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Olive Garden, Red Lobster See Sharp Drop In Profits After Anti-Obamacare Campaign Backfires

By Rebecca Leber on December 20, 2012 at 10:46 am

"Olive Garden, Red Lobster See Sharp Drop In Profits After Anti-Obamacare Campaign Backfires"

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Ever since Darden Restaurants — the owner of the Olive Garden and Red Lobster chains — first announced its anti-Obamacare campaign, the company has had a tough couple of months. Darden admitted as much when it revised its predictions for latest quarterly earnings down in December, attributing the drop to “recent negative media coverage on Darden [...] and how we might accommodate healthcare reform.”

The negative press led the company to reverse course on its threat to shift employees to part-time status to avoid covering them under Obamacare. The latest report on Darden’s earnings prove that was a good move, since the restaurants did take a turn for the worse as a result of their bad publicity. Its net income fell 37 percent:

The decline in traffic comes despite the company’s efforts to revamp the menus and marketing for its flagship chains. At Olive Garden, the company rolled out an updated advertising campaign and introduced more light and affordable dishes. At Red Lobster, it added options for people who don’t like seafood.

But the company said revenue at U.S. restaurants open at least a year fell 2.7 percent for its three biggest chains during the quarter; it fell 3.2 percent at Olive Garden, 2.7 percent at Red Lobster and 0.8 percent at LongHorn Steakhouse. The figure is a key metric because it strips out the impact of newly opened and closed locations.

Olive Garden and Red Lobster are not the only chains attempting to make their employees pay more instead of offering them basic health care. Denny’s and Papa John’s have also warned they may cut back hours to avoid the provision in the health care law that requires firms with 50 or more full-time workers to offer health benefits. In reality, the costs of Obamacare are overstated, as it only imposes a small increase in health care spending for larger firms, while actually reducing it for smaller employers.

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