ORLANDO Fla. Darden Restaurants Inc. on Saturday said it was shutting down its struggling Smokey Bones restaurant division by closing 54 units and selling the remaining 73.
Darden, which also operates the Red Lobster, Olive Garden, Bahama Breeze and Seasons 52 casual-dining concepts, will take a fourth-quarter pre-tax charge of about $260 million for the closures and sale. The company is also selling its two Rocky River Grillhouse restaurants, which were seen as a possible replacement concept for under-performing Smokey Bones sites.
"This was a difficult decision, because guests continue to give the Smokey Bones experience solid marks and there is a core of restaurants with good sales and earnings levels," said Clarence Otis, Darden’s chairman and chief executive. "However, the Smokey Bones concept and related business model was designed to be a nationally advertised brand." Darden opened the first Smokey Bones in 1999.
Otis said, "We have concluded that it is not a meaningful growth vehicle for Darden. As a result, we've decided to exit the Smokey Bones business and offer it and the related assets for sale."
This is not the first time Darden has pulled the plug on a fledgling chain: In 1995, it shuttered its 51 China Coast restaurants because of disappointing performance.
The fourth-quarter pre-tax charge of $260 million includes a non-cash asset impairment charge of $235 million for all 129 restaurants and $25 million in other estimated costs related to the closures.
Darden said it is immediately pursuing a sale of the remaining 73 Smokey Bones restaurants, which are located primarily in the eastern United States.
Otis said it will continue to grow its other brands and may look for another concept. He has said in the past that the company may buy another brand, and possibly one that franchises. Darden has not franchised any of its other concepts.
"The growth delivered by Olive Garden and Red Lobster will be complemented by prudent expansion of both Bahama Breeze and Seasons 52," Otis said in a statement, "And we also remain interested in adding a proven growth concept with meaningful ultimate sales and earnings potential."
Darden, which before this announcement had about 1,400 restaurants, posted annual sales of $5.7 billion.
Darden said Smokey Bones has lagged the performance of Darden's other brands, with cores guests patronizing the barbecue units less frequently than the other concepts.
Darden said it had been testing the possibility of converting some units to a new format called Rocky River Grillhouse, but that test was dependent on stabilizing Smokey Bones.
The company said this decision will allow it “to better focus its efforts on more productive businesses that will provide stronger opportunities for employees,” according to Drew Madsen, Darden's president and chief operating officer. The company will evaluate each closing to determine whether it is suitable for another Darden brand.
"Many of these closed restaurants are valuable locations," Madsen said. "They just didn't work as barbecue restaurants. We expect these properties to serve the public again as vibrant restaurants and retail businesses."
Darden said it will offer 4,000 employees at closed Smokey Bones restaurants the opportunity to transfer to other Darden locations.
