Darden Restaurants CEO shares tips on surviving recession

Few companies escape recession, especially those selling something consumers can cut, such as dining out. Restaurant industry sales are down, but sales at Darden Restaurants' Olive Garden and Red Lobster have held firm. Darden CEO Clarence Otis, 53, spoke to USA TODAY corporate management reporter Del Jones about gaining market share as the pie shrinks. Following are excerpts, edited for clarity and space.

Q: How are you holding your own in a competitive industry susceptible to recession?

A: People are dining out less, so the occasion is more dear when they do. Someone who may have gone to four or five places a month may be going twice. There is a lower tolerance for service shortfalls, so make sure you operate better than you might normally.

Q: Every company should focus on service?

A: Yeah. A server or a manager, regardless of what's happening at home, must walk into a unit and put on a smile. It's more important now when people are experiencing more anxiety than they might normally.

Q: Have consumers been changed forever? Will they stay frugal when things improve?

A: Habits and behaviors change pretty slowly, so there won't be a radical change in behavior. A lot is temporary. There will be structural changes. Credit cards will be harder to get, the limits on credit cards will be lower. It will take a bigger down payment to buy a house. Absent those structural, institutionally driven changes, I'm not so sure there would be a lot of change, but credit will affect how people behave.

Q: What companies do you pay close attention to outside the restaurant industry?

A: Many. I think about Wal-Mart's support platform and supply chain. They are innovative and world class. Marriott has a number of brands that are positioned differently. They do a great job as a multibrand operator, and are focused on sharing much of the back end, such as their reservations technology, without it being obvious to the customer and muddying the brands.

Q: If cost cutting is done so customers don't notice, does that mean pressuring suppliers or cutting employee benefits such as health insurance?

A: We tend not to go to benefits because they are valued by our people. Our suppliers are long-term partners. We cut things like travel. We are automating key steps. We've centralized purchasing to take advantage of scale and qualify for better terms from suppliers, because they can count on us for volume. Companies in more distressed situations cut to the core, but we've made sure that we've got financial flexibility.

Q: At least it's easy to find good employees in times of high unemployment.

A: We're able to keep our good people, so turnover is lower. That's important, because these are people with basic training, and you can layer on advanced training and development.

Q: When competitors lose market share, they often turn to coupons and other forms of discounting. How do you avoid a race to the bottom?

A: Be prepared for cyclical downturns by offering a range from value to premium. When appropriate, emphasize the value offerings. The auto companies that have a range of models from entry-level to midtier have held up better. Those unprepared had to rely heavily on discounting.

Q: Do you lose business when you don't match a competitor's coupon for $2 off lunch?

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