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From the Survey: Darden Restaurants
Darden Restaurants (DRI) is the planet’s largest company-owned and operated full service restaurant company, recognized by some of its popular chains including Red Lobster and Olive Garden. As of May 2011, the company owned and operated 1,860 restaurants throughout the United States. It served up over 404 million meals in fiscal 2011 alone. Despite the company’s massive reach, it all began with a single restaurant in Waycross, Georgia.
In 1938, at the age of 19, Bill Darden opened up a 25-seat luncheonette. The Green Frog featured “Service With a Hop”, and it proved to be a great success. Nearly 30 years later, the first Red Lobster opened its doors. Bill Darden and Charley Woodsby opened their first Red Lobster restaurant in Lakeland, Florida, and dubbed it a “Harbor for Seafood Lovers”. With both critical and customer acclaim, Darden expanded his chain, and managed to open and operate six Red Lobster restaurants by 1970. Wishing to expand the brand further, but lacking the resources, Darden decided to sell the company to food conglomerate General Mills Inc. (GIS) that same year.
The company continued to build the Red Lobster seafood chain, and opened restaurants throughout the country. In 1983, a new Italian restaurant concept, Olive Garden, was internally developed. Olive Garden grew rapidly, and today it is Darden’s largest subsidiary with 754 restaurants in operation as of the end of fiscal 2011.
Darden Restaurants became a public company in 1995 when General Mills distributed all of Darden’s outstanding stock to the stockholders of General Mills. Since then, Darden has developed Bahama Breeze, a Caribbean themed restaurant, as well as Season 52, a grill focusing on lower calorie entrees. In 2007, Darden acquired RARE Hospitality International, adding LongHorn Steakhouse and The Capital Grille, to its portfolio.
Darden remains competitive by offering quality food at affordable prices. Darden has its own purchasing staff that negotiates and purchases food from thousands of suppliers across the globe. In having its own purchasing staff, the company effectively cuts out the middle man by buying directly from producers, thus ensuring affordable prices at its chains as well as long-term relationships with vendors. In addition, Darden takes advantage of long-term contracts to try and ward off spikes in commodity prices.
To keep costumers frequenting its chains, Darden has periodic promotions throughout the year, including Red Lobster’s Endless Shrimp promotion and Olive Garden’s Never Ending Pasta Bowl. The company has also been experimenting with a new “synergy restaurant” concept, combining two of its restaurants in one building. In March of 2011, the first “synergy” concept opened with Red Lobster and Olive Garden under one roof, with separate dining rooms, entrances and menus, but a shared kitchen and staff. This concept will help Darden penetrate smaller markets and the shared building will allow it to promote its brand while remaining cost efficient.
In recent years, Darden has taken its mission to be “The Best in Full Service Dining, Now and for Generations” international. As of May 2011, the company franchised five LongHorn Steakhouse restaurants in Puerto Rico and 22 Red Lobster restaurants in Japan. In May, the company made its debut in the Middle East with a Red Lobster in Dubai. There seems to be much growth potential internationally for Darden as the company has yet to establish a global presence aside from the countries listed above, the United States, and Canada.
Looking forward, the company plans to continue to expand existing brands, and develop new concepts. Expansion efforts rely heavily on locating appropriate spaces. Factors that are important include area demographics, target population densities, and site visibility. The company looks for spaces that are in close proximity to shopping malls, hotels, universities, and offices.
Finally, the restaurant industry is quite crowded. Its chief competitors include DineEquity (DIN) and The Cheesecake Factory (CAKE). Thus, developing new concepts is key for future growth. The company’s most recent concept, Season 52, seems to cater to consumers’ changing tastes, with organic offerings and all entrees that are less than 475 calories. In all, consumers can expect more expansion from the restaurant conglomerate and probably added restaurant concepts in the next few years.
At the time of this article’s writing the author did not have positions in any of the companies mentioned.