World's Largest Up In Smoke
CORPORATE CHAIN UP IN SMOKE & SALE THE BONES
Darden Restaurants, Inc. is the world's largest casual dining restaurant company (based on market share, sales (5.7 Billion) and number of company-owned and operated restaurants). They operate some 1,400 Red Lobster, Olive Garden, Bahama Breeze, Smokey Bones Barbeque & Grill and Seasons 52 restaurants in North America, employing more than 150,000 people who serve 300 million meals annually. All of Darden's restaurants are company-owned, and Darden offers no franchise opportunities in the U.S.
On Saturday May 5th Darden announced the closure of 56 of it's 129 Smokey Bones Barbeque & Grill Restaurants. They wasted no time, in closing them over the weekend. "That leaves us with 73 vibrant, profitable locations, and we will put them up for sale as one restaurant company," said Darden spokesman Joe Chabus.
More than 4,000 employees worked at the closed restaurants, and all are being given the opportunity to transfer to other Darden locations. With more than 160,000 employees, Darden is the 25th largest employer in the U.S.
The 73 remaining locations are all east of the Mississippi River. Chabus said Smokey Bones simply did not perform well in the Southwest or in Texas. Prior to the closure and decision to sale, Darden had been testing the possibility of converting some units to a new format called Rocky River Grillhouse, featuring fire-grilled foods.
According to Chabus, the barbecue chain's sales had fallen below Darden's other brands and had contributed a loss of 8 cents per share to the company's earnings in its 2006 fiscal year. For 2007, the company had been projecting a loss of 10 cents per share from the concept.
Clarence Otis, Darden Chairman and CEO said "Darden is doing the difficult things required to grow. The Smokey Bones reastaurants which remain open form a viable business, but one that is not consistent with Darden's vision of a national restaurant concept.
Its been rumored for many months now that Darden might be in the market to buy a restaurant chain with high growth potential. On Monday Otis reinforced the rumor by making it clear that buying a string of restaurants that fits its casual-dining business would be part of their growth strategy.
On Monday Investors seemed to support Darden's decisions and plans by sending the stock up 5.3 percent to close at $45.51 and then on Tuesday closed up another 12-cents. JP Morgan Analyst John Ivankoe said an acquistion would be a positive step for the chain if it makes a good choice. "We believe management will be prudent in its acquisition and expansion activities as it recognizes the role that premature development played in Smokey Bones failure," Ivankoe said in a note to investors.