Darden could become franchisor via buyout

Darden OKs Smokey Bones redos, could become franchisor —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

Chief executive Clarence Otis was said to have revealed that the company would consider buying a midsized chain that held significant potential to expand and augment Darden’s growth. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

The performance of Darden’s homegrown startups has been mixed, as the still-small Seasons 52 brand generates high levels of traffic and sales, but the larger Smokey Bones and Bahama Breeze chains continue to struggle. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

Darden officials also confirmed an earlier report on www.nrn.com that the company would start converting Smokey Bones units to the new Rocky River Grillhouse format. Smokey Bones units that were said to have been tagged for changeovers are in the Southwest, the Atlantic seaboard north of Florida, and the Midwest, where the grillhouse prototype has operated since mid-November outside of Cleveland. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

Smokey Bones was launched as a barbecue concept, but Darden has radically changed its menu since then, and the chain’s president, J.J. Buettgen, has been quoted as saying that branches in Florida and other areas where barbecue is popular generate average annual sales of $3.4 million per unit, while Smokey Bones elsewhere average only $2.4 million per location. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

“If this Rocky River skews toward value and offers guests some price-sensitivity relative to, say, an Outback, then potentially that could get some traction,” securities analyst Bob Derrington of Morgan Keegan & Co. of Nashville, Tenn., said in an interview. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

All branches of Darden’s current system of 1,443 restaurants are owned and operated by the company, which also prefers to own the land under its outlets. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

The company has not acquired a brand since it bought the Seafood Broiler group on the West Coast in the 1980s for conversion to Red Lobster units. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

Darden told analysts that same-store sales, though projected to grow 2 percent to 4 percent for fiscal 2007, would eventually slow as Olive Garden and Red Lobster continue to mature, though an acquisition could help foster growth. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

Darden has bucked a recent trend in casual dining by vowing to accelerate rather than slow expansion, saying that it now would open about 70 restaurants per year, versus its usual rate of about 45 annually. —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear

“Darden is bullish on casual dining,” said securities analyst Joseph Buckley of Bear, Stearns & Co. in New York. “This is far different from the defensive attitude permeating the sector.” —Rivals who dread competition from the industry’s largest and highest-grossing casual-dining operator may soon have new reasons to fear