Darden Restaurant Financial Analysis

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Executive Summary

Darden Restaurants, Inc. has been a public company since 1995. A company born of the chain Red Lobster, Darden is a recent spin-off as a result of mergers and acquisitions of various types. Publicly traded on the New York Stock Exchange, Darden (DRI) is the parent company of Red Lobster, The Olive Garden, the now-defunct China Coast concept, and a new “Floribbean” concept: Bahama Breezes.

Throughout its existence, as a part of General Mills, Pillsbury, or on its own as DRI, Darden has made waves throughout the restaurant industry. The thought processes behind the introduction of a concept are considered revolutionary, as exemplified by the strategy behind The Olive Garden and Bahama Breezes.

While Darden has not had the most stellar of income statements of late, this is a result of write-offs and write-downs of assets as a result of the failure of the chain, The China Coast. Recent years have shown consistent revenues, yet inconsistent net income, as it has been cut in half, and then redoubled it in recent years (before asset write-downs, a discrepancy that will be discussed in the introduction). In a like manner, most components of the return on equity equation have drastically swung in recent years as a result of inconsistent leadership, and shifting management goals. However, as Darden’s management begins stabilizing the company, cutting sub-quality stores, and gearing up for the nationwide expansion of Bahama Breezes, the company appears to be heading in the positive direction.

However, the entire annual report is not rosy. Upon examining Darden’s use of leverage, it would appear that the company is being careless in their management of debt. Darden did not use a great deal of debt initially, however, they are quickly adding a great deal of short-term liabilities to their reasonable level of long-term debt. This tactic was decided to be alarming to our group.

The future does indeed look bright for Darden. The company is strengthening their existing divisions, so as to increase income and support the start-up costs of Bahama Breezes on the large scale. This strategy of returning to the basics is so simple, it is Darden’s goal to revolutionize the restaurant industry with their inordinate amount of detail to simplest of tasks.


While Darden Restaurants, Inc. was only incorporated in 1995, the history of the company dates back to 1968. That year was when Bill Darden, a restaurant operator whose previous endeavor was a coffee shop in Macon, Georgia, opened the first Red Lobster. Opened in Lakeland, Florida, the chain opened five units by 1970 as it gained a reputation for fine seafood at a bargain price. General Mills purchased the five Red Lobster units in 1970, offering Darden the necessary resources to begin nationwide expansion. The restaurant quickly grew and evolved into the largest full-service restaurant chain in the United States.

Throughout the 1970’s, General Mills expanded the Red Lobster concept throughout the United States and Canada. However, General Mills desired more, and began consumer-driven research developing an Italian restaurant concept that would set the restaurant industry on its ear. By delivering a concept that met the consumers needs, rather than operational needs, The Olive Garden was a “different” kind of restaurant. For example, based on consumer requests, larger tables were chosen, along with more comfortable chairs that had rollers on them. Though simple changes, the impact was huge, as the trend has evolved in the restaurant industry to meet the consumer’s demands.

Building off the growth of Red Lobster and the success of The Olive Garden, General Mills quickly developed its entry into the restaurant industry. Under the leadership of Ron Magruder, General Mills used it expansive resources to grow into one of the largest restaurant entities in the world! A third creation, The China Coast was founded in the early...
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