Orlando-based Darden Restaurants has found its next big thing inLongHorn Steakhouse.
After a couple of years of slow growth during the economic downturn and adjustment to a new corporate owner, the Western-themed chain is taking off, with annual sales expected to hit $1 billion for the first time this year.
Olive Garden and Red Lobster, bought LongHorn and Capital Grille for $1.4 billion in 2007.
Darden this year is accelerating the pace of expansion with plans to dot the country with LongHorns, eventually reaching 600 to 800. With just 356 restaurants so far, "LongHorn still has this long runway of growth available to it," said Dave George, president of the chain.
There is still some room for new restaurants in older markets, including the Orlando area, which George said could likely support one or two more. Yet, much of LongHorn's emphasis is on the new frontier and introducing a more sophisticated look and brand.
As it grows and heads west, LongHorn will have to wrangle with some tough competition.
Unlike Olive Garden and Red Lobster, the country's biggest Italian and seafood chains, LongHorn is No. 3 in the steakhouse category. It generated about 7 percent of U.S. steak sales last year, according to restaurant research firm Technomic.
Tampa-based Outback Steakhouse gets 16.5 percent of the market, with Texas Roadhouse in second place at 9.2 percent.
"I think we compete directly with Outback," George said in a recent interview with the Orlando Sentinel. "Texas Roadhouse is targeted for a little bit lower-income demographic."
Still, restaurant experts say Texas Roadhouse will be a strong rival. Outback, meanwhile, is trying to reinvigorate itself by introducing new dishes, renovating and considering opening more restaurants for lunch on weekends.
LongHorn also will face heavy competition as it moves into Western states, where "there's a lot of steak," said Steve West, a restaurant-industry analyst for the financial services firm Stifel Nicolaus. "It's very competitive, especially in Texas."
George said LongHorn can compete with its new, more contemporary atmosphere and its food. LongHorn also is promoting its lunchtime menu, while many competing steakhouses don't open for weekday lunch.
Though it turns 30 years old this month, LongHorn is still new to much of the country, and that novelty will generate excitement, restaurant analysts said.
And the chain doesn't have to worry about remaking its image in emerging markets, George said, because "they don't know the old LongHorn."
That old LongHorn was a honky-tonk kind of place with road signs, stuffed animal heads and wagon wheels on the walls. Décor in newer and recently remodeled restaurants features stone and wood interiors, back-lit metal silhouettes of cowboys, bronze sculptures and oil paintings.
At the Altamonte Springs LongHorn, which just got remodeled, customers said they like the new look.
It is "a little more classy," said Erika Floyd, 22, an Altamonte Springs hairstylist.
George said LongHorn still wants to attract its primary customer base — diners between 35 and 55, with household incomes between $50,000 and $75,000.
"We're just trying to evolve as that consumer evolves," he said, while acknowledging that "we may be attracting folks before who may have thought the restaurants were too old.''
So far, the new approach appears to be working. Sales at restaurants open at least 16 months, a key industry measurement, have jumped between 6 and 7 percent for each of the past three quarters.
George and restaurant experts both say that LongHorn has benefited from being part of the world's largest casual-dining company, which rang up $7.5 billion in sales last year.
The corporation brought in executives who had made Olive Garden a success and, working with the Italian chain's ad agency, created a new marketing campaign to match LongHorn's more refined interiors.
Well-known for market research, Darden has helped LongHorn tweak little things that make a big difference, said George, LongHorn's chief since 2003. Instead of artwork of cowboys working with cattle, for example, LongHorn chose to hang paintings of them relaxing — something consumers said created a calmer feeling.
Darden's experience also will help the company pick the best places to grow, said Darren Tristano, executive vice president of Technomic.
"Most markets they are going into, they exist there [already]," Tristano said. "They understand the market. It's not new to them. It's just new to the brand."
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Darden steers LongHorn toward major growth with eye on overtaking Outback
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