Olive Garden owners ready for more
Olive Garden owners ready for more

By Travis Reed

Published: July 6, 2007

ORLANDO, Fla. — Pineapple upside down cake is nearing perfection. Cooks are simmering citrus-rum scallops and whipping up a brown sugar rib glaze.

The test oven rarely goes off at Darden Restaurants Inc., which runs the Olive Garden, Red Lobster and three other chains. The company has 1,400 restaurants, making it the world's biggest casual dining operator.

But times are lean in the industry, and Darden will have to grow if it wants to stay that way. It plans aggressive expansion of its already-ubiquitous Italian eatery and might even buy another restaurant chain. The changes come as Darden tries to move past its failed Smokey Bones operation, a more than nine-year investment in American barbecue that never caught on.

In May, the company closed nearly half its 129 Bones locations and put the other 73 on the sales block because stores weren't selling enough. Full-year earnings dropped about 40 percent last fiscal year largely because of charges related to the Smokey Bones moves.

Wall Street applauded the decision to drop the chain. Darden share prices hit an all-time high of $47.60 in the next few weeks, although have fallen to around $45 recently.

Darden has about 1,400 restaurants, with Olive Garden and Red Lobster each accounting for more than 600. The company also has Bahama Breeze, a Caribbean-themed restaurant and bar, and Seasons 52 — an upscale dining experiment close to maturing past the test phase. Breezes has 23 restaurants and Seasons has just seven locations — two in Atlanta and the rest in Florida — but more are planned in 2009.

But Darden's focus still is on Olive Garden. This year it plans 40 new stores, up from 32 last year and 19 the year before, as it nears a goal of 800 to 900. Olive Garden began in Orlando in 1982 and has posted 51 straight quarters of same-store growth, nearly unheard of in the industry.

Wall Street has also speculated that Darden's next brand could be someone else's. Analysts have mentioned high-end seafood eatery Bonefish Grill.

Darden's wide reach means its stores compete against themselves.

Darden chairman and CEO Clarence Otis said that wouldn't limit Darden's options as it searches for a new brand.

"This is a risky business,” Otis said. "You take some of that out if you're looking at vehicles that are more proven than others. But we're comfortable with taking risk.”