Tag: Red Lobster

OM Podcast #8: Operations Management at Red Lobster

Welcome to a very exciting Operations Management podcast! Today, Barry Render and his guest, Executive Vice President of Red Lobster, Horace Dawson, talk about operations at Red Lobster.  They discuss the most important operations tasks to get right in any restaurant but especially the world’s largest seafood chain: forecasting, scheduling, supply chains, and quality.

 

Transcript

A transcript in Word of this podcast is available by clicking on the word Transcript above.

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM.  See our August 21st blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more!  https://www.pearson.com/us/contact-us/find-your-rep.html

As a footnote, Horace Dawson was promoted to CEO at Red Lobster on Sept. 21, 2023.

OM in the News: Red Lobster’s Vertical Integration Into Lobster Farming

In what could be an underwater gold mine, Orlando-based Darden Restaurants plans to create the world’s largest lobster farm in Malaysia, allowing it to sell the crustaceans in Asia and supply them to its chains such as Red Lobster, according to a story in the Orlando Sentinel (April 9, 2012). The lobster farm would partially shield  Darden from rising seafood prices, while creating a new revenue stream. Lobster farming, a field in its infancy because it has been notoriously difficult, could also keep prices lower for consumers but pose tougher competition for fishermen.

Darden plans to  build the 23,000-acre production facility, which will employ 12,000 workers and eventually churn out 40 million pounds of lobsters each year. That’s about $1 billion worth.

Darden says it will take a while to get to that point — at least 2029. It will take several years to start producing food and at least a decade before lobster sales have a big impact on the company’s bottom line. “There’s a growing world demand for lobster products of all types,” says Darden’s VP of Purchasing and Supply Chain Innovation. The project, which will take an investment of $650 million, will be Darden’s “crown jewel” of environmentally friendly seafood production.

But as we noted in this blog just a few days ago (with regard to Delta Air Lines’ plans to buy a jet fuel refinery), vertical integration (Ch.11) moves most companies outside their core competencies. And lobster farming is a tough business for any company to master. Lobsters take a long time to mature and consume a lot of food. They also cannot make the trip all the way from Malaysia to the US alive.

Discussion questions:

1. Why is Darden venturing outside its expertise in restaurants (its chains also include Longhorn Steak, Olive Garden, and Bahama Breeze)?

2. What other restaurant or fast-food chains have successfully vertically integrated? How and why?

Video Tip: Where to Put the Next Red Lobster

Jay and I have developed two video case studies to accompany Chapter 8, Location Strategies. In the first, Where to Place the Hard Rock Cafe, we describe how Hard Rock makes its future location decisions. At that company, the Director of Development has significant personal authority, using his decades of experience and “feeling” about  a city and a location in that town. Of course, he also employs demographics, but not nearly to the extent that Red Lobster and Olive Garden (both owned by Darden Restaurants) do.

In this 10 1/2 min. video, we see that Red Lobster uses trade area characteristics (like income, population density, racial makeup, average age, competition, nearby hotels, etc.), site characteristics (parking, signage, visibility, traffic flow, etc.), and real estate availability –all run through a geographic information system . The GIS (by MapInfo) provides interesting psychographic profiles for potential locations. What used to take Rob Reiner, the director of market development, 8 hours to analyze, now takes 5 minutes.

MapInfo (illustrated at the end of the chapter) segments the US into 72 “clusters”  of customer profiles, based on income and buying behavior. One such cluster, called Equestrian Heights, is detailed in the case study. The software takes into account competition, projected sales volume, cannibalizing from existing stores, and sets a minimum distances between Red Lobsters.

A great guest speaker when showing the video would be a local or district Red Lobster or Olive Garden manager.