Darden Restaurants closing its Olive Garden and Red Lobster combination restaurants due to planned sale or spinoff of Red Lobster chain; combo restaurants in Georgia, South Carolina closed, four others will be converted into Olive Garden standalones
May 6, 2014
– It's the end for Darden Restaurants' combination of Olive Garden and Red Lobster restaurants.
Two of the six combo operations, in Thomasville, Ga. and Beaufort, S.C., closed over the weekend. Darden will convert four others, including one in Palm Coast, into stand-alone Olive Gardens.
Darden said it would no longer operate the hybrids because of its plans to sell or spin off Red Lobster.
Darden launched the experiment three years ago in smaller markets. In the set-up, Olive Garden and Red Lobster share a kitchen but have separate entrances and dining rooms.
The restaurants also opened in Brunswick, Ga.; Waycross, Ga.; and Wilkesboro, N.C. Darden said those areas, along with Palm Coast, should generate enough business to support full-sized Olive Gardens.
Darden spokesman Rich Jeffers said he did not know when the company would convert the remaining restaurants. The Olive Garden sides should stay open during the couple of weeks it will take to change the Red Lobster sections, he said.
Typically, quick-service chains have placed two brands side-by-side in one building. KFC and Taco Bell often share space. So do Baskin-Robbins and Dunkin' Donuts. Such combos are unusual for sit-down restaurants.
"I don't know if it plays that well in casual dining, or other people would have tried it," said analyst Lynne Collier, who covers Darden for Sterne Agee. "It was an effort for them to reduce their investment costs and improve their store level returns. My guess is it's not something they'll do again anytime soon."
In fact, Jeffers said Darden has no immediate plans to try the concept with its other big brand, LongHorn Steakhouse. Instead, it wants to focus on turning around Olive Garden, where sales have been declining.
"We definitely learned a lot," Jeffers said. "We'll certainly continue to evaluate what we learned and see what the future might hold."
Meanwhile, he said, Darden has offered jobs in its other nearby restaurants to the 200 employees who worked in Beaufort and Thomasville.
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