Looks like Darden Restaurants is cleaning house. Or at least a part of it. Darden, the conglomerate that owns restaurants such as Olive Garden, Capital Grille, Longhorn Steakhouse, Red Lobster and Yard House just to name a few, is ready to cut away the rotting limbs. It is reported that Red Lobster will be sold to investment firm Golden Gate Capital for $2.1 billion…in cash. Darden had been on a financially downward slope and it had already announced plans to either give the restaurant chain a complete makeover or to just sell it outright. It appears that they have elected to do the latter. Red Lobster was founded in 1968, essentially revolutionizing seafood across the U.S. In recent times though, the restaurant’s popularity has suffered, and even offering a greater selection of non-seafood items to the menu has done little to bolster sales.
One of the biggest problems Darden CEO Clarence Otis sees with the restaurant is its inability to attract higher-income dinners. Darden stakeholders believe that Olive Garden should be paired with Red Lobster in the sail to Golden Gate Capital. They would prefer if Darden stuck to its smaller, more expensive restaurants that have seemed to fare better than places like Olive Garden. Darden shares fell 3.7% to $48.80 a piece and Red Lobster is down 8.7% in sales from where it was until this point last year. Darden plans on using the money to pay off about $1 billion in debt and then use the rest of the cash to buy back more of its own shares. All in all, Golden Gate Capital will have 700 Red Lobster restaurants to work with. Maybe new ownership will be what it takes to turn this troubled chain around.
