Darden Restaurants, Inc. started this week with some good news. On Monday, the company announced this Monday that it has agreed to acquire Cheddar’s Scratch Kitchen for $780 million, and Tuesday saw the company release robust third quarter financial numbers.
Monday’s deal will add Cheddar’s to a portfolio of brands that includes Olive Garden, LongHorn Steakhouse, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, and Eddie V’s.
"Cheddar's is an undisputed casual dining value leader with broad appeal and strong average restaurant volumes," said Darden President and CEO Gene Lee. "Cheddar's is a great fit in the Darden portfolio because it complements our existing brands. This addition will also enable Darden to further strengthen two of our most important competitive advantages: our significant scale, and our extensive data and insights."
The Arlington, Texas-based Cheddar’s operates 165 locations throughout 28 states. In a press release, Darden noted that Cheddar’s has significant growth opportunities in new and existing markets, and an average annual restaurant volume of $4.4 million.
Highlights of the acquisition deal include:
Cheddar’s President and CEO Ian Baines will remain with the company and report directly to Lee.
"We are excited about the opportunity to be a part of Darden,” noted Baines. “Our operating philosophy and values are similar and we believe this transaction provides a great opportunity for our team members to continue to grow and develop in their careers. Additionally, Darden's expertise will enable us to further capitalize on our growth potential."
The acquisition is expected to be completed during Darden’s fiscal 2017 fourth quarter.
The company also announced solid third quarter financial results Tuesday morning. According to a CNBC report, the announced acquisition and strong numbers sent the restaurant group’s stock soaring more than six percent Tuesday morning.
Highlights from the company’s third quarter results include:
"We continued to gain market share as we outperformed industry same-restaurant sales by a considerable margin again this quarter," said Lee, in the company's financial statement. "Our teams remain incredibly focused on driving strong operating fundamentals, and I'm very proud of the work they are doing to create memorable experiences for our guests."
Darden also revised its 2017 outlooks—raising expected earnings per share from $3.87-$3.97 to $3.95-$4.00—reflecting an updated outlook for same-restaurant sales of approximately 1.5%.
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