by sushi, poke, and cajun crab joints. I think it's a given that eventually, the public's taste for poke, sushi and crab will wane. And something else will move in.

Instead of "all-you-can-eat" shrimp, Red Lobster should have tried modernizing the menu -- at least the specials section of the menu. Leave the cheese biscuits alone (and don't burn them). But advertise a poke bowl. And (gasp!) screamin'-hot-crab.

Independent steak houses have been doing this for decades. Hard to find a traditional Steak Diane anymore. And creamed spinach is the exception, not the rule. (Still love it.) But I can throw a nickle and hit a place offering chimichurri steak.
 

bizaro86

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While I agree that your experience screams "amateur hour, both front and back of the house," I have to disagree with the above.

Those crab joints I referenced are selling reheated frozen snow and dungeness crab. We don't have an ocean anywhere near, so they're doing the same basic business model as Red Lobster -- modernized for today's palate. I would much prefer an off-boat crab -- from Pier 45 & 47. But that isn't the point. These "Criminally-Insane Stabbin' Crab" (there are literally dozens in this town, same basic restaurant, different names) restaurants are offering food that would have most Red Lobster guests screaming for a glass of milk. The fact this town can support dozens of hot-cajun-crab joints but is closing Red Lobsters tells me everything I need to know about that market segment.

Red Lobster isn't going to adapt because they're afraid of alienating what little market share they still have. It would not surprise me in the least if the Red Lobsters which close are replaced by sushi, poke, and cajun crab joints. I think it's a given that eventually, the public's taste for poke, sushi and crab will wane. And something else will move in.

Instead of "all-you-can-eat" shrimp, Red Lobster should have tried modernizing the menu -- at least the specials section of the menu. Leave the cheese biscuits alone (and don't burn them). But advertise a poke bowl. And (gasp!) screamin'-hot-crab.

Independent steak houses have been doing this for decades. Hard to find a traditional Steak Diane anymore. And creamed spinach is the exception, not the rule. (Still love it.) But I can throw a nickle and hit a place offering chimichurri steak.

That's a good point. Red Lobster selling Poke Bowls and hot crab would almost certainly be more successful than it is now. You could do those things and still be a chain restaurant though. There are chain sushi places, and I'm sure Poke chains are coming soon. I was at a local pub chain here having lunch with a friend (~700 miles from the ocean) and the specials were a hot chicken sandwich and an Ahi Tuna Poke bowl. I didn't order it, but if they think they can make it work I'm sure other chains could.

Anyway, I'm not saying chains are better than local/independent places, because that clearly isn't true. But they aren't doomed to irrelevant if they're competently run, imo.
 

T_R_Oglodyte

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That's a good point. Red Lobster selling Poke Bowls and hot crab would almost certainly be more successful than it is now. You could do those things and still be a chain restaurant though. There are chain sushi places, and I'm sure Poke chains are coming soon. I was at a local pub chain here having lunch with a friend (~700 miles from the ocean) and the specials were a hot chicken sandwich and an Ahi Tuna Poke bowl. I didn't order it, but if they think they can make it work I'm sure other chains could.

Anyway, I'm not saying chains are better than local/independent places, because that clearly isn't true. But they aren't doomed to irrelevant if they're competently run, imo.

Although I don't patronize Chipotle, I think Chipotle is a good example of a current chain operation that has hit it's market. But that could also have been said of Red Lobster in it's heyday. The challenge for Chipotle will be whether the can adapt as the market inevitably changes. If not, they will go the way of Howard Johnson's and Red Lobster.

Some other good large chain operation examples that occur to me are Inn-N-Out, Chick-Fil-A, and Waffle House. Not that the food is exemplary, but each of them understands the market they are in and delivering.

Frankly, most people aren't that finicky about their food - they just want something that hits their taste buds, at a price where they perceive value, and in a comfortable setting. The challenge with operating a chain is maintaining consistency across all of the locations - give the customer what they expect. When I go to Waffle House and ask for two eggs over easy, hash browns (scattered, smothered, and peppered), and wheat toast, I know exactly what I will get.
 

davidvel

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Although I don't patronize Chipotle, I think Chipotle is a good example of a current chain operation that has hit it's market. But that could also have been said of Red Lobster in it's heyday. The challenge for Chipotle will be whether the can adapt as the market inevitably changes. If not, they will go the way of Howard Johnson's and Red Lobster.

Some other good large chain operation examples that occur to me are Inn-N-Out, Chick-Fil-A, and Waffle House. Not that the food is exemplary, but each of them understands the market they are in and delivering.

Frankly, most people aren't that finicky about their food - they just want something that hits their taste buds, at a price where they perceive value, and in a comfortable setting. The challenge with operating a chain is maintaining consistency across all of the locations - give the customer what they expect. When I go to Waffle House and ask for two eggs over easy, hash browns (scattered, smothered, and peppered), and wheat toast, I know exactly what I will get.
The consistency is what allows chains to survive, and often thrive, especially with the rise in restaurant prices. Chains offer a product that people know, wherever they are in the country (world), that is exactly how they know it. While there are incredible "mom and pop" restaurants, there are enough duds that people fear getting an unexpected meal that they don't enjoy (but still have to pay a lot for.)

While chains rarely if ever offer the best meal in an area, it is hard to find the best places, especially when traveling. If there is a chain that one knows, that has a reasonably decent experience and food, people will gravitate to that as they know what they are getting.
 

T_R_Oglodyte

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The consistency is what allows chains to survive, and often thrive, especially with the rise in restaurant prices. Chains offer a product that people know, wherever they are in the country (world), that is exactly how they know it. While there are incredible "mom and pop" restaurants, there are enough duds that people fear getting an unexpected meal that they don't enjoy (but still have to pay a lot for.)

While chains rarely if ever offer the best meal in an area, it is hard to find the best places, especially when traveling. If there is a chain that one knows, that has a reasonably decent experience and food, people will gravitate to that as they know what they are getting.
Quite a few years ago, I had a friend who was a PhD yeast microbiologist - degree from UC-Berkeley. Very smart guy. Yeast microbiology is a very big in the brewing business, and beginningwhen he was a grad student he had consulting gigs with many of the mega-brewers. We had quite a few chats about the business that I found interesting.

One set of discussions I remember involved the issue of product consistency - when you are brewing a big brand, you want the product to taste the same no matter where you go. Like McDonalds - when you go into a store and order a Big Mac, the Big Mac should taste the same no matter where you are.

Getting back to brewing, although Coors marketed their "Rocky Mountain Water", water isn't that important. It's not that difficult to treat water supplies to create a consistent water - just deionize the water and reconstitute it with a specific set of minerals. He said the biggest variable was the ingredients - brewers went to great lengths to ensure consistency in the grains and hops used. Most of that is grown under contract, where the grower works under contract to the brewer, using seed provided by or specified by the brewer - growing, cultivating, and harvesting under conditions specified by the brewer.

After ingredients, the next biggest factor is the yeast. That is where he came in. In chemcial engineering parlance, a brewery is just a microbiological reactor. The yeast that is the heart of the process is a constantly evolving and mutating microbe. Thus, during continuous brewing operations, the yeast that is the heart of the process mutates away from the yeast that was used when the current brewing cycle started. Hence, for both brewing and sanitation purposes, breweries are routinely shut down, completely sanitized and disinfected, and then restarted using preselected yeast cultures. Essentially, an operational reset back to a defined starting point.

Yeast is a constantly evolving and mutating microbe. During brewery operations at a mega-brewery, when a yeast strain appears that has paricularly desirable traits, he brewery will grab that yeast, culture and grow it in a lab, and then put cultures into deep freeze for future use in restarting the process. The yeast culture samples can also be shared across the organization.

All in the goal of ensuring consistency in product.
 

Timeshare Von

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Here in Milwaukee, Red Lobster almost always wins the "Best Seafood Restaurant" in a local publication's annual readers' poll. Ditto Olive Garden for Italian places. I cringe to think either in in my top 10 in this area!
 

rickandcindy23

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One set of discussions I remember involved the issue of product consistency - when you are brewing a big brand, you want the product to taste the same no matter where you go. Like McDonalds - when you go into a store and order a Big Mac, the Big Mac should taste the same no matter where you are.
Yet the Venice McDonald's did taste different than home. We only visited one McD's in Italy, and it was on our mile + walk to San Marco Square. Our granddaughter saw it first, that big yellow arch, and she had to stop. I usually don't eat there, but it sure tasted good. We had a lot of pizza and pasta that trip, and the change in menu was fine with everyone. The fries were the same, and our grandkids loved their happy meals. So expensive compared to our other meals.

Rick usually gets a stomachache after eating breads, yet no symptoms while in Italy. As soon as we boarded the ship and ate our first meal, he had stomach issues. I am wondering if it's the flour in the breads here at home.
 

Talent312

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We dined at the McD's at the train station in Innsbruck, Austria.
It wasn't much different than our local McD's.

I dunno how the Red Lobster in our area stays in business.
There's better seafood elsewhere. We call it the Dead Lobster.
 

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Honestly, I think the issues have to come down to the chain not properly managing the customer experience in the restaurant. I disagree that everyone wants sushi, whatever a poke bowl is, or flaming hot anything. Historically I have loved Red Lobsters menu, and so has much of my family. There's whole segments of the population who like more traditional food or slightly blander food. This market is generally dismissed today with all the fusion / hip / whatever's new that often ends up being frankly unappealing to me. I fully believe there's a market here, as with Olive Garden or McDonalds for instance.

What is failing is they're not consistently managing to make their signature dishes well, a la the biscuits or the shrimp. On top of that is bad staffing that I'm seeing across restaurants (other than chinese ones usually) chain or local where either there just isn't enough staff OR they just are literally being as slow as possible. There is no reason to me as a customer that there should be whole empty sections of a restaurant yet 20+ minute waits to be seated and long stretches waiting on the waitstaff once seated.

For Red Lobster specifically, the endless shrimp is the only thing on the menu that gets close to value for money too. Because most of their stuff has gone downhill from 20 years ago, the prices doubling ($40 a meal as an average, not including drinks or anything) - it's the fast casual issue that happened to weak burger fast food. If I'm paying $60 a person, I can get into a more upscale restaurant than fast casual, especially as the chain is failing in food and service quality.

I suppose completely changing the menu is an option, but so too would be fixing some of the above issues. I struggle to believe that you couldn't get better food, staff, etc at the high pricepoint they're trying to hit. Or, for the very low service and food quality level, they need to slash their prices. But most people will avoid a 4/10 restaurant with 7/10 prices.
 

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Rick usually gets a stomachache after eating breads, yet no symptoms while in Italy. As soon as we boarded the ship and ate our first meal, he had stomach issues. I am wondering if it's the flour in the breads here at home.
TLDR: The proteins are probably what he's sensitive to, and European wheat uses different hybrids and growing processes than the USA.

Long ramble: I have a Turkish friend and she had developed a wheat sensitivity. Her doctor told her to make sure she started buying wheat products using European wheat instead of American wheat products (Turkey has both), and she claimed it cleared up her issues.

I thought it was completely unlikely, and then I went down an internet rabbit hole including some Google Scholar searches. My tentative conclusion was that the US commonly (around 33% of the wheat crop) uses some chemical harvesting procedures to dry out the wheat before harvest, which basically stresses the seeds and causes changes in the proteins found in the wheat. It also changes the amount of other non-protein compounds in the wheat. Which could explain some differences in digestibility.

https://www.sciencedirect.com/science/article/abs/pii/S030881462031284X
https://pubmed.ncbi.nlm.nih.gov/12822937/

In any case, I started buying 00 wheat from Italy for my home baking, organic bread from the supermarket, and continuing to eat normal bread at US restaurants, which is the majority of my bread consumption. So a completely illogical response, considering wheat doesn't even give me problems. :D
 
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wackymother

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I have to say...I love Red Lobster! And we are total foodies and we both cook, and we cook a lot of seafood. Red Lobster has updated its menu and they now have a salmon bowl with edamame and a salad that is very good. Our local RL has a very nice staff, and we go a few times a year. It's relaxing and not too expensive.
 

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Rick usually gets a stomachache after eating breads, yet no symptoms while in Italy. As soon as we boarded the ship and ate our first meal, he had stomach issues. I am wondering if it's the flour in the breads here at home.

It's the lack of fermentation. Michael Pollan devotes a third of the book "Cooked" to this.
 

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1) I disagree that everyone wants sushi, whatever a poke bowl is, or flaming hot anything

2) I suppose completely changing the menu is an option, but so too would be fixing some of the above issues. I struggle to believe that you couldn't get better food, staff, etc at the high pricepoint they're trying to hit. Or, for the very low service and food quality level, they need to slash their prices. But most people will avoid a 4/10 restaurant with 7/10 prices.

[Numbers added for convenience.]

1) I invite you to check out the Red Lobster on Flamingo in Las Vegas -- not much happening there. And what few guests they have look like they came from a retirement home. And then go for a drive in literally any direction and count all the crab, sushi and poke places -- and have a look at the parking lot. They're doing brisk business. And they aren't filing for bankruptcy anytime soon. Yes -- there is a segment of the market which wants bland food. That isn't enough to support a restaurant anymore. Meanwhile, there's a line out the door at my favorite Pho joint.

2) Google "skimpflation." Restaurants have never paid the same price for food as average consumers. (The economy of scale.) Most fine dining restaurants barely make any money on food. Their profit comes almost entirely from the bar. The food is just to get the sort of people who buy $5,000 bottles of wine into the restaurant. For every restaurant which isn't selling expensive bottles of Super Tuscan, margins are still razor thin -- it takes six entrees worth of profit to pay for a broken plate. So owners and restaurant managers cut what they can -- staff, wages, food quality, portions. But as Red Lobster has learned, this is a false economy and just leads to a death spiral.
 

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[Numbers added for convenience.]

1) I invite you to check out the Red Lobster on Flamingo in Las Vegas -- not much happening there. And what few guests they have look like they came from a retirement home. And then go for a drive in literally any direction and count all the crab, sushi and poke places -- and have a look at the parking lot. They're doing brisk business. And they aren't filing for bankruptcy anytime soon. Yes -- there is a segment of the market which wants bland food. That isn't enough to support a restaurant anymore. Meanwhile, there's a line out the door at my favorite Pho joint.
My point is as a chain, I'm talking about the places in say Elmira, NY - not Las Vegas. Or Wilkes-Barre, PA. etc.
 

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My point is as a chain, I'm talking about the places in say Elmira, NY - not Las Vegas. Or Wilkes-Barre, PA. etc.

And my point is that a restaurant can thrive selling frozen seafood. I've listed several examples which are doing GREAT. And since everybody comes to Las Vegas, it's a great barometer of the restaurant industry. Las Vegas has to cater to every single need. Not just the people of Elmira, NY.

What's selling? Sushi, asian noodles and spicy.
 

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Here where I'm packing and stacking boxes in a shipping container, there is a crab restaurant on every other corner. "The Boiling Crab." "The Angry Crab." "The Steamin' Crab." "Crazy Cajun Crab." And "Psycho Stabbin' Hobo Crab."

Only one of the above isn't a real name. Wall to wall crab joints -- with full parking lots.

Why? They do precisely one thing and they do it well. And (this is the big one), it's not bland or boring. I went to one of these crab joints that locals rave about. And their XXX-hot dipping sauce was properly hot. Not Thai hot. Not Howlin' Ray's hot. But hotter than anything I've tried in a restaurant in a very long time. It was good enough that I took some home and copied the recipe so I can make it in Hawaii. (We have a crab farm nearby.)

Meanwhile, Red Lobster is selling the same "bland Cracker Barrel/Olive Garden except with Seafood" menu they offered in the 1970s. I see no problems at the various sushi and poke places around town. They're popping up all over. Best of all, they're replacing failing chains.

The venture capital companies saw that Red Lobster's biggest asset was the real estate they held. So that got spun off, leaving last century's restaurant chain relying on last century's customers.

It's the same with the Mexican place we enjoyed this afternoon. (We're eating at all our favorite places because this is the last time we ever will.) Mid-size restaurant which prides itself on serving one region's cuisine and only that one region's cuisine. The quick-service Mexican chain across the street had an empty lot the entire time we were dining. Meanwhile, this place turned over twice while we ate.

The big picture problem is that people aren't interested in what the chains are selling.

no... "you'll get crabs" crabshack? But you are correct. The spun off business bought by Golden Gate Capital sold the real estate and then somehow suckered Thai Seafood and the Seafood Alliance into paying somewhere between $1 to $2 billion for the worthless bag that Red Lobster had become.

Golden Gate capital is laughing all the way to the bank. Thai Seafood and the Seafood Alliance? Just holding that worthless bag.
 

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While I agree that your experience screams "amateur hour, both front and back of the house," I have to disagree with the above.

Those crab joints I referenced are selling reheated frozen snow and dungeness crab. We don't have an ocean anywhere near, so they're doing the same basic business model as Red Lobster -- modernized for today's palate. I would much prefer an off-boat crab -- from Pier 45 & 47. But that isn't the point. These "Criminally-Insane Stabbin' Crab" (there are literally dozens in this town, same basic restaurant, different names) restaurants are offering food that would have most Red Lobster guests screaming for a glass of milk. The fact this town can support dozens of hot-cajun-crab joints but is closing Red Lobsters tells me everything I need to know about that market segment.

Red Lobster isn't going to adapt because they're afraid of alienating what little market share they still have. It would not surprise me in the least if the Red Lobsters which close are replaced by sushi, poke, and cajun crab joints. I think it's a given that eventually, the public's taste for poke, sushi and crab will wane. And something else will move in.

Instead of "all-you-can-eat" shrimp, Red Lobster should have tried modernizing the menu -- at least the specials section of the menu. Leave the cheese biscuits alone (and don't burn them). But advertise a poke bowl. And (gasp!) screamin'-hot-crab.

Independent steak houses have been doing this for decades. Hard to find a traditional Steak Diane anymore. And creamed spinach is the exception, not the rule. (Still love it.) But I can throw a nickle and hit a place offering chimichurri steak.
I dont think Joe's Crab shack is doing too well either. All the stores by me are out of businesss.

We don't really have any of these crab shacks. There is a place on the jersey shore I have been dying to go to - but it is a long drive and doesnt have a great rating. "Bum Rodgers Crab Shack" - It is not the crab legs type of place, but the whole crab and you get a wooden mallet type place. Never tried that, so sounds like fun.
 

free2travel

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Thai Seafood and the Seafood Alliance? Just holding that worthless bag
interesting, not surprising. a major public company that farms shrimp in Thailand (and elsewhere in Asia) wanted to keep RL afloat. the Thais are probably the only ones who make any money off "endless shrimp". as for "endless shrimp" being a value, I see Xtra Lg frozen FARMED shrimp in the grocer for $5/lb almost every week. How much of a value is the ES when Xtra Lg shrimp cost $5/lb. btw, do NOT ask what they feed the srhimp farmed in Thailand. Anybody ever see a detailed chemical analysis of what a lab finds in farmed shrimp?
 

joestein

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interesting, not surprising. a major public company that farms shrimp in Thailand (and elsewhere in Asia) wanted to keep RL afloat. the Thais are probably the only ones who make any money off "endless shrimp". as for "endless shrimp" being a value, I see Xtra Lg frozen FARMED shrimp in the grocer for $5/lb almost every week. How much of a value is the ES when Xtra Lg shrimp cost $5/lb. btw, do NOT ask what they feed the srhimp farmed in Thailand. Anybody ever see a detailed chemical analysis of what a lab finds in farmed shrimp?

Gives new meaning to "sleeps with the fishes"
 
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