Darden Buys Yard House Restaurants for $585 Million

Kareem Shaker

Yardhouse restaurants feature a central bar with a range of beers on draft.

As if restaurant giant Darden needed any more popular eateries in its catalogue, the good folks at the world's largest full-service restaurant group have just agreed to purchase  Yard House Restaurants, including four in the South Florida area for a steep $585 million. It adds the locations to a catalogue that already includes nearly 2,000 restaurants and $8 billion in sales.

"We have a lengthy track record of creating and growing enduring brands. As Fast Company pointed out in its July/August 2009 issue, we've truly become the full-service dining company that feeds America," said a statement on the company's website.

The purchase involves restaurants across the country. Locally, it includes locations at the Gardens in Palm Beach Gardens; Mizner Park in Boca Raton; Hallandale Beach in Broward County; and Coral Gables in Miami-Dade County.

The Yardhouse provides an opportunity for expansion. Darden has done this well with its brands, Olive Garden, Red Lobster and LonghHorn Steakhouse. The aforementioned restaurant chains (except LongHorn), however, have not been performing to expectations, each losing sales by several percent over the last year compared to the prior fiscal year. Higher specialty Darden names like Capital Grille and Bahama Breeze, however, have been steadily growing in sales.

"Yard House gives Darden greater exposure to both younger and more-financially resilient customers," Darden chief cxecutive Clarence Otis said during a conference call Thursday night, eluding to Red Lobsters and Olive Garden's recent struggles..

Yard House is known for its large selection of beers from around the world on tap, but also features a large 130-item menu centering around traditional American cuisine.

According to financial analysts, the purchase will likely be financed with debt, and Yard House will only add marginal incremental profits; it could weaken Darden's credit ratios. Ratings on Darden reflect the view of its business risk as "satisfactory" by Standard & Poor. The firm has been hurt by its performance relative to industry peers, but has boosted by its staring market share in a very fragmented industry.

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