Welcome a new member to the family.
Olive Garden parent Darden Restaurants apparently has no reservations about expanding in a down economy. On Wednesday it agreed to buy Ruth’s Hospitality Group in a $715 million all-cash deal expected to close in June. So be prepared for the debut of the even more confusingly named Darden’s Ruth’s Chris Steak House.
Meat and Potatoes
Darden is known for affordable chains like Yard House and Bahama Breeze, but also its slightly more high-end brands like The Capital Grille and Eddie V’s Prime Seafood (no connection to Pearl Jam’s lead singer). Ruth’s will mark its first acquisition since Cheddar’s Scratch Kitchen in 2017 for $780 million. This latest deal values Ruth’s at $21.50 per share.
While Darden already has two steak-centric chains under its umbrella, adding a third with 150 locations will only make it more competitive amidst growing demand for red meat:
- Texas Roadhouse, a chain with more than 600 locations across the US, has grown to be one of the most popular franchises in the country. On a recent earnings call, executive Michael Bailen said the brand averaged more guests in the first seven weeks of 2023 than in any other period in its history and that same-store sales were up roughly 16%.
- Bloomin’ Brands’ Outback Steakhouse has also seen a bit of a bump lately as its earnings continue to surpass Wall Street estimates. This past quarter, Bloomin’ saw $1.24 billion in revenue, compared to $1.14 billion during the same period in 2022. And year-to-date, its stock value has risen roughly 22%.
Out of the frying pan: Just like the rest of us during our weekly grocery store visits, restaurants are still sweating over rising food costs. In its 2023 state of the industry report, the National Restaurant Association found that 92% of operators said inflated food prices pose a significant issue to their businesses. The hope is that the public’s desire to meet with friends and enjoy the restaurant experience they so sorely missed during the pandemic will continue to counteract increased menu prices.