Olive and Kayla, MBA students at Feliciano School of Business, discuss the aftermath of Red Lobster's bankruptcy following the fallout from their endless shrimp deal. Plus, discover the strategic genius behind Costco's rotisserie chicken as a loss leader. Tune in to this episode and be part of the exploration into the latest business news!
Olive and Kayla, MBA students at Feliciano School of Business, discuss the aftermath of Red Lobster's bankruptcy following the fallout from their endless shrimp deal. Plus, discover the strategic genius behind Costco's rotisserie chicken as a loss leader. Tune in to this episode and be part of the exploration into the latest business news!
Hey girly, how have you been what's new?
Speaker 2:Don't ask me that till the end of the semester, please, because I'm not sure you know.
Speaker 1:Two weeks, yeah, almost there.
Speaker 2:Almost there. I'm very excited, I think. I just don't want to check in with myself until it's over, because I'm not sure.
Speaker 1:But there's no break, there's no break.
Speaker 2:There's no break. We're going right into it, right Straight into summer.
Speaker 1:Wow Session.
Speaker 2:I'm more curious about what's going on with you lately because I know it's day. What of eating Is day how? What if?
Speaker 1:there's food at the crib. There's day, it's day 23. Okay, of eating at home. Okay, it's been a struggle. Okay, trying to save a little dollar, trying to eat healthier.
Speaker 2:What do you miss the most?
Speaker 1:I think, the convenience. So I have to go to the grocery store, I have to plan what I'm going to eat when I wake up late. I still have to try to pack breakfast lunch snacks, the dishes, breakfast lunch snacks, the dishes. So I don't know if it's worth saving a dollar for me not having convenience.
Speaker 2:Let's talk about that, though, because I'm still trying to figure out something real quick. Maybe you can help me out. I don't know if they tried to save a dollar, if they didn't save enough dollars.
Speaker 1:Have you heard about red lobster lately? So I did.
Speaker 2:I've never been, never been, whoa but never one time, not even after the grocery store, so maybe I have been indirectly okay I went without going.
Speaker 1:But yeah, so isn't it about their endless shrimp deal that is causing them to?
Speaker 2:absolutely go into bankruptcy. So they actually, um, at a quarterly loss of 11 million, are now contemplating a chapter 11 bankruptcy, and it's kind of fascinating because it's being on the other side of that. We always like we want that to last just forever. I mean, you want to go somewhere, get endless anything for $20. Everything is like it costs. It costs about that to breathe these days. So I'm like, yeah, let's do that.
Speaker 2:But they did it to a point where, um, their biggest uh manufacturer, manufacturer, their biggest supplier of seafood, is now kind of strategizing an exit because it has no longer like a sustainable thing. On top of that, they also have handed over their leadership to a CEO that specializes in kind of trying to shift out of that bankruptcy mode. So I think it's serious. It's a serious thing.
Speaker 2:You were talking about convenience and you were talking about saving a dollar. I think that's really what Red Lobster has come to signify like over their legacy, because they've always been like an affordable option for seafood and I know that, like seafood itself tends to have a higher price point because of, you know, several different competing factors and Red Lobster was always kind of an accessible option for blue collar families and that's being threatened right now and I'm kind of I'm not sure how I feel about it, because I think it's I'm not sure how sustainable that model is going to be, as we kind of are in the middle of this inflation extravaganza right now. But I also think that it signals so much more than that with the dining industry as a whole.
Speaker 1:Yeah, I think that you know, even a few years ago people would dine out for the experience. You know, I remember my mom and I we would go to Applebee's and it wasn't necessarily about the quality of food. It was like my mom and I are out on the town, it's a Friday, you get the two for 20, you get the appetizer with two entrees. It was a great deal. But then now I think people are questioning is it worth it? You know what has changed in these dining experiences that it's beyond just the same food. You know people want more of an experience and then, if they're not getting an experience, they want the convenience they want. You know Uber Eats or DoorDash to kind of just drop off the food. You are at your home and your own. You know comfort. So I think people go out, you know, to dine in for special occasions and if it's just something that they already know it's like, why am I going to spend a pretty penny on something that seems mediocre overall?
Speaker 2:Well, that's the thing for me now with this whole thing, because, yeah, it can be the convenience, the experience, but the notion of the value of it is being challenged, I feel like, not just because they're facing this bankruptcy, but also even eating at home is kind of expensive these days.
Speaker 2:Right, I mean the experience now is like I don't have to leave my house and socialize. Experience now is like I don't have to leave my house and socialize um, like if the prices are kind of comparable, like you're gonna maybe stay home over doing the whole thing.
Speaker 1:But then it's also like how good is the endless shrimp deal when it's on a per person basis? It's not per table, true and then it's only shrimp.
Speaker 1:That's not including the sides, that's true. It's one of those things that I think it was a promotion to really get people in the door and then from there kind of just hoping people would spend their money on other things as well. You know we've talked about the whole thing with Costco and the Roast to Street Chicken. I remember you talking about that. It's, you know, a loss leader in that. You know the company doesn't mind taking a loss on their profits of the Roast to Street Chicken, knowing that people are not going to leave just spending five dollars on that trip.
Speaker 2:They're going to pick up the size, they're going to pick up other things because it's convenient for them while they're there and by the way, statistically, according to like the floor plans of most costcos, you actually have to walk through about 60 of the store to even get to the chicken and and it is kind of like situated by like sides. You know things that go good with chicken, you know. But I will say one thing to your point. First of all, I love the whole concept of this Costco chicken thing. It's actually legendary, you know, for those that are uninitiated, you know, for 20 years Costco's chicken has been sold for $4.99.
Speaker 1:I love the consistency.
Speaker 2:Well, actually, that's actually what I'm getting at, because the only time in those 20 years that they have raised the price was during the 08 financial crisis. Meanwhile last year 2023, when Red Lobster started to kind of realize that they were in big trouble in the first quarter. With that, you know, I think on average I may or may not have mentioned it was on average, 11 million dollar loss. So in the ballpark, you know, somewhere in the 40s, 40 million dollar loss. But when they did that, it it was a $20 deal, right, started to scramble a little bit, $22. Then it by, I think. I think they waited until the third quarter to raise it to 25. And then they said, okay, 25.
Speaker 1:For nationally.
Speaker 2:For on a national basis. So not just that I don't know if this makes sense, but having all of that movement, I think, did more damage than good. I think that at that point in the game, cause the heat, cause here's really what it is. It was two factors, two contributing factors. One, once you stick with the price, just just do that for the sake of brand integrity, for the brand image, Because, as Red Lobster, as a trusted name in seafood purveyance or you know whatever, and especially because they cater to blue-collar families, just pick a price, you know, because those few dollars do affect their particular but I think it's also that they extended the promotion beyond the time.
Speaker 1:It was supposed to be a limited promotion, but then it was like oh no, let's just keep it, let's just have shrimp all the time.
Speaker 2:Shrimpapalooza, guys, first of all. That's like saying let's just have the holidays all year round, which I would love, but it's kind of like if every day was a party. Like I'm just tired thinking about that and I kind of feel like it's the same thing, not just for people, because people can't do endless shrimp all the time. I feel like having that kind of promotional, that cyclical approach.
Speaker 1:It would be like a motivation to come in during that time.
Speaker 2:We know when Lobster Fest is, you know, you know whatever, and then we go and I feel like it's it's giving like shark week, but like for forever, forever we know when it's coming, we all get ready for it. So not just the fluctuation but the taking away the seasonality of it.
Speaker 1:It feels like a business that's unsure about what they're doing and I I think that that makes people nervous, but I think it was also the company already being in turmoil before this promotion, using this promotion as a means to get some money in. You know, help profits, but then, kind of extending it, lost its value of oh, this is an exciting time. Let me go in during this and they didn't I don't think they actually did the finances correctly to see oh, is this actually profitable based off of how much shrimp costs and how much people are generally eating when they're ordering endless shrimp?
Speaker 2:I mean because if you're going to have it all the time, I'm going to plan to just go and eat just shrimp, like I'm not going to bother with the rest of the menu. But if it's like I'm going there because I know no sides, them cheddar biscuits? No, because like some people you know that are students, they might just go. And here's my little creative take Get a little cheddar biscuit, cut it in half, make a little. There it is no sides. So I think it gives people too much time to strategize how they're going to get the most bang for their buck, because right now that's what it's about there's too many competing factors. First of all, the eating at home, then there's the price of groceries. I mean, I don't know when all things are kind of factored in. You got to make it almost sound better than that.
Speaker 1:And if it was going to be be 25, it should have just been 25 but I think it's also like the indirect competitors of the role of DoorDash and Uber Eats is playing into the, I guess, the eating experience I know for me personally, when it's winter time I'm like I'm hibernating, I'll save my coins for the summertime and I'll be out and about during that time. So I'd rather just honestly take my food to go and I don't think people see places like Olive Garden and Red Lobster, Applebee's and Chili's as a place like oh, let me order and, you know, take it to go.
Speaker 2:You know it's one of those things that you're either eating in or you're not eating there at all you know, and not for nothing, like tipping culture is so out of control, so I feel like that's another barrier, but it's not just the cost of the endless shrimp that you're paying for.
Speaker 1:It's yeah, you know, if you get anything else than the tip and then you're like is it really a deal?
Speaker 2:I thought, let's talk a little bit about the shrimp.
Speaker 2:So you know, standardizing it nationally.
Speaker 2:I think there were some oversights in, like a kind of the logistical situation because obviously if you're in the Midwest, you're not by any type of you know, and that's going to take time, it's going to take people to, you know, make that come together.
Speaker 2:And if you're in a state, it's two things right, it's like that part. And then there's also the fact that if we have a standard rate for something in a plate, if people are being subjected to national standard rate in places where, say, minimum wage is not keeping up with that, now you got all this shrimp in the freezer and you got nobody to eat it because really, like what's going on in today's day and age, I mean, a dollar is a dollar, right, we know the value of it, but more than ever the difference between 20 and 25 dollars, we see now that it's at the detriment of this decades-long legacy and that goes hand-in-hand with the price sensitivity that you had mentioned to me before this that Costco tried to raise their prices and they saw a huge downfall of people getting their rotisserie chicken because the price went up.
Speaker 1:So it just shows how certain groups of people that you're targeting are more price sensitive to even a dollar fifty or even fifty cents.
Speaker 2:You know well remember this was during the financial crisis. So from both sides, from the consumer's perspective I don't even have that dollar maybe but also from their perspective like they don't want to take, and it's kind of that they're actually just a great example of how well the brand image was handled, because they understood that that dollar was going to turn into many more if they did not honor, um, their customers kind of willingness to, to participate that, you know, was shown in the short term, though, because I think in the long term, when people really compare their options of fast food or dining out, they're like, oh, even if the Costco prices for the rotisserie chicken went up, it's still relatively cheaper than other things.
Speaker 1:You know, we've seen with the dollar store that has gone up and it's no longer a dollar, but people are still going to the dollar store because, compared to the other options, it's still cheaper than going to Target or Walmart or other things like that. So I think in the short term it may be affected in the sense that people are like, oh no, I'm not doing this anymore, but when you really compare overall prices, it's still going to be cheaper.
Speaker 2:I mean, I agree. I also do want to mention, on the tail end of that, that you know, I was kind of making this comparison as if we're so far away from that place. But we kind of are in a financial crisis, like we're living in a post pandemic world where just things completely went out of control. And I remember even at a point where, like where just things completely went out of control, and I remember even at a point where, like before, the inflation train kind of really got chugging I heard the term like price gouging going around a lot because people were trying to recoup their losses and things like that and now it's just like rampant. So I feel like people don't know where the line is and people are kind of trying to walk that line between providing that value and also making sure that they meet their, their, their fiscal targets. You know what I mean?
Speaker 2:Um, I don't know, for me it's it's kind of like a romantic perspective, but I just feel like this is kind of one of those things that is signaling the death of the american dream kind of thing, because I think, um, you know people that are that have enough money to be out of touch, enough to say things like we'll just stop eating out and stuff don't understand like the social implication of things and that does affect the economy on a larger scale, like but I think it's also pushing you know, especially restaurants to challenge what they sell.
Speaker 1:You know you're selling food, but I think people want more than that. You know, and it's like what have you really changed to your business model and improving it in the last 20 years? That's a great point. It's like what have you really changed to your business model and improving it in?
Speaker 2:the last 20 years. That's a great point.
Speaker 1:It's just all the same.
Speaker 2:That's a great point.
Speaker 1:And I think post-COVID, people are really questioning how they're spending their dollars. You know, you can either pay for convenience and Uber Eats and DoorDash your food, or you're like, oh you know what, Let me just eat at home and save for my experiences of vacations or things that are going to actually fulfill me a little bit more than you know some of these mediocre restaurants in general.
Speaker 2:The way that even like McDonald's is priced right now, I may as well just skip it four times and then go to.
Speaker 1:Like it's crazy, Like go to some other country go eat their food, their food, like that applebee's would be giving two for 20 and you get basically the appetizer and two entrees, and now 20 that mcdonald's doesn't even take you anywhere and you're not even. You know being served by a waiter and having that experience of sitting down and you know kind of feeling catered to and then the fact that you know you were speaking about the quality.
Speaker 2:I mean, the quality is just not what it was when it was less, and I feel like people are just having a hard time keeping up with paying more for and it's also interesting thinking about how a lot of these um chains they have their food in the grocery stores.
Speaker 1:So you know, if you think about it, you could find tgi friday's wings right in the freezer aisle. You can find panera at, you know, your grocery store. So it's really like do I need to go to that place to get the tgi friday's wings?
Speaker 2:yeah, you're right, and that's actually the thing that red lobster wouldn't be able to sell, because, like just shrimp, no one's gonna buy just shrimp. That's Red Lobster at the grocery store. You know what I'm saying, like they're not, look at the seasonings. That could be another way to supplement their.
Speaker 2:They did it with the biscuits you know, yeah, that's a really Take no Red Lobster. This one might save you here, this one might save you the whole thing. I think, um, what's interesting about let's? I'm gonna just pivot like in the sense that, okay, costco and red lobster, cool, but I want to bring olive garden into this, which?
Speaker 2:basically yeah, first of all. Uh, I don't think red lobster is under darden anymore, but it was. Um, I forget his name, but I know his last name was Darden. It's under this Darden umbrella under which exists Olive Garden and a couple other partners I don't want to misspeak started as a family restaurant, and these kind of approaches to value are what kind of gave birth to these other business models that are like come eat whatever you can and get, then get on out of here. The only problem is with Olive Garden, the price points are so much like it's kind of almost the same price point, but like the margins are so much wider because like I mean it's pasta, it's kind of almost the same price point, but like the margins are so much wider because like I mean it's pasta, it's pasta. Yeah, it takes a lot to get me to go out and pay for pasta, like you know what I mean, but it's like but even they have like an all you can eat pasta bowl, yeah, pasta soup and salad, but that works for those margins.
Speaker 2:With seafood it's a little iffier. And if you don't figure that out, going into it while also subjecting everyone across the country to, basically, you expose yourself for not doing the math all the way. And if you couldn't do it, you should have just kept it what it was, because it's the money and the brand image. The money can't even really exist without that thing. And because Red Lobster has been around for so long, there are certain expectations. I think what it's going to take to save Red Lobster is going to. First of all, you're so right about the lack of innovation, but I don't think they've been challenged to do that in a long time. First of all, there's the appeal of the deal. Right, there's the appeal of the deal right. There's your target segment, which are blue-collar families. If you lose that entry point, the people in that I don't want to say tax bracket, but people like you know in this particular class.
Speaker 1:If you like. Raise prices too much, you're losing your initial target market?
Speaker 2:You are, but then what does that mean for Red Lobster, if it doesn't close? Are you now going to appeal to? Who are you going to appeal to?
Speaker 1:It's like you can still improve relatively. Keep your same tax bracket, your same target market. I guess you know. But what improvements have you made with all the profits that you were making before if everything was the same? You know like.
Speaker 2:End have you made with all the profits that you were making before, if everything was the same? You know, like endless crab legs were 2099 in 2003. They didn't learn, so maybe it was working, but, like you know, I think it's maybe a lack of awareness of how things are, kind of proliferating as the world becomes ever increasingly digital. There's all types of free everything on these little apps. If you download our app, you get a free chicken nugget, whatever. I don't know if they can afford that, being where they are. I don't know if they can survive in this world, like how it's kind of going now, because of all that you have to do even just to remain relevant.
Speaker 1:I mean it is all and loyalty isn't the same with these restaurants, and by the way, if the restaurant ain't instagrammable, yeah they're not gonna experience, they're not, yeah, like they're not gonna go, because now we have social capital, it's more than just the money, um, but they certainly should have paid more attention to theirs, so I think this is why, like this month of me being more conscious of what I'm eating, where I'm eating, how much I'm spending on eating out, I have more of a focus on eating out as a here and there type of thing, rather than, oh, I'm running late or I didn't plan ahead of time, just being more conscious of what I want to spend my money on when I do choose to eat out and, um, yeah, just, I think, being overall more mindful of that.
Speaker 1:And you know, sometimes it's nice to have one of those like Chipotle meals and keep it going. But overall I don't see myself really going to dine in places like Applebee's or you know. It's just like there's nothing that I can't get at the grocery store from the freezer aisle. That you know would do the same thing and cause a third of it. And if I do go out to eat, I want more of an experience of, oh, there's a nice view or there's great customer service. You know there's something special to that experience beyond. Give me a reason to put the outfit on. And the quality of food is definitely there as well, absolutely.
Speaker 2:You said here and there. I wish Red Lobster would have thought about that before making Endless Shrimp be around.
Speaker 1:Took it away.
Speaker 2:Took that need away because it was always there, yeah, and now they took it out completely. Now they took it out completely. So now we back to red lobster. Come to the front, please.
Speaker 1:I just want to talk to you for a second so, based off our discussion, what do you think are the major takeaways from red? Lobsterfts are filing for bankruptcy.
Speaker 2:You know, I think this is kind of evidence of a larger kind of shift where, like you said, we're wanting more from institutions in general, like just the human experience. I don't know if it's because of COVID, I don't know if it's because it's just so expensive to live, but people want, they want, they want more than they've they've had, and I think that it's because people are also and I think this part is COVID related just coming out of it. We realized how kind of nefarious general business practices really were with, like you know, first of all, just labeling people essential and non-essential. I mean, I get what they're trying to do with that, but it's like I'm trying to explain that like business is different. Now, you know, people want, they want their businesses to be responsible, they want them to be sensitive to our needs, they want to be entertained by businesses, and now the food is just the bare minimum.
Speaker 2:And now the food. Yeah, the food is kind of just like um, I think the food just got us to like zero. Now it's not not enough. And now we are being kind of faced with the extinction of a lot of heavy hitters because we just are not. We kind of put our foot down Because, again, like it's kind of comparable like eating out and eating at home and if you can save tipping somebody going out, save the gas, because those prices are out of control too, if we can.
Speaker 2:It's almost like taking back control of our dollar, and I think that is something that we haven't really seen in the American financial landscape, because what I mostly kind of think about when I think about just America and the dollar is the American dream and keeping up with the Joneses, and I think they're even eating at home these days. So you know, we're going to need more and for less and it's got to be good. We have a saying in Brazil bom bonito e barato. Good, pretty and cheap. That's what we like, and if we can't have that, we're going to keep going, because you know you just can't beat a home-cooked meal where we're from. So maybe the US is coming around to some of those kind of—.
Speaker 2:Same values, those same values. Yeah, what do you think Like? What's—i want to get behind your eyes with this one. What is it?
Speaker 1:So I think the first takeaway would be the focus on businesses trying to get customers in the door. You know, a lot of businesses are partnering with Amazon and trying to get customers just to come into their store that foot traffic. So either quick check with Amazon lockers and it's like oh okay, now I'm at quick check, let me get me a soda, let me get this, you know, while I'm here. Or the same thing with Kohl's and Amazon trying to get you know, those returns, but it's also on the other side of the store, so you have to go all through Kohl's in order to be able to do that.
Speaker 1:Yeah, I think the second one would be generally, you know, as you mentioned, the experience, um, food is just like a thing that I think as adults, as me personally, that you realize how much you're eating and you're like three meals a day and then every day so I think I'm it's being more mindful of when do you want to eat out, where you want to eat out, and having those options and then just being like I want to spend my money a little bit more wazzy when it comes to my experiences, and when we're all attached digitally through our phones, it becomes like you need to do more when you're eating out to disconnect from your phones and have that interaction where it's like, oh, this was worth it, I had fun.
Speaker 1:Connect from your phones and have that interaction where it's like, oh, this was worth it, I had fun. So I think those places that I used to go when I was younger with my mom, it wasn't necessarily like I had to disconnect in order to engage. I think people need more interaction, more entertainment, to actually be like present in those moments. So I think there becomes a challenge from restaurants to really find more of what customers are looking for and entertaining them away in a way that they want to really disconnect from their phones and be more present in that moment, like Dave and Buster's, you know, just having like, ok, an arcade area and then you can eat something like that. That feels like I'm really getting more from this than just basic. You know greasy food, I guess.
Speaker 2:Because I could do that at home. If you'd like to watch more episodes of the Human Side of Business and check out all of our other amazing content, follow us on all platforms at Montclair underscore, feliciano, and that's a wrap.