Strategic analysis: Should Darden spin off its brands? (Part 5 of 25)
Darden’s specialty brands
Analyzing menu composition, service, and average check per guest is one method investors can use to mine out the brand’s strategy. Although Darden’s Olive Garden, Red Lobster, and LongHorn Steakhouse aren’t that differentiated from the “common market,” its specialty brands like Capital Grille, Yard House, Bahama Breeze, Season 52, and Eddie V’s are more sophisticated in menu, atmosphere, and service. Alcohol also makes up a rather larger part of sales—above 20%.
The Capital Grille is a prime steak restaurant that’s nationally acclaimed for dry-aging steaks on the premises, which is said to create a stronger beef flavor and more tender meat. Of course, this is more expensive, and the average check at the restaurant amounts to $71.00 per guest, with alcohol making up more than 30% of sales. The restaurant features an award-winning wine list, offering over 350 selections, personalized service, a comfortable club-like atmosphere, and premiere private dining rooms. While steak is probably the company’s number-one focus, the restaurant also serves fresh seafood and culinary specials that customers can enjoy in a relaxed environment.
The Yard House is known for its food, classic rock, and a draft beer selection that features over 125 craft ales and lagers, according to the company. It offers an American menu of more than 100 chef-driven appetizers, snacks, natural burgers and steaks, street tacos, salads, sandwiches, fresh fish, and a generous selection of vegetarian dishes. The average check at Yard House was $20.43 per guest in fiscal 2012.
Bahama Breeze is another specialty restaurant that provides a children’s menu and is based on a Caribbean theme. It offers the food, drinks, and atmosphere of the islands. The menu includes Caribbean-inspired fresh seafood, chicken, and steaks, as well as signature specialty drinks that make up 22% of the restaurant’s total sales. The average check at Bahama Breeze is $24.00 per guest
Eddie V’s is a fine dining brand that was acquired by Darden in fiscal year 2012. It opened in 2000 with an emphasis on prime seafood creations, USDA prime beef and chops, and fresh oyster bar selections. Encompassed in a classic atmosphere, the attire here is dressy. This brand is perhaps the most expensive, with an average check of $88.00 per person. Alcohol sales make up a large portion of payment, at 33%.
Season 52 is described as a casually sophisticated, fresh grill and wine bar with seasonally inspired menus (menus that change each season), offering a fresh dining experience that celebrates living well. None of its menu items total more than 475 calories. This includes its signature flat breads and popular Mini Indulgence desserts, as well as the entrées that are inspired by the seasons and tastes of a farmer’s market.
The restaurant offers an international wine list of more than 90 wines. What further differentiates Season 52 is its wide variety of services. Its private dining rooms are suited for social and business events, the Chef’s Table is a unique setup for those seeking to taste customized food and wine pairing events, and the piano that features live music every night is a great place to spend some time. Prices aren’t that expensive, with the average consumer spending $40.75 per meal, including alcohol sales, which make up 26.90%.
Specialty brand peers
Darden’s specialty brands’ closest peer traded in the public market is probably Ruth’s Hospitality Group Inc. (RUTH). We can also expect Del Frisco’s Restaurant Group Inc. (DFRG) to be a higher-end competitor, pulling in average checks per guest above $50 for all its brands.
Browse this series on Market Realist:
- Part 1 - Darden analysis: Assessing the success of a Darden brand spinoff
- Part 2 - Darden analysis: Must-know background on Barington Capital Group
- Part 3 - Darden analysis: Why spinoffs outperform the market by 10%
- Consumer Discretionary
- Arts & Entertainment
- Bahama Breeze
- Capital Grille
- Yard House