Red Lobster lesson: Millennials needed

In 1968, when the first Red Lobster opened in Lakeland, Fla., it was a pretty big deal for a restaurant to offer so much fresh seafood. While the interior was a bit on the dark side – and the wait for a table sometimes long – guests lined-up for a then-unique addition to the casual dining world.

Fast forward to 2014, and not a heck of a lot has changed at Red Lobster – except the lines. They're mostly gone. Sure, the menu has expanded and the interiors lightened up a bit, but Red Lobster is still very much Red Lobster.

That's part of the problem that led to its decline and ultimately, to troubled parent Darden Restaurants' decision to unload it on Friday for $2.1 billion to the investment firm Golden Gate Capital. In Darden's fiscal third quarter ended Feb. 23, Red Lobster's same-store sales dropped a huge 8.8% and visits nearly 12%.

While Red Lobster's troubles have been exacerbated by its mostly seafood menu, its problems reflect larger trends in the casual dining industry. There's a general lack of innovation and a lack of perceived value.

For Millennials in particular, there also is an "uncool" factor not just at Red Lobster, but for almost all casual dining chains. "Most Millennials would rather starve than be caught in any of those places," says Bob Goldin, executive vice president at Technomic, a restaurant industry research firm.

Industry numbers confirm that. Sales last yea at the 500 largest "fast casual" chains (such as Chipotle and Panera) grew at roughly twice the rate of the 500 largest casual dining chains (such as Applebee's and T.G.I. Friday's), reports Technomic,

Here's what experts say casual dining chains must immediately do to attract customers, particularly Millennials:

• Think healthier. Millennials are less focused on eating a lot of food on the cheap. They're more interested in quality food that's healthier. And forget those high-calorie, high-sodium appetizers. "They need to at least change perception and make people thi! nk that they have healthier menu options," says Gary Stibel, CEO at New England Consulting Group. With Millennials, he says, "perception is reality."

• Offer customized products. This is what Millennials, in particular, love about Chipotle and Panera. They point to what they want and they get it, notes Lynne Collier, senior restaurant analyst at investment firm Sterne Agree

• Speed up the service. Few things drive Millennials crazier than slow service, One way to speed things is to let folks place orders and pay via table-top tablets, says Collier. Chili's and several others are testing this, she says. The tablets also help entertain guests with games to play while they wait.

• Fix the look. Casual dining was very trendy 25 years, ago, says Goldin, but mostly "hasn't changed its look since then."

• Embrace change. Millennials grew up with their Boomer parents lugging them to Olive Gardens and T.G.I. Fridays, and won't go back unless they offer something new, Stibel says. "Millennials eat to be seen. And they don't want to be seen in family restaurant."

• Cut the prices. Menu items at fast-casual alternatives like Chipotle and Panera can cost one-third to one-half the price of some casual dining chains. Though some are addressing the pricing issues, such as Applebee's with its two entrees for $20 menu (plus an appetizer), most are still ignoring it, Stibel says.

• Innovate. About 50 years ago, the casual dining sector changed everything by giving families new places – and new ways – to eat lunch and dinner. But that innovation hit a wall, Stibel says. "Now it's known for its absence of innovation."