Darden Analysis

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Previously merged with General Mills, the Darden Restaurants Inc. separated the companies in 1995 and became a company that would be traded publically on the New York Stock Exchange. This firm created The Darden Restaurant, Inc. Foundation in 1995 to give millions of dollars to non-profit organizations every year. To help “create a legacy of greatness for generations,” Darden founded a new Restaurant Support Center in 2009. The center is declared to be a place of “pride and performance.” Pursuing innovation, in 2010 Darden announced its Sustainable Restaurant Design Initiative. This advanced the firm to establish its first LEED-certified restaurant, an Olive Garden in Jonesboro, AK. In 2011 Darden is named on the “100 best companies to work for” FORTUNE’s list, becoming the first full-service restaurant to make the list.

The firm adapted to the market trends and demands by announcing their plans to reduce sodium and calorie footprints by 20% over a 10-year period. This announcement in 2011 also declared that children’s menus for all the restaurant brands would be revised to provide a greater variety.

Currently, through subsidiaries, Darden owns and operates more than 2,100 restaurants. The Darden Specialty Restaurant Group presently includes eight companies in their brand portfolio.2 More than 200,000 people are employed, functioning these restaurants and serving more than 425 million meals a year. Since opening the first Red Lobster in 1968, “Darden has grown to be the world’s largest full-service restaurant company.”2 Today the firm is lead by Chairman and Chief Executive Officer Clarence Otis Jr., implement Darden’s core purpose "to nourish and delight everyone [they] serve."2

BUSINESS THEMES

Diversification

Darden comprises a diverse selection of brand restaurants, including: Red Lobster, Olive Garden, LongHorn Steakhouse, The Capital Grille, Bahama Breeze, Seasons 52, Eddie V’s Prime Seafood and Wildfish Seafood Grille.2 These brands deliver various food collaborations and distinct cultural experiences.

Apart from Darden’s two mature brands, Red Lobster and Olive Garden, The Specialty Restaurant Group was created to integrate a portfolio of growth-oriented small to medium-size, full-service restaurant brands. These differentiated brands focus on culinary and beverage innovation and exceptional service, and they have enduring business models that leverage the Group’s talented and expandable support platform.1 The acquisition of these smaller brands are intended to establish a diverse stream of food selections and dining environments, providing almost every restaurant experience demanded by consumers.

Customer Satisfaction and Operating Techniques

“Our goal is to nourish and delight every guest we serve, make Darden a special place for every employee, supplier partner and community partner, and reward every shareholder with meaningful value creation.”1 Darden’s foundational mission of operations is to deliver exceptional guest experiences that consistently exceed expectations across all the individual brands.1 To ensure this the firm hires, trains and develop the best operators, challenging them to implement passion and commitment in their teams that elicits discretionary individual effort that distinguishes the difference between a good guest experience and a great one.1

Performance Enhancement

“As one of the world’s largest restaurant companies, Darden is focused on performance – from the dining room to the boardroom.”1 To evaluate operations and assess financial performance, Darden monitors a number of operating measures, with a special focus on two key factors: same-restaurant sales and restaurant earnings.1

Sales data of guest traffic sums and menu item combinations are gathered daily and analyzed regularly to help develop menu pricing, product offerings and promotional strategies.1 Darden focuses on the balance of pricing and product offerings, along with other initiatives, to build sustainable same-restaurant sales growth.

Operating the Business at Scale

Operating the business at scale means allocating and optimizing resources to drive the greatest results and volume across market segments. Darden is confident that they can achieve growth for two reasons: 1) Their track record of creating comparable value indicates that since fiscal 2008, annual revenues increased by $1.4 billion, annual diluted net earnings per share from continuing operations increased by $1.03 and cumulative dividends and share repurchase totaled $1.9 billion; 2) Their brands have strong individual and collective growth profiles and they have a wealth of collective experience and expertise.1 The firm’s operating support platform is vigorous and ever more cost effective, and the dynamic culture of the firm is adamant to thrive in the marketplace and influence a “positive difference in the lives of guests, employees, partners and neighbors.”1

Strong Brands

Darden has demonstrated the ability to build compelling brands and develop them over time, keeping them remarkably relevant to restaurant consumers. These capabilities are displayed in the competitively superior same-restaurant sales growth achieved in fiscal 2012 at Red Lobster and LongHorn Steakhouse, respectively in their fifth and fourth decades of operation.1 The brands’ performance reflects significant effort over the past several years in evolving critical brand elements, including each brand’s promotional approach, core menu, advertising, and restaurant design and décor.1

Collective Experience and Expertise

“We believe the breadth and depth of our collective experience and expertise – which the addition of the talented team at Yard House will only increase – sets us apart in the full-service restaurant industry.”1 This collective capability is the product of investments over many years in areas that are critical to Darden’s success in the industry, including brand-management excellence, restaurant operations excellence, supply chain, talent management and information technology.1 to stimulate growth the firmis changing by remodeling their organizational structure to better implement the firm’s existing expertise and adding new expertise in additional areas that are crucial to future success.1

Along with significant structural modifications in fiscal 2008 with the acquisition of LongHorn Steakhouse and The Capital Grille, the firm formed the Specialty Restaurant