How Is Darden Planning to Expand Its Business?
What’s Cookin’ for Darden Restaurants: 3Q16 Earnings and Outlook
Unit growth
In this article, we will discuss unit growth, another key revenue driver. In the last 12 months, Darden Restaurants (DRI) has increased its restaurant count by seven units.
Unit growth across brands
In the last 12 months, Darden, which forms 1.1% of the holdings of the iShares Select Dividend ETF (DVY), has added seven specialty restaurants and one LongHorn Steakhouse. On the other hand, it has decreased the unit count of Olive Garden by one. The company management said it is temporarily slowing down its unit growth to focus on improving its operations and menu items. Currently, the company is remodeling its Olive Garden restaurants. By the end of 3Q16, 35 restaurants were remodeled. The company claimed that the returns on remodeling and bar refresh investments were high.
Peer comparisons
In 3Q16, Darden added only one new restaurant, whereas peers Texas Roadhouse (TXRH), Brinker International (EAT), and Buffalo Wild Wings (BWLD) are expected to add seven units, two units, and 16 units, respectively.
Outlook
The company is planning to add 24 to 28 new restaurants and remodel 60 more Olive Gardens with an investment of $250,000 to $400,000 on each brand in 2017. Under the bar refresh program, the company is planning to invest $20,000 on each restaurant to improve the utilization of older Olive Garden cafe and bar areas.
We will discuss the EBIT margins of Darden in our next article.
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