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Many of those locations could be monetized through sale-leaseback transactions or by creating a public market real estate investment trust, Mitarotonda said.

“Darden owns substantially more real estate than its peers, including the land and buildings of approximately 1,048 restaurants and the buildings on an additional 802 ground-leased sites,” he wrote, adding that Barington estimated the value of those real estate assets at $4.2 billion.

Barington also said it was convinced Darden could reduce its operating expenses by $100 million to $150 million a year.

“While the company recently committed to reducing operating support spending by $50 million a year, we believe that a rigorous internal review of the company’s cost structure will reveal significant additional cost reduction opportunities,” Mitarotonda said.

The company said it aimed in September to make cuts and save $50 million per year in annual general and administrative expenses beginning fiscal 2015. Darden at the same time said president and chief operating officer Drew Madsen would retire at the end of Darden’s second quarter in November.

“Barington Capital has taken the first step in being the ‘activist’ who fights for the significant changes needed at Darden,” New Haven, Conn.-based Hedgeye Risk Management LLC said in an Oct. 11 note.

Hedgeye suggested breaking the company into an Italian-cuisine company with Olive Garden and Seasons 52; a seafood company with Red Lobster and Eddie V’s; and a steak company with LongHorn and The Capital Grill. Hedgeye recommended spinning Yard House off as separate public company and selling Bahama Breeze.

 “We are of the view that Darden has been in steady, long-term decline, and until management or a third party makes significant changes, we will continue to see the earning power of the company erode,” Hedgeye said. “We believe that Darden has become ‘too big to perform’ in the highly competitive casual-dining industry.”

Contact Ron Ruggless at ronald.ruggless@penton.com.
Follow him on Twitter: @RonRuggless