Darden Restaurants

Darden Restaurants, Inc.

Type	Public
Traded as	NYSE: DRI[1] S&P 500 Component
Industry	Restaurant
Predecessor	Green Frog Restaurant (1938-1967) Red Lobster Inns of America (1968-70) General Mills Restaurants (1970-95)
Founded	First Restaurant (The Green Frog) opened in 1938 in Waycross, GA.
Founder	Bill Darden
Headquarters	1000 Darden Center Drive Orlando, Florida, U.S. 32837
Number of locations	More than 1,500 - 2015 Annual Report
Area served	Worldwide
Key people	Eugene Lee (President & Chief Executive Officer) Jeffrey Smith (Chairman)
Services	Foodservice
Revenue	US$ $7.999 billion (FY May 2012)[1]
Operating income	US$ 638.0 million (FY 2012)[2]
Net income	US$ 475.5 million[1]
Total assets	US$ 5.944 billion (FY 2012)[2]
Total equity	US$ 1.842 billion (FY 2012)[2]
Number of employees	200,000[1]
Website	darden.com
Footnotes / references [3][4]

Darden Restaurants, Inc. is an American multi-brand restaurant operator headquartered in Orlando.^[3] As of April 2017, the firm owns eight casual dining restaurant chains: Olive Garden, LongHorn Steakhouse, Bahama Breeze, Seasons 52, Eddie V's Prime Seafood, The Capital Grille, Yard House and Cheddar's Scratch Kitchen (the latter having been acquired on April 24). Until July 28, 2014, Darden also owned Red Lobster. Darden has more than 1,500 restaurant locations and more than 150,000 employees, making it the world's largest full-service restaurant company.^[1] As of 2012, Darden is the only Fortune 500 company with its corporate headquarters in Greater Orlando.^[5]

History

The company's former logo, used until 2009.

What would come to be known as Darden Restaurants, began when William (Bill) Darden, age 19 opened his first restaurant, The Green Frog, in Waycross, Georgia, in 1938. He later founded the Red Lobster Inns of America and opened the first Red Lobster restaurant in Lakeland, Florida, in 1968.^[6] Darden chose Lakeland because he wished to see how a seafood restaurant would fare in a non-coastal region, and Lakeland was the innermost city in Florida. The initial Red Lobster franchise was applauded by diners and critics alike. The store became successful and by 1970 had expanded to three locations in the state with two more under construction. While the locations were profitable, the company lacked the resources to expand further, so Darden sold the company to food giant General Mills that year.^[7]

General Mills ownership

General Mills upgraded the chain to a more casual dining/family fare oriented format, opened a new company headquarters in Orlando and retained Darden as company manager. In 1975, when Darden was promoted to Vice President of General Mills, Joseph (Joe) R. Lee, the company's first restaurant manager, was promoted as President of Red Lobster. Under General Mills ownership, Red Lobster expanded into a chain of almost 400 locations by 1985. The company underwent several restructurings and transformed itself from an inexpensive fast-food seller into a chain of casual dining seafood restaurants by 1988.^[7]

One of the company's first ventures into the diversification of its portfolio was the York Steak House chain of English-themed steak and chop restaurants in the 1970s. The franchised steak and potatoes restaurant was a cafeteria-style restaurant with salad bar and hot station. By the end of the 1980s, the chain had been mostly closed down, though some independent locations still exist. These places were very similar to a Ruby Tuesdays® now.^[8][9]

In 1982, Darden opened the first Olive Garden concept store in Orlando. The chain took off, and by 1989 General Mills had opened over 145 stores, making the chain the fastest-growing unit in the company's restaurant holdings. While Olive Garden did not meet critical success, it was popular, and its per-store sales soon grew to match those of Red Lobster. The company eventually became the largest chain of Italian-themed full-service restaurants in the United States.^[7]

In 1990, China Coast was launched as an attempt to create a (U.S.) national casual dining restaurant that featured American Chinese cuisine. While the chain eventually expanded to some 50 restaurants, its sales were lackluster and lost an estimated $20 million USD. By the end of 1995, the company was shuttered, and the remaining locations were either converted to Red Lobsters or Olive Gardens or closed altogether.^[7][10]

Darden

In 1995, General Mills decided to spin off its restaurant chains to focus on consumer food products. The new company was named Darden Restaurants, after Red Lobster's founder. General Mills stockholders received one share of Darden for every common share of General Mills held. General Mills restaurants had $108 million net income in that year. At the end of 1995, Darden operated 1,250 restaurants in 49 states with 73 locations in Canada.^[7]

Darden Restaurants was spun off from General Mills beginning on May 9, 1995, when it began trading on when-issue basis at $9.75 a share.^[11] The company became a fully separate entity on May 31, 1995, when its shares went on sale on the NYSE. The shares opened at $10.75, 17% below expectations, but climbed to $11.125 by the close of trading.^[12]

Darden executives planned to have two additional chains in place by 1998. In March 1996, Darden launched a test of Bahama Breeze Caribbean Grille concept featuring food and drinks found in the islands of the Caribbean Sea and a Caribbean theme, was created in 1996.^[7]

Markets were over saturated with restaurants in 1997 forcing Darden to close 48 poor performing locations and lose $91 million due to the restructuring. Red Lobster and Olive Garden were given make overs in 1998. Darden also made a profit of $102 million that year.^[7]

1999 saw Darden opening additional location after recovering from the 1996-1997 losses. The company then began testing a new concept entitled Smokey Bones BBQ Sports Bar that opened in late 1999 in Orlando. The restaurant is a sports bar concept featuring barbecue and related foodstuffs in an Appalachian mountain-lodge setting.^[7]

In 2003, Seasons 52 was under development with the idea of "provide guests the opportunity to indulge while still eating well." Season 52 were only being opened in the Florida or Atlanta markets during its initial phase.^[13]

Darden announced in January 2007 that the company was willing to expand by purchasing an existing 100 location chains even considering franchisors.^[14] By May, Darden indicated that its Smokey Bones division would be sold and or shut down including the two Rocky River Grillhouse, the proposed replacement concept for Smokey Bones.^[15] In August, Darden acquired rival Atlanta-based restaurant holder Rare Hospitality for $1.4 billion USD, gaining Rare's two chains, The Capital Grille and LongHorn Steakhouse. As part of the Rare acquisition, Darden set up its Specialty Restaurant Group to include Capital Grille, Bahama Breeze and Seasons 52.^[16] In December, Darden announced that it would sell its Smokey Bones chain to Barbeque Integrated, Inc., an affiliate of Sun Capital Partners, Inc., for approximately $80 million. The sale was completed in January, 2008.^[6][17]

Expansion and ownership changes

In 2010, Seasons 52 started a new expansion phase opening up in 11 more states over the next three years.^[13]

In January 2011, Darden announced co-locating their Olive Garden and Red Lobster brands in smaller markets to share kitchen but continue separate menus and eating areas.^[18] As part of the February Darden analyst conference, an analyst indicated that the corporation may be targeting another restaurant chain for acquisition possibly one of BJ's, California Pizza Kitchen or Yard House.^[19] In October 2011, Darden acquired 2 chains, Eddie V’s Prime Seafood and Wildfish Seafood Grille, for $59 million cash transaction and were placed within its Specialty Restaurant Group,^[20] Also In October, Darden signed an area-development agreement with Americana Group of Kuwait to develop and operate at least 60 locations using the Red Lobster, Olive Garden and LongHorn Steakhouse concepts.^[21]

In July 2012, Darden acquired the Yard House 39 location beer-centric chain for $585 million from TSG Consumer Partners. Yard House will be alongside the other upscale restaurants in Darden's Specialty Restaurant Group.^[22] On December 23, 2013, Darden's stock rose 3 percent after activist investor Starboard Value, a hedge fund, took a stake in the company.^[23]

Red Lobster sale

On December 19, 2013, Darden announced plans to sell or spin-off the Red Lobster brand, citing pressure from stock investors.^[24] This was in direct response to the company spending US$100 million on a new digital platform. At the time, the project was already at least one year behind schedule and above budget. A large number of layoffs occurred in its marketing department, and the company's second in command also left.^[25]

On May 12, 2014, Darden announced that as part of the spinoff of Red Lobster, it was converting the co-located Red Lobster and Olive Garden locations into standalone Olive Garden locations.^[26] On May 16, 2014, Darden announced it would be selling the Red Lobster seafood restaurant chain to Golden Gate Capital for US$2.1 billion.^[27] Darden announced the completion of the sale of Red Lobster on July 28, 2014.^[28]

Acquisitions

Differences between Starboard and Darden management soon emerged over the hedge fund's proposal to split the company in two and spin off a third to handle their real estate portfolio, a move Starboard said would greatly boost shareholder value. Matters came to head when management announced a plan to spin off the underperforming Red Lobster early in 2014. Starboard led a large group of investors in asking management to delay the move and see if better options, such as its plans to revitalize the chain, were available.^[29] When management instead decided to sell the chain to private equity firm Golden Gate Capital in May, Starboard and other investors sharply criticized the $2.1 billion "fire sale" price as a serious undervaluing of Red Lobster and its assets such as the underlying real estate. It also claimed management had refused shareholders' requests for a special meeting to discuss the deal.^[30]

Chief Executive Officer Clarence Otis, Jr. announced he would be resigning at the end of the year, the same day the Red Lobster sale was complete.^[31] Management said afterwards that it would work on a needed turnaround plan for Olive Garden, also struggling. However, after CNBC reported on a leaked document, supposedly offered to potential lenders and buyers earlier in the year, that described Red Lobster's financial position far more optimistically than management had in its contemporary public statements,^[32] one of the investors, a union pension fund, filed suit alleging material misrepresentation.^[33] Management claimed the document had been prepared by Golden Gate in consultation with Red Lobster's executives, who could have been expected to have that view of the chain's future.^[32] Eugene Lee was named permanent CEO on February 23, 2015, after serving as interim CEO in October 2014.^[34]

Starboard assembled its own slate of directors to challenge all the sitting board members in the company's upcoming shareholder elections. In support of their candidacy it released a 294-slide presentation in early September about how the company had gone wrong and how its directors would restore it to health. While it received considerable media attention for its detailed focus on Olive Garden, in particular the chain's "wasteful" practice of serving too many of its free unlimited breadsticks at once (to prevent food waste due to staleness: instead of one per customer plus an additional one per table; additional breadsticks are served fresh on demand) and not salting the water it boiled pasta in so as to secure a longer warranty on the pots, it also attacked management for spending lavishly on the chain's corporate headquarters while paying the general managers of individual restaurants less than its competitors did.^[35][36] Management responded two days later that it was already implementing many of the suggested changes, and said the free breadsticks merely represented "Italian generosity."^[37] Nevertheless, in October, shareholders replaced the entire board with Starboard's slate, in what an observer called an "epic fail" for management, since that rarely happens.^[38]

On March 27, 2017, Darden announced its intent to acquire Cheddar's Scratch Kitchen for $780 million^[39] from shareholders such as L Catterton and Oak Investment Partners. On March 28, 2017, when Darden announced it that had acquired Cheddar's Scratch Kitchen and "lifted its full-year earnings outlook," the company became the biggest gainer that day on the S&P 500, with shares growing nearly 9 percent.^[40] The acquisition was completed on April 24, 2017.^[41]

Units

• LongHorn Steakhouse
• Olive Garden
• Cheddar's Scratch Kitchen
• Darden’s Specialty Restaurant Group
  • Eddie V's Prime Seafood
  • The Capital Grille
  • Bahama Breeze
  • Seasons 52,^[20] fresh grill and wine bar with a seasonal menu with containing 475 or fewer calories. ^[42]
  • Yard House USA, Inc. - 62 locations
• Darden Corporation
• GMRI, Inc.
  • RARE Hospitality International, Inc.
    • RARE Hospitality Management, Inc.

See also

• List of restaurant chains
• List of food companies
• List of casual dining restaurant chains
• List of S&P 500 companies
• Companies listed on the New York Stock Exchange (D)
• List of Florida companies
• List of Orlando companies
• List of Michigan companies

References

External links

• Official Website
• Yard House
• Eddie V’s Prime Seafood

• • Business data for Darden Restaurants: Google Finance
  • Yahoo! Finance
  • Reuters
  • SEC filings